Yes, gas fees are extremely popular at the moment. But there is a lot of misconception about these fees. People think it’s a scam. Also, they think open marketplaces become rich by taking large portions of the artist’s money when minting NFTs. But this is not the case at all. What is usually missing here is a basic technical understanding of how blockchains work. And in this article, I’m gonna give you a very simplified explanation of what are gas fees.
Let’s Understand Gas Fees
Before knowing anything, let me give you a brief explanation of what Ethereum is at its core. Ethereum is not just another blockchain or cryptocurrency, it’s much more than that. It is planned to be an infinite machine or the world computer. To become this world computer, the machine must be able to execute all kinds of programs on the Ethereum network. These programs are called smart contracts, and they are written in Ethereum’s own programming language, Solidity. They can consist only of a few lines of code, or they can be long and complex.
Now, you can create all kinds of applications with solidity language. But you need something that prevents the world computer from getting spammed and eventually blocked by running into infinite loops. And therefore each line of executed code comes with a cost and these costs are called gas fees. They are essential to run the Ethereum blockchain. So it’s basically the fuel that allows it to operate.
Also Read: What Is Tokenization?
What is Gas in Gas Fees?
The term gas refers to the unit that measures the amount of computational effort required to execute a specific operation on the network.
For example, a single transaction consisting only of a few lines of code requires 21,000 gas units. On the other hand, a complex transaction with many lines of code easily requires millions of gas units. These are more complex smart contracts.
Now, where does the gas price comes from? The gas price is measured in G-wei or Giga way, which is a smaller unit of ether.
1 G-wei is 0.000000001 ether.
And one G way itself is 1 billion ways with one way as the smallest unit of the ether currency.
So far, so good.
But why do the gas fees fluctuate that much?
To answer this question, we need to take a look at how transactions process as per the theory of miners. These miners are the ones who receive the fees. Now after the transaction is signed, it is collected in the mempool. Mempool is some sort of a waiting room where it waits together with all the transactions to get into the next blockchain. Each block can only contain a certain amount of transactions. we can also determine it by the maximum gas limit per block. This limit is currently at 12.5 million guests unit.
For example, when you divide these 12.5 million gas units (a block can contain by 21,000 gas units needed for a simple transaction) then each block can contain up to 595 transactions total. The thing is when there are more than 595 Transactions in the mempool. The miners select the ones with the highest gas fees attached to them and include them first. So this results in a simple bidding system. This means the more you pay, the sooner the miners pick your transaction. Also the faster it gets in the next block.
Th’s also means the busier the network, the higher the gas price. Because more participants are bidding against each other for a spot in the next block.
But still, the amount of gas you pay depends on two variables. The size of the contract you want to execute and how fast you want when you need to execute it. And it’s this timing that you can use to lower the transaction fees.
How to monitor Gas Fees?
If you want to constantly monitor the gas price you can install this little handy Chrome extension. So simply go to the Chrome Web Store, and type in something like Etherium gas price. And there pick the most rated one there and add it as an extension. Now, you can see what a good gas price should actually look like. You can also get notified via email once the price drops below a certain value.
And another option you have is to go to etheriumprice.org. Also, take a look at the chart there which shows your local timezone. And it gives you an idea of when prices are low and when prices are high throughout the week. As you can see, gas fees fluctuate quite a bit and they heavily depend on how busy the network is. If you are not in a hurry then wait for a good time and dates to sign the transaction. Of course, that’s not always the case, especially when prices are high.
If you want to exchange your altcoins back into the ether. For instance, in this case, you have to deal with the current gas fees. But even then, you can slowly adjust the settings in your software wallet.
During the minting process, the digital asset assumes the form of NFT. Your artwork and other items, such as memes and GIFs, become unique NFTs when you use blockchain minting. The price of minting an NFT is entirely determined by the four key factors outlined below:
-Charges for services you consume
Gas fees, contrary to their name, have nothing to do with the consumption of liquid fuels or the environmental impact of mining. Rather, it is the payment sent to miners for entering or executing transactions on the blockchain.