Gas Fees: Why They Exist
Gas is not a fee - it is a unit of computation
Every operation the EVM performs costs a specific amount of gas. Simple operations cost little gas. Complex operations cost more.
| Operation | Gas cost | Example |
|---|---|---|
| Transfer ETH | 21,000 gas | Send ETH to another wallet |
| Transfer ERC-20 token | ~65,000 gas | Send USDC to someone |
| Uniswap swap | ~150,000 gas | Swap ETH for USDC |
| NFT mint | ~100,000-300,000 gas | Mint a new NFT |
| Deploy a contract | ~1,000,000+ gas | Deploy a new smart contract |
Gas use depends on the operations executed, their inputs, and the relevant state. The price per unit of gas also changes with demand. The table gives examples rather than guaranteed costs for every implementation.
How the fee is calculated
Since August 2021 (EIP-1559), Ethereum uses this formula:
Base fee: Set automatically by the protocol. Goes up when blocks are full, goes down when they are not. This portion is burned (permanently destroyed). Nobody receives it.
Priority tip: An optional tip you add to incentivize validators to include your transaction faster. During busy periods, higher tips get processed first.
Why fees spike
Ethereum can process about 15-30 transactions per second. When demand exceeds this, users bid against each other for block space. Fees rise until enough people stop transacting.
Events that cause fee spikes:
- Popular NFT mints: When a hyped NFT collection launches, thousands of people try to mint at the same time
- Market crashes: Everyone rushes to sell or move funds to safety
- New token launches: Speculators race to buy new tokens early
- Airdrop claims: When a protocol distributes free tokens, everyone claims at once
The dollar cost depends on gas used, the effective gas price, and ETH's market price. Review the wallet's current estimate before submitting a transaction.
How to pay less
| Strategy | How it works |
|---|---|
| Compare networks | Check current execution and data fees on networks supported by the application |
| Wait when practical | Monitor demand rather than assume a particular day is cheapest |
| Set fee caps carefully | A fee cap limits the price per gas unit; the gas limit caps units available to execution |
| Batch transactions | Some protocols let you combine multiple operations into one transaction |
| Use gas tracking tools | Sites like etherscan.io/gastracker show current fees in real-time |
The burn mechanism
Before EIP-1559, all fees went to miners. Now, the base fee is burned. In high-usage periods, more ETH is burned than created by new block rewards. This makes ETH deflationary - the total supply decreases.
Since EIP-1559 launched, over 4 million ETH has been burned (worth billions of dollars). Whether ETH is inflationary or deflationary in any given period depends on how busy the network is.
Key takeaways
- Gas is a unit of computation. The price per unit depends on network demand.
- Total fee = gas used × (base fee + priority tip). The base fee is burned.
- Fees spike during high-demand events (NFT mints, market crashes).
- Layer 2 fees depend on execution costs, data costs, and network demand.
- Use gas trackers and time transactions to save money.
Quiz: Gas Fees: Why They Exist
1 / 5Why do gas fees exist?