A gas fee is what you pay to have a transaction processed on a blockchain. Block space is limited, and the validators or miners who run the network need a reason to include your transaction. The fee does both jobs: it pays for the work and it rations the space. Sending tokens, swapping on a decentralized exchange and minting an NFT all cost a fee.
The word gas comes from Ethereum, and most of this guide uses Ethereum as the example. Other chains use different names and formulas, but the logic is the same.
What Gas Measures
Gas is a unit of computation. Every operation a transaction performs has a fixed gas cost. A plain ETH transfer uses 21,000 gas. A token transfer uses more, and a swap that passes through several contracts can use several hundred thousand.
The fee you pay is the gas used multiplied by the price per unit of gas. On Ethereum that price is quoted in gwei. One gwei is one billionth of an ETH.
For example, a transfer that uses 21,000 gas at a price of 10 gwei costs 210,000 gwei, which is 0.00021 ETH. The same transfer at 100 gwei costs ten times as much.
The ethereum.org gas and fees documentation explains the units and the formula in full.
Base Fee and Priority Fee
Before August 2021, Ethereum fees worked like a simple auction. Users guessed a price, and overpaying was common. The London upgrade introduced EIP-1559, which split the fee into two parts.
- Base fee: set by the protocol for each block. Everyone pays the same base fee, and it is burned, meaning removed from the ETH supply.
- Priority fee: an optional tip that goes to the validator. A higher tip can get a transaction included sooner when blocks are full.
The base fee moves with demand. Each block has a target size. If the last block was fuller than the target, the base fee rises, by up to 12.5% per block. If it was emptier, the base fee falls. A string of full blocks can double the fee within a few minutes, and a quiet period brings it back down just as quickly.
Wallets also ask for a max fee, the most you are willing to pay per unit of gas. If the base fee plus tip comes in below your max, you only pay the lower amount.
Gas Limit vs Gas Price
These two settings are often confused.
The gas limit is the maximum amount of gas the transaction may use. Wallets estimate it for you. If the limit is too low, the transaction runs out of gas and fails, and the fee for the work already done is still charged. Unused gas is not charged, so a limit slightly above the estimate costs nothing extra.
The gas price, meaning the max fee and tip, decides how attractive the transaction is to validators. If it is below the current base fee, the transaction waits in the queue until fees drop or until you replace it with a higher bid.
Why Fees Spike
Fees rise when many people want block space at once. Common triggers:
- A popular token launch, NFT mint or airdrop claim
- Sharp price moves that send traders rushing to move funds
- Waves of liquidations on lending protocols
Fees on Other Networks
Each network has its own fee design.
- Bitcoin: fees depend on the size of the transaction in bytes, not the amount sent. Users bid a rate per byte, and miners pick the highest bids first.
- Solana: a small fixed base fee per signature, plus an optional priority fee for faster inclusion. The Solana fee documentation describes both parts.
- BNB Chain and similar networks: the same gas model as Ethereum, with lower prices because blocks are larger and validators are fewer.
- Layer 2 networks: Arbitrum, Optimism, Base and others execute transactions on their own chain and post compressed data to Ethereum.
How Layer 2 Cuts the Cost
A rollup collects many transactions into a batch and posts a single compressed record to Ethereum. The cost of that record is shared by everyone in the batch. Each user pays a small execution fee on the Layer 2 plus a share of the Ethereum data cost.
The Dencun upgrade in March 2024 added blobs, a separate and cheaper kind of data space meant for rollups. Fees on most Layer 2 networks fell sharply afterward, often to a few cents or less per transaction.
How to Keep Fees Down
- Check the current gas price before you send. Most wallets show it.
- Wait if the transaction is not urgent. Weekends and quiet market hours are often cheaper.
- Use a Layer 2 when the application you need is available there.
- Combine actions where possible. One larger transfer costs the same gas as one small one.
Common Mistakes
- Holding only tokens and no native coin. You need ETH to pay gas on Ethereum, even to move USDC.
- Lowering the gas limit to save money. This causes failed transactions that still cost a fee.
- Bridging a small amount to a cheaper network when the bridge fee is larger than the savings.
Nothing in this article is financial advice.
Key Gas Facts
- Simple ETH transfer: 21,000 gas
- 1 gwei: 0.000000001 ETH
- Base fee: burned since August 2021
- Maximum base fee change: 12.5% per block
- Blobs for rollups: live since March 2024
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Gas is paid in each network's native coin, so the cost in dollars moves with that coin's price. The Ethereum price page shows the live ETH price and chart, and the converter turns a fee quoted in ETH into dollars. The DEX page shows active liquidity pools with their volume and liquidity.