Will your vehicles run without fuel? Could your machines run without power? Of course, Not! Ethereum (ETH) blockchain is no exception. The critical energy source for this digital asset is Ethereum Gas. What about it? When are Ethereum gas fees lowest? What are the possible alternatives? Woah! Enough questions! Let’s find some answers.
Ethereum gas fees
Ethereum is an open-source, decentralized blockchain that supports smart contract functionality. The platform’s currency is called Ether.
The Ethereum gas fee is on the rise again, draining everyone’s wallets. Having average gas fees for Ethereum transactions hovering over $63 in 2021, Ethereum transactions cost 20 times more than the industry average. Ethereum is becoming prohibitively expensive to use, making it unsuitable for most low-value transactions.
So, what’s Ethereum gas fees?
Gas fees in Ethereum represent the cost of keeping the network operational. ETH transactions are subject to a fee charged in gas. Gas fees vary according to supply and demand, set by the miners.
It depends on the factors like the market for gas, the computing power required for smart contracts, the volume of transactions, the smart contract’s size, etc.
Crypto investors are actually seeking ways to pay lower Ethereum gas fees to execute transactions. But, a low gas amount can cause a transaction to fail.
In other words, miners are not sufficiently rewarded for accepting and adding that transaction to the ledger. Often, the gas is expressed in gwei, which is ETH’s denomination.
One gigawei (gwei) is 1,000,000,000 wei, where wei is the smallest Ether unit base. A wei is equal to 10^18 ETH (0.000000000000000001 ETH). Thus, 1 Ether equals 1 billion gwei.
Okay, that’s confusing math. Let’s explore why ETH fluctuates, including exorbitant gas, and what is required to execute smart contracts.
What’s with the ETH gas fee fluctuations?
The demand and supply of Ethereum gas fees determine the prices most of the time. If miners don’t like the gas price, they can decline a transaction. As a result, gas prices fluctuate according to the relative computational power.
The “Ethereum gas limit” thus comes into play. Your gas limit is the maximum amount you will spend on a transaction. Gas limits let Ethereum miners know that a transaction needs more work and in other cases can also cause miners to overlook your transaction. Gas prices are high on certain days and times for this reason.
Let’s break it down with some examples. You order X food for Y amount of money. Similarly, an X amount of credit card swipe charges you some Y percent of the amount in processing fees.
In both ways, X measures utility, and Y indicates an action’s cost. On the network, a smart contract may have an ether value of X, with the gas price being Y. Simply put, Ethereum miners are reimbursed for their computing efforts.
What is the reason for such high fees?
When there is a high volume of activity, the gas fees can increase, and transactions may fail. What is the cause of these difficulties?
Ethereum’s popularity, perhaps.
Experts estimate that Ethereum’s value will increase by 400% in 2022. Gas fees increase as Ethereum demand rises. The platform needs more computational power to keep up with the growth, so miners favour transactions with higher gas fees.
DeFi is responsible
Ethereum – The first blockchain to create smart contracts. This created an opportunity for many developers to modify the app, leading to the creation of decentralized applications. The popularity of blockchain-based apps clogged up the network, and gas prices rose.
DeFi contributed heavily to the increase in ETH gas prices during 2020. The primary consensus mechanism of Ethereum is proof-of-work (PoW), which is a prohibitive foundation that does not scale. Averaging 15 transactions per second, transaction fees increase with network throughput.
Also, NFTs
New investors are finding their way into the world of NFTs through platforms such as Rarible and OpenSea. Do you remember the launch day of CryptoKitties DApp in 2017? The high on-chain activity simply choked the Ethereum network.
The event caused Ethereum network traffic to spike to all-time highs and significantly slowed down the platform as gas fees increased from 0.002 ETH to 0.008 ETH. It also contributed to NFT inflation, and gas prices skyrocketed, pushing investors to find the cheapest gas fees options.
When are ETH transaction fees lowest?
So, how to save some bucks on all of your Ethereum transactions? What if we say there are some best times and days to make the lowest gas fee transactions? And if there are other possible solutions?
On weekdays, 1 AM and 5 AM (UTC) is peak time and the most expensive. Of course, it’s working time for most of the US and Europe. Compared to that, the least crowded time is between 9 and 11 PM (UTC)-when most Americans are asleep, Europe is just getting started, and Asia is wrapping up work.
ETH is cheapest on Saturdays and Sundays from 6 AM to 7 AM (UTC) – that’s when you should make an ETH transaction. However, the worst times for the network are Tuesdays and Thursdays when network traffic is at its peak and gas fee is most expensive.
In other words, holding off on making purchases or paying less for low-priority transactions helps since you’ll receive a confirmation shortly about processing your transaction.
What are other possible solutions to reduce Ethereum gas fees?
Schedule your transactions wisely.
Although the average cost of an Ethereum transaction can vary significantly throughout the day or week, they are generally high.
So, if you don’t sense any immediate threat of waiting for the transaction, you are just saving 50% of the gas fees. Check for the time slots above where the network traffic is low and make your payments.
Layer-2 Solutions can feel your pain.
Layer-2 solutions can make trading effortless, efficient, reliable, and scalable. In a Layer 2 solution, transaction processing is offloaded to another network, and subsequent results are finalized on Ethereum’s main chain. More details are awaiting here!
Other L1 Blockchains are awaiting here!
The “Ethereum slayers” of 2021, or blockchains with ultra-low transaction fees and faster transaction speeds than Ethereum, were the most profitable sectors in that year. As these low-cost blockchains have grown in popularity and have attracted users, the corresponding ecosystem has also grown exponentially. The most popular low-fee blockchains are Avalanche and Solana.
So, that’s about it. Either sticking to the less popular times or switching to the alternative solutions is the key for the time being. But has the popularity gone any down for Ethereum? We doubt that. Despite the high transaction fees, users still believe it to be the best platform. Let’s see what the future holds. In the meanwhile, we still want to fuel your ignited minds. Grab some coffee and stay tuned for more interesting information, only on bitsCrunch!
