Ethereum (ETH) Gas Prices Explained
Ethereum gas and gas prices are among the topics that inevitably come up when we talk about the world’s second-largest blockchain network and there is a good
Ethereum gas fees explained
The Ethereum gas limit
Essentially, gas fees are one of the mechanisms rewarding network participants for doing computational work on the Ethereum network. Users who want to transfer ETH or run contracts on Ethereum include such fees to incentivize miners to process and validate their transactions faster. Users can also set a ‘gas limit’, which indicates how much they are willing to spend on a transaction. Any gas that remains unused in a transaction is returned to the user.
The gas limit also serves as a safeguard against bad actors spamming the network, as it prevents accidental or hostile infinite loops or other waste of computational resources due to unoptimized code.
Ethereum gas price
The rising gas price is one of the main causes of concern within the Ethereum community today. Since miners are inherently incentivized to process transactions that include higher fees, users need to pay more gas if they want to avoid lengthy waiting periods. The recent increase in activity on Ethereum, combined with the network’s limited scalability has only exacerbated the problem. According to Etherscan, the average Ethereum gas price currently stands at around 54 gwei, which is nearly five times higher than what it was a year ago. Not to mention that the price of Ether currently sits at around an all-time high of more than $2,300, which makes transactions on Ethereum even costlier.
The high gas price is one of the reasons driving users and blockchain projects to seek Ethereum alternatives (link to the Ethereum alternatives piece). Earlier this year, Enjin, a blockchain platform for non-fungible tokens, announced that it was moving from Ethereum to a Polkadot parachain, citing the high gas fees as the primary reason for the decision.
Meanwhile, the Ethereum developers community is coming up with different ways to solve these issues. Considerable efforts are focused on so-called Layer 2 solutions like ZK rollups and Plasma, which aim to lower the load on the main Ethereum chain, thus helping improve processing capacity and lowering fees. You can read more about the most promising Layer 2 scaling solutions here.