Gas Fee

Gas fees are a key part of the economic incentive systems of many major smart contract networks, including Ethereum. Users pay these fees when submitting transactions, helping compensate network participants for processing activity.

Gas costs scale with the computational resources that each operation requires. A simple token transfer typically requires less computational work than a complex DeFi operation, and therefore typically incurs a lower gas fee. The gas limit specifies the maximum amount of gas a transaction is permitted to consume.

Gas fee rates depend on several factors. One is the network’s fee mechanism. For example, on Ethereum users pay for each unit of gas in a denomination known as gwei (gigawei), with each equal to one-billionth of an ETH. Each transaction can contain a base fee as well as a priority fee added by the user to expedite processing. Other networks use different models.

Another key factor determining gas prices is network activity. During periods of network congestion, users have to pay higher fees to have their transactions processed, as the network’s processing capacity is at a premium. During the DeFi rush of 2021, the average Ethereum gas fee reached over $70, making everyday usage prohibitively expensive.

For this reason, gas fees became a major point of competition among blockchains, with some costing less than a cent for simple transactions.

In recent years, gas fees have generally been trending down across the board as networks introduced upgrades to improve scalability. Ethereum itself has gone through several revisions to its fee mechanisms — such as in the 2021 London upgrade and 2024 Dencun upgrade — to bring gas costs down for users.