🧬Why Ethereum Transaction Costs Are So High & How to Lower Them (2024)

📌Key Notes:

-Transaction fees in Ethereum depend on blockchain congestion and operation complexity. Despite a large user base, Ethereum’s limited processing capacity leads to high fees. The Merge upgrade hasn’t changed this.

-The magnitude of fees in Ethereum is determined by the gas limit assigned to a particular operation and the current gas price.

-There exist several primary strategies to mitigate fees within the Ethereum network. These strategies encompass leveraging the network during periods of reduced activity, experimenting with transaction simulations or aggregations, and exploring alternative approaches.

-One well-liked approach for diminishing transaction fees concerning Ethereum assets involves the adoption of Second-Layer (L2) solutions and sidechains.

Gas in Ethereum is the term for computational resources needed for operations, like token transfers and smart contract interactions.

Gas prices are in Gwei (0.000000001 ETH).

(Updated information: As of today, March 8th, 2024, here’s a breakdown of gas prices:

• Low: 57 Gwei (around $4.55)
• Average: 57 Gwei (around $4.55)
• High: 60 Gwei (around $4.79)).

The required resources vary with Ethereum’s congestion and operation complexity, resulting in a gas limit, like fuel for a trip. Transaction fees are the gas limit multiplied by Gwei price. For example, 21,000 gas units at 14 Gwei equals a fee of 0.000294 ETH.

Ethereum is the most used blockchain, with hundreds of popular apps, but its performance hasn’t improved since 2015, falling behind modern projects like Polkadot, Solana, and Algorand. This leads to consistently high fees, especially for smart contract operations.

After The Merge in the Ethereum network, transaction fees didn’t change significantly. The main change was the reduction in block time from 14–15 seconds to 12 seconds, improving network speed by approximately 20% and slightly alleviating congestion.

It is expected that by the end of this year, the Shanghai hard fork will introduce changes to the fee calculation mechanisms at the blockchain’s base level, potentially helping to lower fees. Additionally, the implementation of sharding and “rollup” technologies is planned, which could increase the network’s throughput to 100,000 transactions per second and further reduce transaction fees.

Despite the high fees on the Ethereum network, there are ways to reduce transaction costs right now. You can utilize second-layer solutions like Arbitrum, Optimism, Loopring, ZKSync, Boba Network, and Aztec Network. These protocols leverage “rollup” technology, allowing transactions to occur off the main Ethereum network and then aggregating them into larger groups. This reduces network congestion and lowers transaction fees.

Commissions for transfers and swaps of tokens in Ethereum and L2 projects

Choose a time when the network is less congested. Services like Ethereum Price can provide statistics on network congestion, and typically, lower fees are observed on Monday during the first half of the day.

Some crypto wallets, such as Metamask or Burrito, allow manual adjustment of transaction fees when sending transfers. However, be cautious not to set fees below the recommended minimum, as this could result in the transaction not being processed.

-Simulate transactions before sending them. Use helper services like Tenderly and DeFI Saver to estimate the actual cost of your transactions.

-Consider using other blockchains that offer cheaper transactions and faster transfer speeds. EVM-compatible networks like Matic (Polygon), and Fantom have similar ecosystems to Ethereum. There are also independent projects like Solana, Cardano etc.

-Utilize specialized applications like Balancer that can aggregate transactions from multiple users, reducing fees for each participant. Some DeFi projects offer discounts and other incentives for transactions within the Ethereum ecosystem.

Metamask Gas Fee Settings

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