Gas Fee is one of the first things you need to pay attention to when you want to start your crypto investment journey. It is an important factor in the operation of blockchain platforms. Let's learn with Finhay what Gas Fee is, what types of Gas Fees there are, and how to use Gas Fee effectively.
What is Gas Fee?
Gas Fee (or Gas Fee) is the fee paid to the blockchain platform to execute transactions or interact with smart contracts. Gas is a special unit used to measure the level of activity on the platform. In other words, it is the computing resources that respond to a given task.
What types of gas fees are there?
Gas Fee types are divided according to features, nature, usage, operating platform, etc. Here are the most common types of gas fees and how to distinguish them.
What is Gas Limit?
In simple terms, this is a Gas Limit, which is the maximum amount of gas a user is willing to pay for a transaction or blockchain function. In other words, Gas Limit is the maximum value that the platform can take from a user when making a transaction. This is a protection mechanism to prevent smart contract errors or miscalculations from wasting users' money.
Example: On Ethereum, a typical transaction has a Gas Limit of 21,000 gas units.
The time and form of the transaction are factors that affect the value of Gas Limit. For some exchanges and e-wallets, Gas Limit is an automatically set function. However, in some other cases, users can also actively adjust this value manually according to the needs of each user.
If you set the Gas Limit too low, there is a risk that there will not be enough Gas for the validator/miner to confirm your transaction. Initially, the transaction is still verified and processed. However, when there is not enough Gas to confirm the transaction, the platform will stop performing the action you requested. This situation is called "running out of gas".
When there is not enough gas, your transaction will be considered invalid and rejected, and the previously spent gas will not be refunded to the account. This means that you always have to pay gas fees for each transaction, regardless of whether the transaction is successful or not.
If you set the Gas Limit too high, the Gas Fee you need to pay for each transaction will also be higher.
What is Gas Price?
The fee that the user is willing to pay for each unit of gas is called the Gas Price, and this fee can also be customized according to user needs.
Most blockchain platforms today use an auction mechanism to manage and prioritize transactions to be processed first. Specifically, the validator/miner will search for and select the transaction with the highest Gas Price. Transactions are then processed in descending order.
The auction mechanism helps ensure market fairness and allows more entities to participate in providing computing power, thereby promoting healthy competition and increasing the security of the blockchain.
This mechanism allows your transaction to be verified by validators/miners faster when you pay a higher Gas Price than others. On the other hand, if the Gas Price is too low, it will take a long time to confirm or even fail because no verification is received.
Distinguishing between Gas Limit and Gas Price
To understand in detail what Gas Fee is, you need to know how to distinguish between Gas Limit and Gas Price. The way to distinguish between these two types of gas fees is very simple, you can think of it as follows:
If the transaction wallet you make on the blockchain is a car, then Gas Fee is the fee you have to pay to refuel that car. At this time, Gas Limit is how many liters/units of gasoline you want to fill your car with (you can fill the tank up or fill it to the level you want), and Gas Price is the price per liter/unit of gasoline. For example, on Ethereum, Gas Price will be calculated in Gwei.
How to calculate your gas bill
The calculation formula of Gas Fee is as follows:
Gas Fee = Gas Limit x Gas Price
Continuing with the example above, 20,000 gas units (Gas Limit) costs 20 Gwei/gas (Gas Price).
即 Gas Fee = 20,000 × 20 = 400,000 Gwei = 0.0004 ETH。
Therefore, the total gas fee you have to pay is 400,000 Gwei or 0.0004 ETH.
The remaining gas after the transaction will be returned to the user's account on the principle of not exceeding 1/2 of the gas consumed by the transaction.
Why is Gas Fee required?
First, when you pay Gas Fee to make a transaction on a blockchain platform, you are paying fees to the validators/miners who are responsible for verifying your transaction. The responsibility of the validators/miners is to maintain the operation and ensure the security of the blockchain. Without them, the network will not exist.
The second purpose of Gas Fee is to ensure the security of the platform, requiring users to pay a fee for each transaction to help developers prevent bad guys from spamming and causing network congestion.
Third, current blockchains all have their own tokens, so requiring users to pay Gas Fee will help create an incentive to increase the price of the token and maintain the stability and long-term development of the blockchain.
Fourth, the Gas Fee pricing mechanism helps ensure that fees are used in the most reasonable way. It prevents resources from being wasted on activities that have no value to the blockchain platform.
Current blockchain gas fees
Typically, Gas Fees on the blockchain will be paid using the platform's own token. Therefore, Gas Fees will be paid in different currencies depending on the platform you use. Examples from some of the most popular crypto platforms today:
If you want to trade on Binance Smart Chain: You need to pay Gas Fee with BNB.
If you want to trade on Ethereum: You need to pay the Gas Fee in ETH.
If you want to make a transaction on Solana: You need to pay the Gas Fee in SOL.
04 Tips to help you save gas fees when trading
Limiting gas waste and maximizing Gas Fee have always been a concern for traders. In addition to understanding what Gas Fee is, you can also apply the following 04 tips:
Simplify transaction steps
More complex transactions mean more computing resources are consumed. Validators/miners will have to work harder to complete transaction verification for you. Therefore, transactions involving multiple steps will cost more Gas Fee than simple transactions. Simplifying transactions is the first step to saving Gas Fee.
Estimated Gas Limit for Transactions
Setting a high Gas Price will give you priority in validating transactions. Also, set the Gas Limit higher than the estimated value to ensure that the transaction is not rejected due to running out of gas. However, if both of these gas are too high, it will also cost a lot more than usual.
To avoid wasting gas, you can use some supporting websites such as BSCscan for Binance Smart Chain or EtherScan for Ethereum to estimate the Gas Limit and Gas Price at the time of transaction. From there, there is a reasonable adjustment. The Gas Limit level only needs to be slightly higher than the estimated value to avoid running out of gas.
Limit transactions when gas prices are too high
As mentioned above, Gas Price often changes depending on the time of day and transaction demand on the network. Gas Price tends to be higher when the network is active and lower when the network is inefficient.
Based on this rule, you should limit transactions when the Gas Price is too high. Therefore, you don't need to charge too much for each transaction. Now most platforms support providing reference information of Gas Price for your reference.
Avoid confusing Gas Price/Gas Limit with the amount of tokens you are trading
Since Gas Price and Gas Limit are also one of the factors that you can customize as needed, there are many cases where users confuse Gas Price/Gas Limit with the amount of tokens they want to trade, thus consuming too much Gas. . You should carefully check the details of the transaction before starting to execute it.
The above is the answer to the question of what is Gas Fee, as well as some basic information about how to use each type of Gas. Gas Fee plays an important role in maintaining the operation of the platform. The tasks of each Gas Fee are different, but the main purpose is still to ensure the fairness and efficiency of the platform. In addition, traders also need to know how to use each type of gas effectively to avoid waste and maximize profits.
