But why have gas prices on Ethereum climbed so much?

I can already hear you and I hear the complaints of people who want to invest and participate in different protocols on Ethereum but who are put off by excessive gas prices…

For the oldest among us, we can remember the good old days when gas costs were measured in cents. Yes, yes and it wasn’t that long ago anyway…

This increase in gas prices is relatively recent and it has only been a few months since the fees easily exceeded the actual amount of the transactions.

So to better understand this increase in gas, let's go back to basics.

What is gas on Ethereum

As a quick reminder of what gas fees are, tell yourself that they are the fees paid in ETH to execute a transaction on the network.

Thus, gas fees are used to pay for the computing power required to execute a transaction, record it and validate it on the blockchain. That’s how ethereum miners get paid, in case you were wondering 😉

That said, this is only part of the use of gas. It can also be used to launch Dapps and to store data on the blockchain among other things.

You should also know that when we talk about gas, we are talking about ETH. It is simply the name of the currency chosen to better express the correlation in terms of units of measurement. And to be more precise, gas on Ethereum is called "gwei".

It was necessary to do this because originally the costs had to be minimal and to avoid having to write many zeros on the figure, it was necessary to proceed by fraction of Ether.

In the same way that 0,001 BTC = 1 mBTC (micro-bitcoin which are widely used in online gaming platforms for example).

In short, for gas, it's the same thing. One gwei = 0,00000000001 ETH.

Also, you should know that gas contains two distinct elements:

• A gas limit: this is the maximum quality of gas that the user is willing to pay to pay for a transaction.
• The price of gas: again, it is the user who defines the amount of Gwei that he is willing to spend for each unit of gas.

Users are the ones who can set the gas limit they can "bear" to pay for a transaction. The more complex the transaction, the higher the gas fee it will require.

What must be understood by this is that of course it is the user who defines the limits and the price of gwei that he is ready to give to execute his transaction but if these limits are too low, then his transaction will not have priority. Basically, it will take longer for it to be executed.

Worse yet, ethereum miners can refuse the transaction if gas prices are not deemed profitable for them…

So why are fees increasing?

Now that we've quickly seen how gas fees work, it's time to get straight to the point.

In fact, the first answer we can give is that the more transactions there are on the network, the more gas prices increase. And, when there is network congestion, that's when prices skyrocket.

And, with the frenzies that we have seen recently, particularly with yield farming, the food tokens and especially on NFT, you can imagine that the network experienced a memorable peak.

We could even go further and mention the global lockdown which has certainly pushed investors to become more interested in and invest in cryptocurrencies. The confinement combined with the fact that DeFi has shown itself to be very innovative with very attractive rates of return displayed. All this has certainly contributed to the ever-growing enthusiasm for cryptocurrencies.

Finally, the stars were well aligned for cryptocurrencies, as we have seen.

And even if Binance SmartChain arrived as a nice alternative (in any case, cheaper), Ethereum remains the dominant network in DeFi.

The other explanation for the surge in gas prices can also be explained by the very model of Ethereum's current operation.

Indeed, the Ethereum model is that there is an auction for gas prices. It is the one who can pay the most who will somehow determine the accepted price. In times of congestion, miners choose to process transactions with larger gas fees. And, to carry out their transactions, people will then agree to pay more. And prices are soaring almost perpetually...

Will this calm down or is the situation inevitable?

In fact, Ethereum is very aware of this problem. High gas fees are not a good thing in absolute terms, especially if we want to democratize and make financial services accessible.

Currently, exchanging a single token for another token can cost you more than the transaction itself. Basically, if you want to exchange 20€ of ETH for OMG for example, well, it could cost you 23 euros!

So, this is why Ethereum wants to move from a Proof of work consensus to a Proof of stake consensus. It is much less expensive and does not require computing power that only suitable equipment can provide.

So what should we do in the meantime?

Be aware that you can reduce gas fees by making transactions when there are fewer people on the network. For example, at night or during the week, the costs are lower.

Likewise, you can also turn to Binance Smart Chain for example or other blockchains which offer lower network fees for example.

Or, you can keep your ETH safe and wait until the new version can reduce fees.

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