Understanding Gas Fees and How to Optimize Transactions

If you have ever tried to swap a token, mint an NFT, or send some Ethereum (ETH) to a friend, you have probably had a moment where you stared at the gas fee and thought “that cannot be right.” One minute the fee is a couple of dollars, and the next it is twenty. Sometimes more. The price seems to change at random, and if you do not understand what is driving those numbers, it is easy to either overpay or have your transaction sit in limbo for hours.

Gas fees are not actually random, though. They follow a logic that makes a lot of sense once you see how the pieces fit together. If you are still getting familiar with how blockchain technology works, understanding gas fees is a good next step because they affect every single transaction you make. This guide will break down what gas fees are, why they fluctuate so much, and what you can do to avoid paying more than you need to.

What Are Gas Fees?

Every time you do something on a blockchain, whether that is sending crypto, interacting with a smart contract, or minting something, the network has to verify and process that action. The computers doing that work (validators, in Ethereum’s case) need to be compensated for the resources they are using. Gas fees are that compensation.

Think of it like postage. You want to send a package (your transaction), and the postal service (the network) charges you based on how heavy and complex that package is. A simple letter costs less than a bulky parcel. Similarly, a straightforward ETH transfer is cheaper to process than a multi-step smart contract interaction.

The term “gas” comes from the Ethereum network, which popularized the concept. Every action on Ethereum is assigned a gas cost that reflects how much computational work the network needs to do. A basic ETH transfer costs around 21,000 gas units. Something like a Uniswap token swap might cost 150,000 gas units or more, depending on how many steps the smart contract involves.

How Ethereum Gas Fees Are Calculated

The math behind gas fees confused a lot of people before Ethereum’s EIP-1559 upgrade in 2021, and honestly, it still trips people up. But there are really only three numbers you need to understand to make sense of what you are paying.

Gas Units

This is the amount of computational work your transaction requires. You do not set this number yourself. It is determined by what you are asking the network to do. Simple transfers use fewer gas units. Complex operations like deploying a smart contract or interacting with a DeFi protocol use more.

Base Fee

The base fee is the minimum price per unit of gas at any given moment. Ethereum adjusts this automatically with every block based on how full the previous block was. If blocks are consistently more than 50% full, the base fee increases. If they are under 50%, it decreases. This adjustment can be up to 12.5% per block, which is why fees can ramp up quickly during high-traffic periods.

One important detail here is that the base fee gets burned. It does not go to validators. This was introduced with EIP-1559 and it means that during periods of heavy usage, more ETH is being destroyed than created, making the overall supply deflationary.

Priority Fee (Tip)

The priority fee is essentially a tip you add on top of the base fee to incentivize validators to pick up your transaction faster. During calm periods, even a tip of 1-2 gwei is usually enough. When the network is congested, you might need to tip significantly more if you want your transaction processed quickly.

Putting It Together

Your total fee is calculated as follows.

Total Gas Fee = Gas Units x (Base Fee + Priority Fee)

So if you are doing a basic ETH transfer (21,000 gas units) and the base fee is 20 gwei with a 2 gwei tip, you are looking at 21,000 x 22 = 462,000 gwei, which is about 0.000462 ETH. At an ETH price of $3,000, that works out to roughly $1.39. Not bad. But during a popular NFT mint when the base fee spikes to 200 gwei, that same transfer jumps to around $13.23. The transaction is identical, but the network conditions changed.

Why Gas Fees Fluctuate So Much

Gas fees are driven by supply and demand for block space. Ethereum can only process a limited number of transactions per block (roughly every 12 seconds), so when more people want in than the network can handle, they start outbidding each other.

The biggest spikes usually happen during high-profile NFT drops (the Bored Ape Yacht Club mint in 2022 famously pushed gas to over 8,000 gwei), sudden market crashes or rallies where everyone rushes to sell or buy, the launch of a new token or DeFi protocol, and airdrops where thousands of users try to claim tokens at the same time.

The type of transaction also matters. A standard ETH transfer is cheap because it does not require much computation. But a multi-hop swap on a DEX aggregator, a smart contract deployment, or a complex DeFi strategy that involves staking, borrowing, and swapping in one transaction can easily cost 5-10 times as much in gas. If you are active in the DeFi space, this is something you will run into constantly.

Time of day plays a role as well. Gas fees tend to be lower during off-peak hours, which generally means late night to early morning UTC (roughly 2:00 AM to 8:00 AM). Weekends also tend to be cheaper. This is not a hard rule, but if you are not in a hurry, timing your transactions during these windows can save you a noticeable amount.

Practical Ways to Reduce Your Gas Costs

You do not have to accept high gas fees as a fact of life. There are several strategies that can meaningfully cut what you pay, and none of them require advanced technical knowledge. Here are the ones that make the biggest difference.

Time Your Transactions

This is the simplest and most effective approach. If your transaction is not time-sensitive, wait for a lull. Tools like Etherscan’s Gas Tracker show you the current base fee and give you a historical chart so you can spot patterns. Blocknative’s Gas Estimator is another solid option that provides real-time predictions for how much you should expect to pay.

To give you a sense of the difference, during a congested period you might see a base fee of 50-100+ gwei. During a quiet stretch, it can drop to 8-15 gwei. For a complex DeFi transaction using 200,000 gas units, that is the difference between paying $30 and paying $5.

Use Layer-2 Networks

Layer-2 (L2) networks like Arbitrum, Optimism, Base, and Polygon process transactions off the Ethereum mainnet and then settle them in batches. This dramatically reduces the cost per transaction.

How dramatic? A Uniswap swap on Ethereum mainnet might cost $5-15 in gas during normal conditions. The same swap on Arbitrum typically costs less than $0.50, and on some L2s it can be under $0.10. The trade-off is that you need to bridge your assets to the L2 first (which involves a mainnet transaction and its associated gas fee), but once you are there, the savings add up fast if you are an active user.

Most popular DeFi protocols and NFT platforms already operate on one or more L2 networks, so you are unlikely to lose access to the tools you use. Some newer crypto projects are even launching directly on L2s to avoid mainnet fees altogether. If you are doing more than a few transactions a week, moving to an L2 is probably the single biggest cost saver available to you.

Set Your Priority Fee Carefully

Most wallets like MetaMask give you three speed presets for your transaction (slow, average, and fast). The difference between them is the priority fee you are offering validators. During quiet periods, there is very little reason to choose “fast” because even a minimal tip will get your transaction included in the next block or two.

MetaMask also lets you set custom gas fees if you go into the advanced settings. If you understand the current base fee and network conditions, you can often set a lower max fee than what the wallet suggests by default. Just be careful not to set it too low, or your transaction might get stuck. If you are still getting comfortable with how crypto wallets work, it is worth spending some time with the default settings before experimenting with custom values.

Batch Your Transactions

Some dApps and smart contracts allow you to combine multiple actions into a single transaction. For example, instead of doing separate “approve” and “swap” transactions (each paying its own gas fee), some DEXs let you do both in one go. DeFi aggregators like Zapper or DeBank can bundle multiple DeFi actions together.

If you are managing a portfolio across several protocols, look for platforms that support multi-call transactions. The gas savings from combining even two or three actions can be significant over time, especially if you are doing this regularly.

Choose Gas-Efficient Protocols

Not all smart contracts are created equal. Some protocols are written with gas efficiency as a priority, while others are bloated and expensive to interact with. Uniswap V3, for instance, is more gas-efficient than V2 for many types of swaps. Newer protocols that have been built with gas optimization in mind will generally cost less per interaction.

You can compare the gas costs of similar protocols by checking their average transaction costs on Etherscan. If two DEXs offer roughly the same rates on a swap but one consistently costs less gas, it makes sense to use that one.

Gas Fees Beyond Ethereum

Ethereum is not the only blockchain that charges transaction fees, but it is the one where fees are most noticeable because of high demand and limited throughput. Other networks handle things differently.

Solana, for example, has a completely different fee structure. Transactions typically cost a fraction of a cent, partly because the network can handle thousands of transactions per second. The downside is that Solana has historically experienced more outages under extreme load. You can read more about Solana’s technical architecture and trade-offs if you are considering it as an alternative. BNB Chain (formerly Binance Smart Chain) also offers very low fees, usually under $0.10, though it achieves this partly through a more centralized validator set.

Bitcoin has its own version of gas fees, simply called transaction fees, which are based on the size of the transaction in bytes rather than computational complexity. These can also spike during busy periods, though the dynamics are different from Ethereum’s.

If Ethereum’s gas fees are a consistent pain point for you and the apps you use are available on other chains, it is worth exploring whether those alternatives fit your needs. The process of exchanging between different cryptocurrencies has also become much simpler in recent years, which makes switching between networks less of a hassle than it used to be.

Final Thoughts

Gas fees are one of those things in crypto that seem completely opaque until you understand the mechanics. Once you know that fees are driven by network demand, that the base fee adjusts automatically, and that your priority tip controls how fast you get processed, the whole system starts to make a lot more sense.

The most practical takeaway is that you do not have to accept high fees as a given. Timing your transactions during off-peak hours, using Layer-2 networks for regular activity, being smart about your priority fee settings, and choosing gas-efficient protocols can all add up to meaningful savings. None of these approaches require advanced technical knowledge. They just require a little patience and awareness of what is happening on the network.

Ethereum’s developers are continuing to work on upgrades that should bring fees down further over time. Proto-danksharding (EIP-4844), which went live in March 2024, has already made L2 transactions significantly cheaper. More improvements are in the pipeline. But in the meantime, the strategies above should keep your wallet from taking unnecessary hits.