If you are trading on a decentralized exchange based on the Ethereum platform, Binance Smart Chain BSC, etc., then you must be interested in Gas fees. In particular, the transaction fees on the Ethereum platform are quite high and that is a big barrier for most retail players.
What is gas fee (Gwei)?
Gas is a fee, a unit of measurement for the computation of transactions or smart contract execution on the Ethereum blockchain platform or Binance smart chain BSC…
Gas is used to allocate resources of the virtual machine and the unit of measure of Gas used is Gwei. Gwei represents trading speed, high Gwei makes your transactions prioritized by miners to process first.
The nature of the Gas fee generated is to pay for the corresponding computational workload. Thus, Gas transaction fees are simply payments made by users in exchange for the amount of computation needed to process and validate transactions on platforms.
Gas fee is not fixed, but depends on each transaction, from time to time. And the value of the gas fee is determined by the network’s miners, who can refuse to process the transaction if the value of the gas does not meet their desired level.
How to optimize gas fee?
In fact, Gas fees of some platforms are very high (maybe $10-$50/transaction), typically the Ethereum network. It is this that has caused some major obstacles.
Total cost of a transaction = Gas Limit * Gas Price
- Gas Limit is a cost limit because it is the maximum amount of Gas units that you are willing to spend on that transaction.
- Gas Price is how much you pay for each unit of rapid increase or decrease your transaction will be mined. If you want to pay less fees for a transaction, you can reduce the amount you pay per unit of Gas..
While the widespread adoption of layer 2 scaling solutions and later ETH 2.0 can really fix the situation, a few tricks below can still help you save on gas costs.
The simplest trick is to avoid making trades during certain times of the day. New research from Flipside Crypto shows that the Ethereum blockchain displays fairly specific congestion patterns that savvy users can exploit to pay less.
Ethereum Average Hourly Fee | Source: Flipside Crypto
Analysts sampled average fees on Ethereum starting January 1, 2020. The bars represent the average where most data points are located, while the dots represent outliers.
The chart shows that, on average, the Ethereum blockchain is busiest between 8 p.m. and around 1 a.m., which corresponds to the early US session between 8 a.m. and 1 p.m. EST. This is not coincidental, as during that period, both Europe and the US are working hours.
In contrast, the least busy period is from 4 am to 6 am (Vietnam time). This also makes sense – the US business day is coming to an end, Europe is getting ready for bed, while in Asia, it’s still dawn. In addition to the lower mean, the evening UTC time period also has fewer outliers.
Useful information to wait for periods of high activity or send a transaction with a lower fee with confidence knowing it will be confirmed in a few hours. The latter trick is only useful for low-priority transactions like token transfers, while it is discouraged for certain DeFi protocols.
Notably, decentralized exchanges are often bad targets for low-priority transactions. A slippage protection setting can mean that by the time the trade is confirmed, the price has naturally moved from the original point and the transaction fails, completely wasting gas. Some DeFi protocols also have internal checks to reject transactions older than a few minutes.
Use gas fee reduction tokens
In addition to simply waiting, some tricks can also help significantly reduce gas costs. For example, the 1inch.exchange decentralized exchange’s Chi GasToken is designed to reduce the total gas consumed by a particular transaction. The token acts as a discount storage mechanism, users should buy Chi when gas is cheap and use it when gas increases. Chi can also be purchased just like any other token on Uniswap. In addition, Chi Gastoken is designed to automatically redeem and burn tokens to reduce the circulating supply to balance the price.
Depending on the needs of the user, certain solutions can help avoid high gas costs. Some layer 2 solutions like Zk Sync, OMG’s Plasma, Matic or xDai offload transactions to another ledger, allowing for virtually free token transfers after an initial setup cost. For transactions, Loopring and DeversiFi offer unattended transactions with essentially zero gas fees.
Such alternative platforms are showing lower adoption and may not be suitable for everyone, but they are also the only realistic path to reducing congestion once and for all.