Gas Fees Crypto Explained

To maintain and increase readability, gas fees were incorporated into the decentralized system of transaction management in the Blockchain ecosystem.
Riddhi D.
7:42 6th Jan, 2023

So, now let's start by understanding what does gas fee mean in crypto.

Introduction to Gas Fees Crypto

Gas Fee is the fee being charged by the blockchain network for validation of your transactions on the network. Talking about the technical meaning of this word, on the Ethereum blockchain, gas is the charge needed to complete a transaction or carry out a contract.

The smallest possible units of the cryptocurrency ether (ETH), known as GWEI, are used to price fees. Validators are compensated with gas for the materials required to complete transactions.

Gas fees Zelta
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These fees may simply be referred to as transaction fees, miner fees, or anything similar in other cryptocurrencies. However, the term "gas" is frequently used to describe the costs associated with carrying out work on other blockchains because Ethereum is presently the second-largest cryptocurrency by market cap.

Supply, demand, and network capacity at the moment of the transaction all affect the gas' actual Price.

In order to reward miners for their efforts in maintaining and protecting the blockchain, the idea of gas was first developed.

Gas fees were introduced as the incentive for staking ETH and taking part in validation once the proof of stake algorithm was launched; the more a person has staked, the more they can earn, i.e. the more you will invest, the more you will earn.

These gas fees can also be referred to as the Price per unit of the total investment or work done by the user.

But, you must be wondering what the need to introduce these Gas Fees was.

Need for Gas Cryptocurrency:

The answer to this question can be better understood by understanding the overall working of the Gas Fees, the cryptocurrency miners who use their computers to validate blocks of transactions on the Ethereum blockchain network receive the gas fees.

This fee is treated as a service charge for the Ethereum validators in exchange for staking their ETH and validating blocks, which are both crucial activities in the process of processing and verifying transactions on the network.

This, in total, gives you insights about how the working goes hand in hand with the requirements of the gas fees. Now, moving forward, let's see how are gas fees calculated

How are Gas Fees Caalculated? Zelta
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One of the easiest and least expensive transactions is the payment or transfer of Ether from one account to the other. The creation of a Non-Fungible Token (NFT) or the creation and execution of a smart contract are two more processes that result in gas fees.

Click Here To Learn More About NFTs

Since the Gas fee is also referred to as work done per unit transactions or work, and it is calculated using the formula i.e.

Gas Fee = Gas Limit * Gas Price Per Unit.  

Let's start understanding by taking a numerical example for the same,

If the computation involves the Gas cap = 30,000 while the Price per unit = 400 gwei, it will give you the equation of  30,000 * 400 = 12,000,000 gwei or 0.012 ETH.

Now, you must be wondering what is gwei.

Don't worry; we have got you covered; Gwei is a combined name taken from the combination of two words, Giga (a unit of measurement) and wei(smallest denomination of Ether).

We can also refer to gwei as a unit which is used on the digital coin Ethereum network, Ether (ETH). Gwei is also known as nanoether since nano is a prefix that means one billionth of anything.

Because "gas" pricing is expressed in gwei, it is the most widely used ether unit. This must have given a clear picture of what Gwei is.

GWEI Zelta
Credits to CoinSwitch

Till this point of the article, you got to know everything about these Gas Fee from how these are calculated to what they actually are but as an investor, it must be triggering a thought in your mind that paying these gas fees above the transactions is so expensive and in what terms will it help you as an investor since you are only one paying here.

This is because, even though the cryptocurrency market can be seen as highly speculative and investors should proceed with care, gas fees give you a reason to keep coins like Ethereum on your radar.

As an Ether investor, you have the option to stake your holdings and profit from gas prices. And with changing times, these passive incomes also fluctuate greatly over time.

This means that it relishes you on both sides of the coin, i.e. whether you are an investor or even if you are a trader, it will keep something ready in hand for you.


The expense of launching a transfer or smart contract on the Eth network is known as "gas" in the cryptocurrency world. The network charge and a gas limit are combined to form the gas fee, which is paid in ether.

For instance, multiplying your transaction size by the number of transactions you intend to perform will give you the gas charge calculation.

In simple words, If you want to send 1 Ethereum coin with a single transaction, you will need to multiply 1 ETH by the number of transactions you want to send which will identify the gas fees for the transaction.

The charge for transactions and smart contracts on the Ethereum network is known as the network fee. The gas limit determines how much gas may be used in a particular transaction or smart contract.