Beginner Basics: Why does Gas Matter?
By RocketFuel Team
What Are Gas Fees?
Think of gas fees as the fuel for your blockchain transactions. Whenever you send crypto, trade an NFT, or interact with a smart contract, you pay a small fee to power that action on the network. In simple terms, a gas fee is the blockchain’s transaction fee, the cost to get your transaction “mined” or validated and included in the ledger.
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On networks like Ethereum, these fees are paid in the blockchain’s native coin (for Ethereum that’s Ether) and often denominated in tiny units like Gwei (1 Gwei = 0.000000001 ETH). Gas isn’t a literal gasoline, but the metaphor works: it’s the fuel that validators (miners or stakers) charge to process your transaction. This fee compensates them for the computing work and helps secure the network
If there were no fees, nobody would have an incentive to validate transactions, and spammers could overload the system with free transactions
A simple analogy: Imagine a blockchain as a busy highway and your transaction as a car. Gas fees are like toll payments. If the highway is crowded (network busy), toll prices rise to prioritize cars willing to pay more. If it’s midnight with no traffic, tolls might cost almost nothing. Gas fees work the same way, they fluctuate based on supply and demand on the network. During peak usage or network congestion, users offer higher fees (like bidding) to get miners to include their transactions sooner. At off-peak times, you can get away with paying less and still have a speedy transaction.
Why Do These Fees Exist?
It may seem annoying to pay a fee on top of everything else, but gas/transaction fees serve important purposes:
Incentivizing Validators: Fees are a reward for the people (or computers) who validate and secure the blockchain. For example, Bitcoin miners receive your transaction fees (plus block rewards) as payment for confirming transactions. Similarly, Ethereum’s validators earn gas fees for processing operations. No fees would mean no reason for them to spend time and electricity to run the network
Preventing Spam: Fees impose a tiny cost for each action. This discourages someone from flooding the network with millions of bogus transactions because it would get very expensive. In other words, requiring gas is like putting a postage stamp on a letter, it prevents someone from endlessly sending junk mail for free
Allocating Resources: Different transactions consume different amounts of computing power. Complex operations (like interacting with a DeFi smart contract) require more “gas” (computing steps) than a simple crypto transfer. Gas fees ensure you pay proportionally for the resources you use. If you want to do a million calculations on Ethereum, you’ll need to pay more gas than someone doing a basic one-step send. This way, heavy users contribute more to network upkeep. 🤔
In short, transaction fees keep the network secure and efficient. They’re not there to nickel-and-dime you, but to make sure the blockchain can run reliably.
Not All Blockchains Are Created Equal
Here’s where things get interesting: fees vary wildly across different blockchains. Each blockchain has its own design, capacity, and demand – leading to different fee levels. Some are known for being expensive (but maybe very secure or decentralized), while others are ultra-cheap (often due to higher throughput or different consensus mechanisms). Let’s compare a few popular ones:
Different blockchains have different “road conditions” – some can handle lots of traffic with low fees, while others get congested and pricey.
To give you a sense, here are the current average transaction fees (in USD) on some well-known Layer 1 blockchains:
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Average fees are approximate and fluctuate. Speeds are rough estimates of how quickly transactions finalize.
Looking at the table, you can see the contrast. Bitcoin prioritizes security over speed, so it processes fewer transactions per block, which can lead to higher fees when the network is busy. In late 2024, Bitcoin fees averaged around $1–$2 per transaction, but they have been as high as $60+ during past congestion. Ethereum, being the go-to platform for NFTs and DeFi, saw fees skyrocket during peak hype (over $20 at times in 2024) but recent upgrades and quieter markets have brought the average down to well under $1. Still, when a new meme coin or NFT drop is clogging Ethereum, you will notice higher gas prices!
On the other hand, Solana’s fees are almost invisible – just a few ten-thousandths of a dollar. You could do thousands of Solana transactions and barely spend a penny in fees. Solana achieves this with a high-speed design (proof-of-history + proof-of-stake) that handles a huge volume of transactions, keeping costs per transaction extremely low. Similarly, XRP was built for quick bank transfers, so it’s optimized to be dirt cheap and fast for moving funds.
Blockchains like Binance Smart Chain (BSC) and Avalanche fall somewhere in between – they offer much lower fees than Ethereum by having faster block times or bigger throughput. For example, Avalanche’s average cost is only a few cents, making it far more affordable for frequent usage than Ethereum L1. BSC (now often just called BNB Chain) targets low fees (under $0.20 on average) to attract users who were priced out of Ethereum during high-fee eras.
Why the differences? It comes down to technical design and demand:
Block size / throughput: Solana and others process many more transactions per second than Bitcoin or Ethereum, so the cost is split among more users, keeping fees low.
Consensus mechanism: Some networks (like Solana, Avalanche) use efficient proof-of-stake variants or other innovations that reduce the work needed per transaction, lowering costs.
On-chain demand: If a blockchain is the hot place to mint NFTs (like Ethereum was in early 2021), demand can exceed supply of block space, bidding up fees. Less congested networks stay cheap.
Economic policy: Some chains subsidize or burn fees. For instance, Solana burns a portion of fees, and others like Ethereum burn base fees (after EIP-1559) which can indirectly affect fee dynamics.
In essence, each blockchain is like a different city’s traffic system — some have wide open freeways, others have toll roads, others get jam-packed at rush hour.
Layer 2 to the Rescue: Cheaper Alternatives
If you’ve heard complaints about Ethereum’s gas fees, you’ve likely also heard of Layer 2 solutions. Layer 2s (L2s) are networks built on top of a Layer 1 blockchain (like Ethereum) to help process transactions more efficiently and at lower cost. They bundle up transactions off-chain, then write the result back to the main chain, splitting the fee among many users.
Two popular L2 examples are Arbitrum and Optimism on Ethereum. They use a tech called optimistic rollups to batch many Ethereum transactions into one. The result? Way lower fees for you when using an L2.
Currently, doing a basic token transfer on Arbitrum or Optimism might cost only a few cents to maybe 10–20 cents, versus, say, $0.50 on Ethereum L1. In fact, after a major Ethereum upgrade in late 2024 (called Dencun), Arbitrum’s average fee dropped to around $0.15 per transaction. Optimism is in a similar ballpark, often just a few cents or tens of cents per action. Some data even shows Arbitrum is slightly cheaper than Optimism on average (about $0.10 vs $0.14), but both are dramatically more affordable than using Ethereum L1 for equivalent tasks.
The trade-off is that when you use an L2, you might have to bridge your funds to that network first (which itself is an L1 transaction and has a fee), and occasionally wait a bit longer for final confirmation (especially if moving funds back to Layer 1, sometimes there’s a delay). But for most users doing regular DeFi, NFT trading, or games, L2s feel just like using Ethereum but with nearly negligible fees. For example, a simple swap on an Arbitrum-based decentralized exchange will cost pennies in gas, whereas on Ethereum mainnet the same swap might have been a few dollars in gas.
Other L2s and sidechains (like Polygon, zkSync, etc.) also compete to bring fees down. Polygon’s chain, for instance, often costs well under $0.01 for transactions by having its own validator set and high throughput. The bottom line for beginners: if you find Ethereum fees too high, check if your wallet or app supports a Layer 2 network. It could save you a bundle, especially for small transactions.
Why Fees Matter to You (Yes, You!)
If you’re a first-time crypto buyer or just starting to dabble in NFTs or DeFi, you might wonder why all this fuss about fees. Here’s why it’s important:
Budgeting for Transactions: When you buy your first $50 of Bitcoin or Ether, you don’t want to lose a big chunk to fees. On some exchanges or networks, you might pay $1–$5 in network fees to withdraw your crypto to your own wallet. Knowing the typical fee helps you decide how much to transfer or which network to use (for example, using a cheaper chain for moving funds). If Bitcoin fees are high that day and you only have a small amount to send, you might choose an alternative like Litecoin or Solana for that transfer to keep costs low.
NFT and DeFi Costs: Imagine you want to purchase a $20 NFT on Ethereum. If the gas fee to execute that purchase is $15 at that moment, the fee is almost as much as the item! Fees can make small-value trades uneconomical. Beginners often get sticker shock seeing, say, a $30 gas fee to send an NFT. By understanding fees, you can time your activity for when network demand is lower (fees tend to drop on weekends or off-peak times) or use Layer 2 networks to mint/trade NFTs much cheaper. Many NFT platforms now support Layer 2 or alternative chains (like Polygon or Solana) precisely to cater to users who don’t want to pay high Ethereum fees. 💸
Using DApps: If you’re trying DeFi (decentralized finance) protocols, every interaction (swapping tokens, adding liquidity, claiming rewards) will incur a transaction fee. For a newbie experimenting with $100, paying a $10 fee for each action on Ethereum can quickly eat your funds. In contrast, doing the same on a low-fee chain means you can experiment freely without burning cash on fees. It’s like learning to drive in a free parking lot versus a pricey toll road. Understanding where fees are high or low lets you choose the right platform for your needs and budget.
Avoiding Surprises: Crypto is all about being your own bank, but that also means being aware of “hidden” costs. If you only ever use centralized exchanges, you might not encounter network fees much. But the moment you venture into the world of personal wallets and on-chain transactions, fees are an essential factor. Being prepared (and setting your wallet gas settings appropriately) will save you from frustration. Nobody likes finding out their $100 USDC transfer became $99 because of a $1 network fee they didn’t anticipate.
In summary, fees matter because they affect how you use crypto day-to-day. However, don’t let them scare you off, in many cases, especially with today’s options, you have choices to minimize what you pay.
Note from Jeff: In general, gas fees are one of the few actual “use cases” where the coin holds value. After all, if you need the coin to use the chain, then that must be worth something right? Now that there are so many alternatives for lower fees, one may need to wonder where else value is derived from these coins. Sure, it costs money to make transactions or to deploy apps, but if it becomes nearly $0 to do everything, is the coin actually worth much?