What Is Gas Fee?
Gas fees are payments that users make to have their transactions processed on a blockchain. On Ethereum, gas is denominated in 'gwei' (a billionth of an ETH); fees vary based on network demand and transaction complexity. Simple ETH transfers cost less than complex DeFi interactions.
Gas prices spike during network congestion — periods when many users want to transact, such as during high-volatility moves, NFT mints, or new protocol launches. A swap that costs $5 in gas during quiet times might cost $80+ during peak congestion. This makes small trades uneconomical at peak times.
Layer 2 solutions (Arbitrum, Optimism, Base) and alternative L1s (Solana, BSC) emerged largely to address gas costs. Sub-cent fees on Solana enabled use cases impossible on Ethereum mainnet. The tradeoff is varying degrees of decentralization, security, and tooling maturity across these alternatives.
Related terms
- DeFi (Decentralized Finance) — Financial applications built on blockchain without traditional intermediaries.
- AMM (Automated Market Maker) — Smart contract that lets users trade against a pool of assets without counterparties.
- Slippage — The difference between the expected fill price of an order and the actual execution price.