Gas may perplex many crypto traders, especially those new to the field. In blockchain, gas refers to the fees users pay to interact with a blockchain, whether transferring their crypto assets, lending new ones on a DeFi platform, etc. Because these fees vary based on network demand and transaction urgency, they can be tricky to navigate.
Let’s delve into this concept and the challenges related to it.
Gas Fees Significance and Estimation
The term gas comes from the Ethereum network, where it was first used to describe co-called transaction fees, the term preferred in many other blockchains, including Bitcoin. Gas fees refer to the cost that blockchain users pay to network validators every time they want to perform a function on the blockchain. The purpose of gas is to compensate validators for their work and incentivize them to continue working.
Gas fees may seem utterly unpredictable from one minute to the next, making it difficult for users to understand how they work. However, there is a way to assess the amount you need to pay. Let’s look at Ethereum as an example.
After Ethereum’s London upgrade, the total gas fee is calculated by multiplying a base fee, which can be checked using Etherscan, by gas units (also called gas limits), which depend on the complexity of the transaction but do not fall short of 21,000. In addition, a tip for validators (also known as a priority fee) is included to incentivize validators to pick up your operation for processing.
Perfectly aware of the complex and time-consuming nature of such estimations and their negative influence on crypto adoption, many DeFi projects are working on streamlining gas payments to create a more user-friendly and efficient blockchain space.
Impacting Factors
Network congestion is one of the most commonly discussed factors impacting gas prices. It happens when there is an upsurge in demand for network resources, which leads to a decrease in network speed and an accumulation of transactions that require processing. As a result, users compete for validation resources by raising gas fees so that their trades can be executed within a reasonable time.
So, the urgency of a transaction is also critical. Users who wish to expedite their trades can choose to prioritize their transactions, while others can wait for the demand to die down. However, remember that higher gas prices do not always equal faster processing, and there may always be someone else with an even higher offering.
Another crucial factor influencing gas costs is the complexity of transactions. The more complex an operation is, the more gas will be required to compensate for the additional computational resources needed for its execution. Therefore, users should take this into account when estimating trading costs.
Common Gas-Related Issues & Ways to Mitigate Them
Gas payments can be a challenge to navigate, as noted earlier. One of the difficulties is estimating the appropriate gas price, which can lead to overpayment or underpayment and delayed transactions in adverse scenarios. Gas is expensive, even during average blockchain activity, and when network congestion occurs, gas fees can become unreasonably excessive, making transactions too costly for users. The third problem is the need for specific native coins for gas payments. Gas payments are blockchain fees paid in each particular chain’s original cryptocurrencies, meaning that crypto traders must store various coins in their wallets and manage them carefully.
There are a couple of strategies crypto traders can embrace to avoid overpaying for gas. Firstly, they can utilize gas fee tracker tools to monitor network conditions in real time and set gas prices accordingly. Secondly, users can also choose platforms and services with built-in gas solutions, such as Kinetex’s Gasless innovation, which has a slippage tolerance feature that ensures users do not overspend while trading. It also allows them to make gas payments in a variety of supported tokens, streamlining the swapping experience.
Developers can approach gas-related problems from multiple angles. They can explore various scaling solutions, particularly Layer 2s, to make networks more robust and adapted to the higher demand, thus helping decrease gas fees. Developers can also implement optimization techniques in smart contract development. Such techniques may include using efficient algorithms, minimizing data storage, and reducing computation complexity, which can also be accomplished with the help of zero-knowledge technology.
Conclusion
Understanding the intricacies of gas fees is a vital skill for all crypto owners. The ongoing progress and advancements in blockchain solutions are positive indicators for the future of DeFi, which is expected to be more simplified, accessible, and efficient. Kinetex is at the forefront of these positive changes, creating solutions that make swapping crypto assets more convenient and favorable cost-wise. The team implemented the gasless flaw in both Liquidity Aggregation and Flash Trade modes of the Kinetex dApp to assist users in paying gas fees in the most effortless way possible.
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