When you first start trading on Ethereum, you will probably encounter a Gas Limit. So what is Gas Limit and how is ETH gas fee calculated on the Ethereum network?
When using a wallet Metamask to buy a certain token on Uniswap you will probably see a Gas Limit of 21,000 and a Gas Price of 200. So what does that mean?
In fact, when making a transaction, the platform or wallet you are using will automatically optimize the transaction fee for you.
But during peak times such as when people rush to claim 400 free UNI for example, the fees will go up to record highs causing the transaction to fail.
So you have to make adjustments in order to trade successfully.
Fees are a very important part of the Ethereum network.
It helps the blockchain to work stably. It also has the effect of protecting the network from attacks because it will be very expensive to harm the system.
What is Gas?
As we all know Ethereum is a huge network of computers connected to each other. Ether (ETH) is the currency of this blockchain.
Gas is a unit of measurement for the calculation of transactions or Smart Contracts arising in the Ethereum network.
Gas can be considered as fuel for the network to operate. It is similar to the electrical energy consumed in a household.
Why need Gas?
Some people will ask why not use ETH as a transaction fee but go through Gas?
The answer is that the price of ETH fluctuates too much.
For example, when ETH is priced at $10 you can spend 0.5 ETH ~ $5 for transaction fees but if ETH goes to $10,000, 0.5 ETH will be $500.
Are you willing to pay $500 for 1 transaction?
That is why the system of charging transaction fees through Gas was born. It helps to separate the computational cost from the price of ETH.
As I said above, in most cases Gas is set automatically. You only have to adjust manually when the demand for transactions in the system increases, leading to an increase in Gas prices.
Since miners (miners) often choose transactions with higher gas fees to execute, if you pay too low fees, you will have to wait a long time. While you may be in urgent need of that transaction.
In general, transaction fees and network congestion are always a headache for everyone. Especially when it matters. It threatens the growth of the DeFi trend.
Gas (transaction fee) = gasLimit * gasPrice * 1/109
I will explain below.
What is Gas Limit?
Gas Limit is the maximum amount of Gas you are willing to pay for a particular transaction.
The standard Gas Limit number is 21,000. This is the minimum amount of Gas to ensure your transaction will be completed and you do not need to worry too much.
The more complex the transaction, the higher the Gas Limit. For example, transactions in Smart Contracts can be up to 100,000, 200,000…
Why Gas Limit is needed?
This is a spending limit that protects you in the event of code or Smart Contract failures.
For example, if you send 1 ETH without a destination, it will run around in the system, draining your money.
I compare it like this for you to understand…
When you go out and you put in your pocket 10 million, no matter how much you play, you can't exceed that amount. It's the limit that helps you stop.
Gas Limit is too low
When you set the Gas Limit too low, the miner still executes but when you run out of Gas, the transaction is halted.
The transaction is returned to the original state, but the lost Gas cannot be recovered.
It is used to pay for the system's resources and the miner's computing power.
So, whether a transaction succeeds or fails, you also have to pay the Gas fee. But the failed transaction pays less.
So you always remember that 1 successful high gas transaction is better than 3 failed low fee transactions.
Not to mention that you will be very inhibited and miss the golden opportunity in investment.
Charging a fee for a failed transaction helps:
- Prevent endless loop attacks.
- Increase the efficiency of the network.
- Energy for system resources.
Gas Limit is too high
It is unnecessary for you to pay the Gas Limit too high. If you set the Gas Limit too high, the unused Gas will be returned to you.
What is Gas Price?
This is the amount you are willing to pay for 1 unit of Gas as above.
For example, if the Gas Limit is 21,000, how much do you want to pay for 1 unit of that 21,000. Gas Price is calculated in GWEI.
1 GWEI = 1 / 109 ETH (1 part per billion)
For example, Gas Limit is 21,000, Gas Price is 600, the way to calculate ETH gas fee for the transaction will be:
Gas (transaction fee) = gasLimit * gasPrice * 1/109
=> Gas = 21,000 * 600 * 1/109 = 0.00126 ETH
Then, depending on the ETH price at the time of the transaction, you can convert it to USDT for easy estimation.
For example, 1 ETH is currently priced at $3,000, then the above gas fee will be 0.00126 * 3,000 = $3.78
How to check Gas Price
If Gas Limit is quite fixed, Gas Price always fluctuates according to market demand. So how to check the Gas Price at the time you are trading?
Note that Gas Limit if you set it too high, the unused portion will be returned, but Gas Price will be lost no matter how high you set it.
But if it is too low, the transaction will have to wait a long time for the Pending transaction.
There are many ways you can check Gas Price:
Note that you can set a little higher for a quick and smooth transaction.
So I just went through what is Gas Limit, what is Gas Price and how to calculate ETH gas fee for any transaction on Ethereum.