Ethereum is sick. The network is congested. Transactions have slowed, gas fees have skyrocketed, and if any more symptoms appear, the 2nd largest cryptocurrency by market cap will need to take a COVID-19 test before coming back to work.
In all seriousness, it has become more difficult than ever to use the Ethereum network. A number of traders having recently purchased the native token, Ether (ETH), find themselves unable to participate in the decentralized applications (dApps) built on the platform because of the outrageous gas fees charged by the network.
But what is gas, anyway? And how does gas work on the Ethereum network? Stick around and find out how you can pay less gas when trading your crypto.
What are Gas Fees?
Gas fees aren’t really a complicated idea. Using a proof-of-work consensus mechanism, Ethereum gas fees are paid to miners who work tirelessly to process your transactions. In this way, gas fees provide an incentive to those who secure the network by mining.
Thankfully, plans are in the works to update the Ethereum network to proof-of-stake. But in the meantime traders must pay a heavy price to trade ETH and ERC-20 tokens.
How Gas Fees Work
Gas fees are paid in ETH and are denoted in gwei. Gwei, itself a shortening of giga-wei, refers to a quantity of 1 million wei — the smallest unit of ETH.
A recent upgrade to Ethereum updated the network's fee mechanism to some extent. By making fees more predictable for traders — and burning a portion of the fees collected — the London upgrade has helped spur additional demand for the currency.
Despite the upgrade, gas fees remain incredibly high on the Ethereum network. And traders are increasingly searching for alternative smart contract platforms for trading their crypto.
Ethereum vs. Ethereum Competitors
Smart contracts and the platforms hosting them have revolutionized the altcoin market. And as the 1st blockchain to implement them, Ethereum has a few advantages over its competitors.
First and foremost, Ethereum has the largest number of dApps created on its platform. And among them are some of the largest cryptocurrencies by market cap.
Using the ERC-20 standard, the popular decentralized exchange (DEX), Uniswap (UNI) has helped push the price of ETH to new heights. And with an array of decentralized finance (DeFi) tokens available to swap on the DEX, Uniswap continues to garner the attention of new participants.
But alternative networks, while not as developed, have seen an explosion of interest lately. And as Ethereum gas fees climb, platforms like Cardano (ADA) and Solana (SOL) continue to eat into ETH’s market share.
Due to their innovative use of the proof-of-stake mechanism, these Ethereum killer platforms have increased throughput, lightning speed transactions and most importantly — cheap transaction fees.
Where to Buy Ethereum
As the 2nd largest cryptocurrency by market cap, ETH is available on most exchanges. And while the accessibility of the token helps expand the adoption of crypto, choosing a reputable trading platform among a crowded field has become more difficult.
While Coinbase remains the most popular U.S.-based exchange, a number of competitors with their own distinctive features come highly rated by discerning investors.
Voyager, a mobile brokerage with a fantastic altcoin selection, offers incredibly low fees to its members. Crypto.com, the industry’s fastest growing exchange, is offering terrific rewards for assets held on the trading platform.
Gemini, another fantastic exchange, offers best-in-class security and focuses on licensing and compliance as pillars of its platform. Whichever exchange you decide on, ETH will likely be prominently featured.
Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts.
Best Time to Pay Less Gas on Ethereum
If you’re ready to dive into the Ethereum network, one way you can save on gas is by watching the time. Ethereum gas fees fluctuate a lot and if you time your trades correctly, you can save considerable money on your transactions.
In short, Ethereum gas fees are cheapest when less people are using it. But before you stay up all night, remember that as North America sleeps, participants in Asia start trading. With that in mind, 3 a.m. EST is probably the best time to save money on Ethereum gas fees.
Alternative Ways to Save on Fees
- Polygon network
The Polygon (MATIC) network is a powerful Layer 2 solution. And with popular dApps like SushiSwap (SUSHI) deploying on the network, the ETH compatible side chain has become a favorite way for experienced traders to swap ERC-20 tokens.
- Optimistic Ethereum
Optimistic Ethereum is another Layer 2 solution available to savvy consumers. While generally less developed than the Polygon network, Optimistic Ethereum separates itself from competitors with a minimalist approach to their code, allowing any project to deploy with a single click. And now, Uniswap (UNI) has done just that.
- Arbitrum
Arbitrum was designed as an easy-to-use platform for developers to launch Scalable, Ethereum compatible smart contracts. Arbitrum is unique for its EVM-compatible rollups, allowing languages that can already compile to EVM work immediately, out of the box. Arbitrum doesn't have a token; instead it uses ETH to process transactions, similarly to Ethereum's mainnet.
- A different blockchain
These days, there are certainly no shortages in alternative blockchains. Cardano (ADA), Binance smart chain (BSC) and Solana (SOL) represent the most popular smart contract platforms competing with Ethereum.
Layer 1 vs. Layer 2 on Ethereum
While Ethereum itself is a Layer 1 smart contract platform, Layer 2 solutions to the network’s high fees have become increasingly popular. But low fees aren’t always the most important consideration when it comes to trading your crypto.
While scalability and cheap gas are fantastic reasons to use Layer 2 solutions, Layer 1 networks are inherently more secure. And because of the risks already involved with cryptocurrency trading, some participants feel more comfortable keeping their trades within the Ethereum network.
Keeping in mind that Ethereum 2.0 is going to help make the network that much more functional, it’s possible that some might want to come back to Ethereum as gas fees could drop. Or, at the very least, the increased functionality would make the token that much more valuable. Only time will tell.
Deciding the best way to save on Ethereum’s gas fees can be a highly personal choice. Often the decision comes down to your own comfortability and trading strategy. From proof-of-work blockchains to Layer 2 solutions and the options presented here, including the best time to use the Ethereum network, can help you save a lot of money.
Frequently Asked Questions
Is Ethereum a big cryptocurrency?
Yes, Ethereum is the second largest cryptocurrency by mert cap behind Bitcoin.
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About Micah C. Miracle
Before writing for Benzinga, Micah’s work was featured on a number of ranking news sites, including The Merkle, Global Coin Report and the Crypto Gazette.