5 tips to save on Ethereum gas fees
Updated: Nov 3, 2021
With demand for the Ethereum network hitting new highs, Ethereum gas prices have become somewhat painful. With significant transaction fees for even the simplest of transactions can eat into your profits and can be infuriating for any crypto enthusiast who is looking to utilize the network. This short article explores several strategies that you can adopt to lower and mitigate your gas expenses.
Ethereum Gas 101
Gas is a fundamental component of the Ethereum network. Simply put, it is the amount of ETH that users pay to perform an activity on the network. On a more technical level, gas is a unit of measurement that tracks how much it costs to execute computation for a specific action on Ethereum. For example sending ETH from one address to another, trading a DeFi token, minting an NFT, or deploying a smart contract on the blockchain.
You might be wondering: why have gas fees at all. Well, they actually play an important role in helping Ethereum operate effectively as the gas fees prevent spam transactions as well as pay miners (and soon stakers with the merger of Eth2) in return for securing the network.
Gas is how you are able to access decentralized computation on Ethereum, and it’s also part of what makes this computation possible. Gas is denominated in Gwei, which is the equivalent to 0.000000001 ETH.
If you hear someone saying “gas is 70 right now,” they are referring to the fact that you can expect to successfully complete an Ethereum transaction for ~70 Gwei. However, this doesn’t mean you multiply 70 by 0.000000001 ETH to determine the gas fee. This is where Ethereum’s gas limit comes into effect.
The gas limit, which is currently 15 million units, determines a c
eiling for how much gas can be spent in one Ethereum block on the blockchain. There is also a gas limit for particular types of transactions, for example a basic ETH transfer from one address to another has a gas limit of 21,000 units.
So to calculate the gas fee of a particular activity, you simply take a transaction’s gas limit and multiply it by the current gwei price.
Let’s consider there is a 21,000 gas limit and the amount of Gwei needed to perform the transaction is 50 Gwei.
To calculate the gas fee:
50 x 0.000000001 ETH = 0.00105 ETH. Therefore at an Ethereum price of say $3000 x 0.00105 = $3.15
Why has gas been expensive recently?
In order to access Ethereum’s block space one has to pay ETH (gas fees) . With the rise in popularity of DeFi and NFTs, Ethereum’s block space has become increasingly more valuable as the demand for block space has increased considerably recently . Consequently, gas prices have risen dramatically. That’s because gas prices are effectively determined by demand for block space which is a result of an auction-like process in which users “bid” with their willingness to pay for inclusion (i.e. set the gas fees) and th
en miners (and later stakers) accept and order transactions as they see fit.
By agreeing to pay a higher gas fee it ensures that you have a better chance of having your transaction processed quickly. Therefore in periods where many users are trying to access Ethereum block space, gas prices tend to spike upward as people raise their bids as to what they’re willing to pay to use Ethereum and have their transactions completed in a timely manner. Due to the increase in popularity of cryptocurrency in 2021 and in particular the different platforms and protocols that run on it, more often than not Ethereum blocks are full!
How to save on Ethereum gas fees
There are some truly remarkable applications, protocols and platforms operating on the Ethereum network, however it can be extremely frustrating at times. With demand for Ethereum so high and gas fees being so pricey, many people are simply getting priced out of being able to interact in the space.
Ethereum is currently in the process of building and transitioning to Ethereum 2.0 which should solve its scaling solution. There currently isn’t a clear date as to when this will roll out, however once completed expensive gas prices will hopefully no longer be of cause for concern. For now they remain a concern while Ethereum goes through its transitional period. Additionally, there are several strategies and processes one can adopt today that can significantly mitigate your gas expenditure. With a little bit of research and work, you can quickly become smart about gas and stop spending more ETH than is necessary when you want to use the Ethereum network. So with all that said, let’s take a look at the best ways to currently save on gas!
1. Optimize the timing of your transaction
Ethereum gas prices can fluctuate considerably intraday as different on-chain events take place and as different parts of the world wake up and look to become active.
As such, there are certain times where, on average, gas prices are typically lower. If you take these times into consideration and target them for when you will perform your transactions, that could be a good starting point in being able to lower your gas expenses. So…when are the best times to transact?
Generally speaking, gas prices are higher during the work week and lower on Saturdays and Sundays, so one easy thing to do is look to batch your transactions on the weekends.
As for actual time of day calculations, a recent report from Paxful determined the following:
“The busiest times and therefore, the most expensive times, are from 8 AM to 1 PM (EST). This comes as no surprise because Europe and the US are all fully awake and at work during that period. By contrast, the least busy time is between midnight to 4 AM (EST) —the time the people in the US are asleep, Europe is just about to start their day, while Asia is finishing up their workday.”
Analytics tools such as what Ethereum Price displays allow users to assess a week’s worth of network activity in line with their local time zone and determine the best time to undertake their transactions. The chart below, which shows results in GMT for a recent week, reveals that the weekend was quieter than weekdays, while weekday afternoons were the busiest.
So if you transact during these daily windows your gas expenses stand a good chance of being lower than they would be otherwise!
2. Organize your transaction types efficiently
As has already been mentioned every transaction requires gas to complete, and different types of transactions require different amounts of gas. If for example you are an active DeFi user, perhaps you could consider combining related transactions whenever possible so as to save on gas fees.
For example, if you have two Ethereum addresses, Account1 and Account2, each containing 1,000 tokens. You want to lock all of the tokens into a vault for a brand new Dapp to earn a yield on them. However doing this from each address separately will require twice that amount of gas. Instead, consider transferring the tokens in Account2 to Account1, and then lock all 2,000 tokens in the vault at the same time and therefore save on fees.
Similarly, let’s assume that you adopt a Dollar Cost Average strategy and every week you look to purchase an additional 1,000 tokens and then lock them in your vault. Naturally each transaction would require a certain amount of ETH. In order to save some money, first do some simple math: If the value of the new tokens you will earn over the course of that week in yield is less than the gas fee, consider waiting until a later date to lock a combined amount of tokens.
While these strategies may be considered simple, they are also easy to overlook.
3. Calculate the gas fees according to the conditions
If network traffic is high and you can’t (or don’t want to) wait to make a transaction, you can try to come close to correctly estimating the amount of gas needed to complete it. While most Ethereum wallets provide users with an estimate of both the gas fee amount and the time needed to confirm a transaction, those numbers are just estimates and, importantly, don’t take into account real-time network conditions.
Most Ethereum wallets allow users to select an estimate of the gas fee based on the speed of the transaction.
Therefore, tools such as Gas Now and Etherscan’s Gas Tracker may help to prevent users from overpaying based on the wallet-provided transaction fee and speed estimates. These sites analyze the Ethereum network’s pending transactions queue and display the different fees users might need to pay to ensure a transaction is confirmed within a certain timeframe. Ensuring a transaction confirms almost immediately can be significantly more expensive than submitting a low-priority transaction. However, please be aware that if you select the slowest setting when the network is busy can result in the transaction failing. If a transaction is not time-sensitive, a user can check a tracking tool, and then go back to their wallet and choose a preferred speed and corresponding fee. The MetaMask wallet, for example, offers three speed options (Slow, Average, or Fast), as illustrated.
Alternatively, wallet “Advanced Options,” when offered, allow users to manually enter the maximum gas fee they are willing to pay, rather than accept one of the standard options.
4. Use gas tokens
Essentially you can mint gas tokens when gas prices are low and then redeem them when they are high, at which point you receive a refund in ETH to help cover your gas expenses.
Gas tokens work because of a storage refund system ultilised on the Ethereum network. This refunds Ethereum users that delete storage variables and encourages people not to over burden Ethereum’s state.
So with gas tokens, you can effectively take a snapshot of Ethereum’s state at the time of low gas prices and then basically unlock that state when gas prices are higher to receive an ETH refund. The result being cheaper transactions!
Gas tokens do however clog up Ethereum’s state size and can lead to inefficient gas pricing, so it it quite possible that they will be phased out in the coming years. In the meantime, they can lower your gas expenses so don’t ignore them now, especially if you undertake a lot of transactions
For example, a couple of popular gas token projects are GasToken.io with its GST2 token and CHI that was introduced by the 1inch decentralized exchange. They both work very similarly in that they create extremely simple smart contracts which are later destroyed, providing a gas refund.
To use either of these tokens, you simply navigate to their “Contract” page on EtherScan and call the “Mint” and “Free” functions. Whenever you “free” your tokens, you will receive a refund in ETH that will help cover your gas costs.
5. Strategize transactions through DeFi Saver
What if you could test out and simulate transactions without actually carrying them out, this way you can get an idea of what you’ll incur, and play around with, how much gas you’ll pay before you have to actually pay it? Well this is possible by utilising DeFi Saver’s new Recipe Creator and Simulation Mode!
So how does the process work? Basically you use the Recipe Creator to line up different types of Ethereum activities you might look to perform and then you run the Simulation Mode to test them out without paying any gas fees.
Naturally this system isn’t a direct way for saving gas, however it is a means for you to fine-tune your transactions and that can help to mitigate gas costs in the long run.
Thankfully high ETH gas prices aren’t a permanent concern. With the introduction of scaling solutions as well as Eth 2.0, the prices will eventually come down quite considerably in the future.
For now unfortunately we have to just accept with these prices and operate smarter and more efficiently. So the next time you have to perform an Ethereum transaction, don’t enter into it without giving it some thought and consideration. At a bare minimum check what time of day it is. You can save yourself a lot of ETH just by being more mindful as to how you approach gas now!
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