Ethereum is bursting at the seams – thanks to DeFi Since the launch of the uniswap token UNI, network fees have reached a new high. Coinbase Pro has now pulled the rip cord.
Ethereum is more in demand than ever: As a first mover among smart contract platforms, the network has established itself as the standard for decentralized applications (dApps). In addition to the Smart Contract compatibility, this is also due to the fact that the ERC-20 standard Ethereum made it comparatively easy to create new “crypto currencies”. The problem: Ethereum has been reaching the limits of its scalability for quite some time. With corresponding consequences for the network fees, which are called gas fees at Ethereum.
Gas fees accrue with every transaction in Ethereum – this applies to Ether, the native currency of the Ethereum block chain, as well as to Altcoins, which are based on one of the Ethereum standards. In addition to transactions, i.e. moving ether and tokens, each calculation operation of a Smart Contract costs gas – the more complex, the higher the gas price. The Ethereum Yellow Paper contains a list of gas charges for individual functions of a Smart Contract.
The gas fees are paid in ETH,. To avoid confusion, the gas fees are usually denoted in Gwei. One Gwei corresponds to 0.000000001 ETH – a “nanoether”. A standard transaction requires at least 21,000 gas units. Ethereum users have the possibility to determine how much they want to pay for a gas unit. They can also increase the “Gas Price Limit” above the minimum value of 21,000. This gives the desired transaction a better chance of being processed by the miners, i.e. those who provide the computing power.
The principle of competition prevails: the Ethereum Miners prefer the blocks with which they can earn the most gas fees. If the Ethereum network is particularly busy – which is usually the case – the Ethereum Miners have the luxury of being able to put less profitable blocks on the back burner. So if you want to see your Ethereum transaction completed quickly, you should have deeper pockets.