Analysis of Ethereum Gas Fees: From Unit to Pricing Logic

The following will discuss the relevant contents of Ethereum Gas fee from unit to pricing logic:

Gas's unit

The basic unit of Gas is wei, which is the smallest subdivision unit of Ether. In practice, larger units are usually used to represent the Gas price, such as Gwei, 1 Gwei = 10^9 wei. This unit system is designed to facilitate more intuitive processing and representation of small expense amounts in the Ethereum network, as Gas prices are usually a relatively small value, but in large quantities of transactions or complex calculations, their total amount can have a significant impact on the cost of users.

Pricing logic of Gas fee

• Transaction demand and network congestion: The transaction processing capacity of the Ethereum network is limited. When transaction demand is strong and the network is congested, miners have more choices and will give priority to high-priced transactions for packaging to obtain higher returns. At this time, the price of Gas will rise to balance the supply and demand relationship of the transaction. For example, during the peak interaction periods of some popular DeFi applications (decentralized financial applications) or when there are large smart contract deployments, the number of transactions in the network increases significantly, and the price of Gas may rise rapidly. According to statistics, in some extreme cases, the price of Gas may be several times or even dozens of times higher than usual. On the contrary, when the network is idle and transaction demand is low, the price of Gas will drop because miners will accept transactions with lower Gas prices in order to package enough transactions.
• Transaction complexity: Different types of transactions consume different amounts of Gas, which will also affect the pricing of Gas fees. Simple Ether transfer transactions only involve basic account balance updates. They are relatively simple and consume less gas, usually around 21,000 gas. Complex smart contract calls, especially transactions that contain a large number of computing, storage operations or involve multiple contract interactions, require more gas. For example, the creation of trading pairs of some decentralized exchanges, complex financial derivative contract operations, etc. may require hundreds of thousands or even millions of gases. Because these complex transactions take up more network computing resources and storage space, miners need to make more efforts to verify and package it, so they will charge higher gas fees.
• Limits of block Gas Limit: Each block on Ethereum has a Gas Limit limitation, that is, the total amount of Gas that each block can accommodate is limited. It's like a container with a fixed capacity, and when a transaction fills the container, the new transaction needs to wait for the next block. In this case, the Gas price will be affected by the block Gas Limit. If the Gas Limit of the current block is about to be used up and there are still a large number of transactions waiting to be processed, then subsequent transactions need to increase the Gas price to attract miners in order to be packaged into the next block. On the contrary, if there is still more remaining in the block Gas Limit, the price of Gas may be relatively stable or decline.

Pricing of Ethereum Gas Fee is a complex dynamic process that is affected by a combination of multiple factors. When users conduct Ethereum transactions, they need to set the Gas price reasonably according to the actual situation to ensure that the transaction can be processed in a timely manner and avoid paying excessive fees.