Key points
- The cost of transactions on Ethereum depends on network congestion and the complexity of the operation. Ethereum has many users but limited throughput—this keeps demand high and fees elevated. The activation of The Merge did not change that.
- Fees are calculated from the gas limit required for a given operation and the prevailing gas price.
- There are several ways to reduce fees: use the network during off-peak periods, simulate or aggregate transactions, among others.
- Popular ways to cut costs for Ethereum-asset transfers include layer-2 solutions and sidechains.
What is gas in Ethereum?
“Gas” in Ethereum denotes the amount of computing resources required to execute an operation. A token transfer or the issuance of a new asset, deploying or interacting with a smart contract—all such actions consume resources of the virtual machine. Their amount is measured in gas.
The gas price is quoted in gwei, which is a small denomination of ether equal to 0.00000001 ETH.
The amount of computing resources needed for a transaction is not fixed and depends on Ethereum’s network load as well as the complexity of the operation.
Hence the notion of a gas limit: the amount of computing resources required to carry out a transaction, whether swapping assets in a DeFi protocol or sending USDT ERC‑20 between addresses. You can think of the gas limit as the litres of petrol needed to travel from point A to point B.
The transaction cost is calculated by multiplying the required gas limit by the gas price in gwei. If your transaction needs 21,000 units of gas and the market gas price is 14 gwei, the fee will be 0.000294 ETH.
As of 19 October 2022, sending USDT on Ethereum from one address to another required about $0.91 in gas, while a more complex operation—such as swapping assets on the decentralised exchange Uniswap—cost around $3.11.
After the London hard fork in August 2021, Ethereum’s fee structure changed. It introduced a burn mechanism and elastic block sizes that adjust to network load. A detailed fee-calculation scheme is published on the Ethereum Foundation website.
Ethereum remains the most used blockchain protocol, hosting hundreds of popular applications. Its throughput, however, has not changed much since its 2015 launch and lags newer projects such as Polkadot, Solana and Algorand. That keeps fees high—especially for smart-contract operations.
How did fees change after The Merge?
Since Ethereum’s transition to Proof‑of‑Stake, the mechanisms that determine transaction fees have not changed. The only indirect effect on costs may come from shorter block times. Before the activation of The Merge, blocks were produced every 14–15 seconds; after the merge, the interval fell to 12 seconds. Ethereum became roughly 20% faster, which can modestly ease network load.
The first post‑Merge upgrade aimed at lowering fees by changing base‑layer pricing mechanics is expected in the second half of 2023 as part of the Shanghai hard fork.
Subsequent upgrades envisage sharding and broader use of rollups. According to Vitalik Buterin, this could lift throughput to 100,000 transactions per second while reducing fees on Ethereum.
Layer‑2 solutions
Although Ethereum fees remain high and a full fix is some way off, there are ways to pay less today. A wide range of layer‑two protocols aim to bring fees down.
Ethereum L2 solutions are based on rollups (Rollups): transactions occur off the main Ethereum chain, are batched together and only then settled on the base layer. Popular L2 projects include Arbitrum, Optimism, Loopring, ZKSync, Boba Network and Aztec Network.
| Network | Send ETH | Swaps |
| Ethereum | $1.22 | $6.09 |
| Loopring | $0.05 | $0.32 |
| ZKSync | $0.06 | $0.32 |
| Arbitrum One | $0.07 | $0.19 |
| Boba Network | $0.19 | $0.32 |
| Optimism | $0.21 | $0.31 |
Sidechains in Ethereum use independent security and consensus, effectively operating as separate networks. Like L2s, sidechains aim to increase throughput and cut costs for assets from the “parent” network. The most popular Ethereum sidechains include Matic (Polygon PoS), Gnosis Chain and Loom Network.
Other ways to reduce fees on Ethereum
- Pick off‑peak times. The Ethereumprice service tracks this. Its data currently suggest that Monday morning is the cheapest time to send transactions.
- Some wallets (for example, MyEtherWallet and MetaMask) allow you to set fees manually. Do not go below the minimum recommended amount, or the transaction may fail to execute.
- Simulate transactions. Before sending, estimate the real cost with helper services such as Tenderly and DeFi Saver, which emulate your transactions.
- Consider other blockchains with cheaper and faster transfers. EVM‑compatible networks such as BNB Chain, Matic (Polygon PoS) or Fantom have ecosystems similar to Ethereum’s. There are also independent projects such as Solana, Cardano and Near.
- Use specialised applications such as Balancer that can aggregate multiple users’ transactions, lowering the fee per user. Some DeFi projects offer discounts and other bonuses for operations with Ethereum‑ecosystem assets.