Gas and Fees

Gas is essential to the Ethereum network. Like oxygen is necessary for humans to exist, Gas is the air that allows Ethereum to operate. It might sound an historical word, as Gas stands for fuel, in the same way that cars for some more years might need gasoline to run.


Gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network. Since each Ethereum transaction requires computational resources to execute, each transaction requires a fee. Gas refers to the fee required to successfully conduct a transaction on Ethereum.

Gas fees are paid in Ethereum's native currency, ether (ETH). Gas prices are denoted in Gwei, which itself is a denomination of ETH

Who Sets Ethereum Fees

Ethereum users send transactions with requested gas prices and then miners choose which transactions they want to mine into a block. In this sense, Ethereum gas prices are dynamic and the result of an equilibrium being reached between what users bid and what miners accept on a rolling basis.

You can compute the cost of an Ethereum transaction fee at any time by multiplying the current gas price by the current Ethereum gas limit (i.e. gas price * gas limit = transaction cost).

What Is the Ethereum Gas Limit?

A key component of the Ethereum gas system is the Ethereum gas limit. In the context of transactions, the gas limit is the maximum amount of gas units you are willing to spend on a transaction. This ceiling is used to ensure transactions are executed, and since you won’t always pay the maximum amount, any unused ETH is returned to your wallet.

For basic ETH transactions, a standard gas limit is 21,000. So for example, let’s consider a hypothetical generic transaction sent when the gas price is 100 gwei. We can compute this transaction’s cost by multiplying 21,000 (gas limit) x 100 (gas price) x 0.000000001 (gwei denomination), with the result being 0.0021 ETH. Relatedly, gas limits for smart contract token transfers can range from 25,000 to as high as 500,000.