Ethereum Gas fees Explained

| November 17, 2023

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Ethereum Gas fees

You must have paid a cut or a fee while transacting over the Ethereum blockchain. That fee is also referred to as “gas”. You might be wondering, what is gas? What is the gas fee? Or, why does it cost so much? What is GFS? Or, how can you bring down gas costs? How can you calculate gas fees? Before answering all your questions, let’s understand some of the key concepts related to Ethereum Gas fees.

Key Takeaways

  • Users pay gas fees to execute a wide range of functions on the Ethereum blockchain.
  • Gas fees are used to compensate miners in order to process and validate transactions on the Ethereum blockchain.
  • The gas prices fluctuate based on the demand and supply for the network’s validation requests.

What is Gas Fees?

Gas is a metric or a unit of measurement that helps determine the net amount of computational effort needed to process and execute a set of operations or transactions on any blockchain.

What Is ETH (Ethereum) Gas Fee?

The ETH gas fee is a specific amount charged on every transaction executed over the Ethereum network. But, why do you need Eth Gas? Paying gas fees is essential since processing transactions over the distributed network is a computationally intensive task.


Gas fees are utilized by Ethereum Virtual Machine EVM to deploy, execute, and manage smart contracts in a decentralized way. Whether the transaction was successful or a failure, you are required to pay the transaction fee. Gas fees are essential because without charging gas fees – the Ethereum blockchain network won’t be able to function properly.


On the Ethereum blockchain, the gas fee is denominated in small fractions of the ETH (ether) also known as ‘Gwei’ (1 billion Gwei = 1 ETH or 1 ETH is equal to 1 quintillion wei.).

How to Calculate ETH Gas Fee

The gas fee is essential for conducting any kind of transaction on the open-source Ethereum blockchain. As a user, you are required to have ETH in your wallet to pay for prevailing gas fees. The three major components of the Ethereum gas fee are: Gas unit (limits), Base Fee, and Tips.

Formula

Total Fee = Gas unit (limits)*(Base fee + Tip)

Base Fee:

According to the latest EIP-1559 proposal, crypto-users are required to pay a base fee. The base fee won’t be that high; in fact, it is expected to be in accordance with the minimum amount of gas required to execute a transaction, include the transaction in consecutive blocks, and prioritize operation.

Priority Fee:

In order to prioritize operations, you’re required to pay a priority fee. Priority fee act as a tip for the miner. It incentivizes miners to process the transaction in less time. As a crypto-user, you can set the priority fee’s value. The priority fee’s value will determine how quickly you want your transaction to go through.

Gas Limit:

The gas fee has an upper limit and a lower limit. As a crypto-holder, the maximum number of units of gas you are willing to pay solely to carry out the transaction on a priority basis on the Ethereum network is called the gas limit. On the other hand, to send an ETH across the Ethereum network, you are required to pay 21,000 Gwei (a standard minimum cost).

Example:

For instance, consider you want to send 1 ETH to your partner. The gas limit is 21,000 units, the base fee is 100 Gwei, and you included a tip of 10 Gwei.
Total Fees = 21,000 x (100 + 10) = 2,310,000 Gwei, or 0.00231 ETH.
When you send the ETH, 1.00231 ETH gets subtracted from your wallet. Your partner will receive 1.0000 ETH. Out of which, the miner receives the tip of 0.00021 ETH, plus 0.0021 ETH gets burned.

Why are ETH gas fees so high?

ETH gas price heavily depends on the complexity of the transaction, total transaction amount, and network congestion. The price is never fixed. It changes with the market demand. If you’re looking forward to transacting a significant amount or conducting a complex transaction based on multiple parameters, then you’re likely to pay a significantly high gas cost. Other than that, if the network demand is all time high as well as when the network is more congested than usual, the gas prices are expected to go up. In comparison to other types of crypto-transaction, code-based complex smart contracts usually demand more gas which means higher gas cost – to run on top of the Ethereum blockchain.

When are ETH gas prices lowest?

The gas price is lowest on weekdays, specifically at midnight. Apart from that, you will ETH gas price at its lowest on weekends between 2AM to 3AM (EST). To learn more, you can visit here.

How to reduce your gas cost?

There are no ways available to avoid the gas fees completely. But there are ways to reduce the gas fee when using the Ethereum blockchain.

  • Gas fees shoot up when more users are trying to interact with the Ethereum network. You can use the network on weekends if usage is significantly low.
  • It would help if you choose the right time to transact over the network as well as be patient. Try to transact over the Ethereum mainchain when demand for network resources is low.
  • You can set a max fee limit on each and every transaction executed over the network. By setting your max fee limit, you tell the Ethereum blockchain that to conduct the transaction, you are willing to spend X amount of gwei at most as your total gas fee. You don’t end up paying more than you’re required to for a particular set of transactions or operations.
  • Or else, you can employ other upgraded Layer 2 scaling solutions that are built on top of the Ethereum blockchain. Layer 2 scaling solution improves the overall efficiency of the network and saves on gas fees. Additionally, it eases the network congestion issue, reducing gas costs.

Prior to executing the transaction and transferring your ETH, you can monitor the real-time gas price using the following tools:

  • Etherescan
  • Blocknative ETH Gas Estimator
  • ETH Gas Station

Another way to minimize the net gas cost is by setting a tip. On the Ethereum blockchain network, you can set a tip for the miner. It is used to denote the priority level of your transaction. Since miners are directly benefiting from the tip, they are likely to work on your transactions and execute them quickly.

If your on-chain transaction is not that time-sensitive, then you can opt for a lower tip amount. If you’re reducing the tip amount or the priority level, then you are likely to bring down the gas price.

Conclusion

As we’ve seen before, extreme swings in crypto prices are the result of rapid development across the crypto industry. Even though cryptocurrencies are extremely volatile, still developments such as ETH gas fees offer a reason to keep cryptocurrencies such as Ethereum on numerous investor’s and retail user’s radars. Other than that, as an ETH token-holder, you can also stake your holdings to earn varying returns over the long term.

ETH gas fees are expensive for most users. This is the reason why future updates to the core Ethereum infrastructure are expected to bring down the overall cost of conducting the transaction.

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More on Crypto

As we continue constructing a fully regulated digital asset custody platform, ensuring secure storage for both crypto and fiat assets remains a critical priority. 

To facilitate the last checkpoint of enabling institutions to convert their digital asset treasury into fiat currency, we’re expanding beyond pure wallet infrastructure and integrating seamless fiat off-ramp capabilities for our partners.

We’re thrilled to announce our partnership with Encryptus, licensed and compliant off-ramp solutions tailored for institutional clients. This collaboration elevates Liminal’s service offerings by empowering our partners to convert their digital asset treasuries into fiat currencies efficiently.

Integrating A Seamless Off-Ramp Solution

The digital asset ecosystem historically faced friction points when transitioning between fiat and cryptocurrencies. Off-ramp solutions address this pain point by enabling efficient and streamlined conversion between asset classes, minimising value loss and simplifying compliance processes.

Here’s how off-ramp changes the game:

  • Reduced Friction: Frictionless conversion minimises delays and operational complexities associated with traditional fiat-crypto exchange methods.
  • Enhanced Efficiency: Streamlined workflows expedite asset conversion, increasing speed and cost-effectiveness for institutional and individual users.
  • Optimised Value Preservation: Advanced off-ramp solutions prioritise minimising price slippage and value loss during conversion, protecting user portfolios.
  • Simplified Compliance: Integrated compliance features navigate regulatory complexities, ensuring adherence to relevant financial regulations.

With our partnership with Encryptus, we have embedded their institutional-grade APIs, connecting their off-ramp solution within Liminal’s wallet and custody platform. 

This integration simplifies our clients’ liquidation requirements while keeping their assets secure and more:

  • Effortless Digital Asset to Fiat Conversion: Our partners will be able to access treasury management and facilitate business payments in 54 countries and individual payments in an extensive network of 80+ countries.
  • Streamlined Compliance and Regulation: Our partners will be able to leverage Encryptus’s rigorous licensing and compliance framework, ensuring adherence to stringent financial regulations.
  • Enhanced Platform Value: We will be able to expand the functionality of the Liminal custody solution, attracting institutional users seeking comprehensive digital asset management capabilities.

Moving Towards A Robust Off-Ramp Partnership With Encryptus

The partnership between Liminal and Encryptus earmarks a significant step forward in secure digital asset custody, representing a shared commitment to pushing compliant practices while supplying institutions with easy access to convert their digital assets to fiat. 

For Encryptus, the opportunity to integrate with Liminal’s established platform presents a chance to reach a wider audience and scale their innovative off-ramp solutions to new heights. By streamlining fiat conversion within Liminal’s secure custody infrastructure, Encryptus gains access to a trusted network of institutional users seeking seamless and compliant treasury management.

For Liminal, this collaboration reinforces our dedication to partnering with companies that demonstrably prioritise clear governance and robust policy frameworks. By aligning with Encryptus’s stringent compliance standards, we reaffirm our commitment to building a secure and sustainable future for digital assets, where trust and regulatory certainty go hand-in-hand.

January 22, 2024

Hello world, it’s that time of the month when we share the biggest security breaches in the world of Web3 through our Security and Regulatory Newsletter. 

Liminal believes in optimizing security and custody practices globally across the Web3 industry. Through our Newsletter, we highlight security, regulations, and compliance incidents that have happened in the past month and how one can follow better Security practices to safeguard their digital assets. 

We will also highlight regulatory changes that might have happened globally, which were significant to the overall ecosystem.

Dive in and get a detailed analysis of everything security and regulation in the domain of web3 with Liminal’s Monthly Security and Regulatory Newsletter.

Web3 Security Compromises in January

Abracadabra exploited for almost $6.5 million, Magic Internet Money stablecoin depegs

The Magic Internet Money ($MIM) stablecoin has lost its dollar peg again, dipping all the way below $0.77 in a flash crash before returning to around $0.95.

The depeg appears to be related to an exploit of the Abracadabra lending protocol, which allows people to borrow $MIM. An attacker exploited an apparent flaw in the platform’s smart contracts to drain around $6.5 million.

Goledo Finance hacked for $1.7 million

Goledo Finance, an Aave-based lending protocol, was exploited through a flash loan attack. The attacker stole assets estimated by CertiK to be around $1.7 million.

Goledo Finance contacted the attacker to offer a 10% “bounty” for the return of the remaining assets. In a message on January 29, the attacker wrote: “I hacked Goledo and want to negotiate.”

Socket service and its Bungee bridge suffer $3.3 million theft

The Socket cross-chain infrastructure protocol was hacked for around $3.3 million in an attack that exploited its Bungee bridge. The thieves were able to exploit a bug that allowed them to take assets from those who had approved a portion of the system called SocketGateway.

A little over 700 victims were affected, and the highest loss from a single wallet was around $657,000. 121 wallets lost assets priced at more than $10,000.

On January 23, the protocol announced they had recovered 1,032 ETH (~$2.23 million) of the stolen funds.

Web3 Regulatory Practices for January

The EU Imposes Stricter Due Diligence Rules for Crypto Firms

On Jan. 17, the European Council and the Parliament came to a provisional agreement on parts of the Anti-Money Laundering Regulation (AMLR) that now extends to the crypto sector.

Under the new rules, cryptocurrency firms will be required to run due diligence on their customers involving a transaction amounting to €1,000 ($1,090) or more. 

However, the agreement isn’t final yet as it has to be first officially adopted by the Council and Parliament before the rules can be applied.

So, after the EU passed its landmark MiCA regulation last year, which clarified rules about cryptocurrencies, regulators are now targeting the space with tighter controls. 

While these regulations bolster security and trust in the crypto market, potentially attracting more cautious investors and combating financial crimes, they also present challenges. 

The US State of Virginia Introduces Digital Assets Mining Rights

Recently, the Virginia State Senate introduced Bill No. 339, which outlines regulations for the transactions and mining of digital assets and their treatment under tax laws. 

The legislation exempts individuals and businesses engaged in crypto mining activities from obtaining money transmitter licenses. Additionally, it protects miners from any discrimination. 

Issuers and sellers of crypto are also exempted from securities registration requirements if certain conditions are met. Moreover, those offering mining or staking services are not to be classified as “financial investment” but must file a notice to qualify for the exemption.

The bill further incentivizes crypto’s use for everyday transactions by offering tax benefits. Under this, up to $200 per transaction can be excluded from an individual’s net capital gains or gains derived from using crypto to purchase goods or services, starting from Jan. 1, 2024.

Key Takeaways:

  • Hackers continue to exploit vulnerabilities in DeFi protocols and cross-chain bridges, highlighting the need for robust security measures.
  • Regulatory frameworks are evolving rapidly, with stricter AML rules and supportive legislation for emerging technologies like crypto mining.
  • Staying informed about these developments is crucial for navigating the digital assets market safely and responsibly.

Stay #LiminalSecure

These events highlight the constant evolution of Web3 security and regulation. You can confidently navigate this dynamic landscape by staying informed and prioritizing security best practices. 

At Liminal, we’re committed to empowering institutions to unlock the full potential of digital assets without compromising security or compliance norms with our robust custody and wallet infrastructure solutions. Join us on this journey towards a safer, more accessible future for digital assets.

January 15, 2024

Buckle up as we’re about to take a trip down memory lane. 

The year 2023 was a wild ride that showed signs of a plummeting market, groundbreaking innovation and regulatory hurdles. 

Contrastingly, in the same year, we saw no market-shattering crashes. Financial institutions extending an olive branch, key jurisdictions unlocking the doors to blockchain technology. 

Simultaneously, at Liminal, we experienced significant breakthroughs, re-engineering our positioning and becoming a pioneer in digital asset security with bank-grade custody. 

We took major strides this year, right from building comprehensive products to becoming a qualified custodian, from revamping our brand design to expanding our offices in newer locations, from partnering with hyper-local communities to onboarding a diverse set of clients,  we did it all. 

So, let us take you through everything we accomplished in 2023 and what the future holds.  

Liminal Became A Qualified Custodian

One of the prominent moves we made this year was to change our positioning as a regulated custodian from being a wallet infrastructure platform. 

We got two licenses in key jurisdictions to operate as a regulated custodian. 

The first one came from Hong Kong, where we acquired the TCSP license issued by the SFC, which oversees and regulates financial activities to ensure compliance with legal and regulatory obligations. 

Our next license came in the MENA region, where we got In-Principle Approval for the FSP license granted by the FSRA, a governing body in ADGM, to establish a progressive financial services environment. 

Both these licenses paved the way for Liminal to push its wallet infrastructure and offer bank-grade custody to institutions looking to operate in these particular regions. 

Liminal Introduced A Suite of Products & Features

Continuing our building spree, we launched new products and integrations to broaden the existing infrastructure and added more parameters of security, scalability and sustainability. 

Staking-as-a-Service

Liminal launched staking for institutions to eliminate the risks involved in running staking nodes and the vulnerabilities in hot wallet transfer. 

Hence, we introduced an industry-first mechanism of cold wallet staking to ease staking for institutions and secure assets explicitly.  

Whitelabel Solution

Accelerating the go-to-market time for organisations looking to build a secure and customisable application, Liminal launched its whitelabel solutions

Targeted to help organisations meet security standards, manage assets with maximum control, and add their custom branding to give it a personal touch. Our whitelabel solution is a first-in-class custodian-developed solution for institutional grade custody.

Smart Consolidation

We are building not just secure custody but also automation-based features to eliminate manual errors, increase the throughput of transactions and scale institutional wallets. 

Taking this ahead, we launched the Smart Consolidation feature to automatically calculate all the active addresses and consolidate them into a single address. With this level of automation, managing multiple addresses becomes uber easy for wallet teams. 

Travel Rule 

To limit the use of cryptocurrencies for activities like money laundering and terror financing by regulatory bodies, travel rule was mandated for institutions to follow. 

Continuing the latest compliance integration policy, Liminal partnered with Notabene to introduce Travel Rule, enabling institutions to manage counter-party risk and extend the process of due diligence right from the Vaults dashboard.   

Liminal Accured List Of Security Certifications

Following our ISO certification for data privacy and risk management, we added two new security certifications to fortify our systems and build trust for our clients. 

Liminal Achieves Crypto’s Highest Security Mark: CCSS Level-3 Certified

Cryptocurrency security lacked a gold standard, creating a vulnerable ecosystem. Enter the CryptoCurrency Security Standard (CCSS), setting the bar for auditing and certifying custodian infrastructure and establishing levels of trust and confidence for investors. 

Liminal became only the second wallet infra platform and the first regulated custodian to be accredited with Level-3 certification, deeming wallets, transfer environments, workflows and engines safe and secure. 

Liminal Reciueved SOC 2 Type II Certification

To tackle threats in institutional-grade security, organisations’ SOC has been identified as the primitive compliance standard for service organisations to handle customer data.

Liminal successfully attained SOC 2 Type II certification, validating its setup of security controls & compliance processes to be industry standard. 

Liminal Level Up

Liminal unveiled its most significant platform upgrade ever, revolutionising the future design standard of a qualified custodian. This level-up activity included revamping our website and product UI, giving a completely new look and feel to not “Liminal” but “Liminal Custody”. 

The Liminal level-up activity was a strategic step and the biggest one for us this year to create an intuitive, inviting and tailored experience for our clients. 

Liminal Reached New Borders

We spread out our operations this year, reaching new borders and onboarding a new wave of institutions across gaming, DeFi, HNI wealth, treasuries, and exchanges! From Indonesia and Africa to India, UAE, and Korea, we are setting up custody operations worldwide. 

This isn’t just a roster of clients; it’s a network ready to spark connections, collaborations, and shared success to further the definition of secure assets. 

Liminal Collaborated With Law Enforcement Agencies

The best and the proudest moment of Liminal for this year was when we collaborated with CBI & Himachal Prashesh police department to aid them in seizing digital assets. 

This partnership put us on the map, as we became the first point of contact for LEAs in India, and we standardised the process of secure seizure of digital assets. Leveraging our expertise, we enabled a safe space for officers to learn the basics of custody, contributing to a safer digital landscape.

Team Liminal Grew Bigger

Building such a massive infrastructure, prioritising security and compliance over everything else, we had to grow the team to build at pace and expand at an even higher level. Not only did we grow in team numbers, but we also elongated our footprint to new destinations. 

Team Liminal went from 32 to 70 with 5 new offices in Mumbai, Ahmedabad, Hong Kong, Singapore and ADGM, setting up our custody operations steadfastly. 

What’s To Look Out For In 2024

We are excited to announce that our commitment to integrating the most secure digital asset wallets with a cutting-edge custody platform is swiftly becoming a reality. 

The upcoming year, 2024, will serve as a testament to this transformative journey. Moving beyond self-custody, we are constructing a comprehensive infrastructure encompassing both custodial and non-custodial wallets. Exciting products are set to launch starting from the first week of January, some of which are: 

  • Official Custody Platform Launch
  • Liminal’s Off-Exchange Settlement Hub
  • Secure Custody of Real-World ‘Tokenised’ Asset

The Web3 space has evolved explicitly this year, pushing the narrative of secure digital asset custody and security, introducing new regulations and compliance standards, licensing VASP providers and standardising the use of custodians as a trusted third party. 

At Liminal, we took major strides this year, from building comprehensive products to becoming a regulated custodian, from revamping our brand design to building the full infrastructure of custodial and non-custodial wallets.

January 5, 2024

Find Out How You Can Benefit From A Fully Self-Custodial Wallet Architecture