Understand about Gas Fee on Cryptocurrencies

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What is Gas Fee?

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As a trader or investor in the cryptocurrency market, you need to know what a gas fee is because that name often appears when making transactions on the Blockchain network as a requirement to process transactions.

Gas Fee is a payment required to be paid to validate transactions using the Blockchain network, the amount that the user should pay will be adjusted according to the low and high transactions that the user wants to process.

This Gas Fee is similar to the admin fee charged to users when making transfers between banks and transaction fees on credit cards. This Gas Fee is familiar to users of the Ethereum Blockchain network, such as when going to Minting NFT or uploading artwork into the Blockchain network, if the user wants the Minting process to be fast, the Gas Fee that must be paid will be even higher.

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Why is Gas Fee required?

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Gas Fee is an essential thing for Blockchain users who want to carry out transactions such as Minting NFT to facilitate the calculation of the resources used. With Gas Fee, the Blockchain network is safer from indications of fraud from parties who want to do bad things.

Decentralized applications (DApps) that run on Blockchain like Ethereum or Binance that use Smart Contracts can run independently and safely thanks to Gas Fees even though the costs involved are relatively expensive.

In addition, a Gas Fee is also required to provide wages to validators or miners on the Blockchain network as a form of incentive for validating transactions made by users.

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How does Gas Fee work?

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Gas Fee works similarly to admin fees which must be when making a sale or purchase transaction only in a different place, in the Blockchain, admin fees or Gas Fees are collected from the derivative of computing costs incurred by validators on the Blockchain.

The more energy expended to speed up transactions, the more expensive the Gas Fee that is required to be paid by the user. That's why DApps users with small capital are reluctant to do NFT Mining using the Ethereum network because the Gas Fee is so expensive.

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Ethereum is the largest cryptocurrency after Bitcoin which makes GWEI (the smallest unit of ETH) conversion more expensive. In addition, what makes the Gas Fee on the Ethereum Blockchain expensive because currently, the network users are getting denser which makes transactions soar as demand increases.

Please note that the Gas Fee depends on several factors, from the current price of the cryptocurrency, the complexity of the transaction, and the number of users who make the transaction.

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Final Thought

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Currently, Gas Fee is a common problem experienced by users, especially of the Ethereum blockchain due to the Proof-of-Work (PoW) consensus mechanism which consumes resources to complete transactions. The complexity of the transaction and the large number of users who make transactions also make system performance more difficult.

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Ethereum developers are currently changing the consensus mechanism to Proof-of-Stake (PoS) which can later complete transactions up to 100,000/second.

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