What are Gas Limit and Gas Price for ETH Transactions?
Transactions on the Blockchain are energy-consuming, and this explains the reason why Blockchain mining companies prefer low energy cost destinations. As a result of the gas requirements for each transaction on the Blockchain, it is important for stakeholders to know the attendant gas limit and price.
Let’s delve into what gas limit and gas prices for ETH transactions are without any further ado.
On the Ethereum Blockchain, there is a need to make payments when you perform a range of functions. These functions are measured in ‘Gas’ and paid for on that basis.
Gas payments are calculated in ETH, and they arise in each of these following functions:
- When sending ETH
- When sending tokens to a beneficiary
- When you interact with any contract
- When you activate any other transaction on the Blockchain.
It has to be noted that each of these functions attracts the designated charges irrespective of whether the transaction fails or is successful. The miners on the Blockchain have a duty to present, execute and validate every transaction on the ETH Blockchain.
When you are charged or billed for gas, this fee is not received by your wallet or Blockchain access provider but gets routed to miners for infrastructure support.
The trail of each transaction is easy to access on etherscan.io, which provides a breakdown of the USD and ETH charged. When you view the transaction, you will get a snapshot of the associated gas limit and gas expanded.
What determines Gas Usage?
Gas usage is determined by the complexity of each transaction. It is also necessary to add that peak periods lead to network congestion, and this can also cause a spike in the needed gas limit for a transaction.
Just as the cost of gold is averaged based on ounces, a unit of gas as decided by miners is 1 Gwei; while 1 Gwei is equal to 10^9 Wei. If you set Gwei/gas at 2 alongside a gas limit of 10000gas, the transaction cost will be 20000Gwei. The standard transfer cost incurred for each token transfer is $0.079.
When sending tokens, you might require up to 100000 gas or at least 50000 gas; depending on the quantum of transactions that are ongoing on the Blockchain. 50000 gas on the average will cost you about 0.001 ETH.
In respect of each transaction, you will need to:
- Specify a gas limit for the transaction
- Specify the Gwei/gas or gas price.
The sum of the two steps above gives rise to the total transaction fees you will incur for any transaction that you initiate on the Blockchain.
What is Gas Limit?
In terms of the gas limit, you need to specify a gas limit for your transactions before processing can take place. On platforms like (MEW) MyEtherWallet, there is a default gas limit suggested for each transaction. However, during peak transaction processing times, the default gas limits might lead to transaction failures.
From my experience, when I claimed my tokens for the EOS ICO on MEW, I left my gas limits at the default 90,000 limit and the transaction failed. I had to reset the gas limit at 210,000 before the transaction could be completed.
While some parties are careful to minimize cost on such token claims and transfers, frustration sets in easily when a transaction fails. Just make sure you have some ETH to spare in order to avoid wasting your time, energy and resources.
You should be able to overlook the risk of overspending on gas as you increase the gas limit since the cost of the unused gas will be returned to your wallet when your transactions are completed. All standard transactions attract a minimum gas limit of 21000.
How can we reduce Gas Price?
You can decide to reduce the gas price per transaction in order to control your expenditure. When you lower your gas price, you are inadvertently reducing the pace at which your transaction could be completed.
Reducing your set price is possible if you are able to confirm the activity pace of the Blockchain at the time. On MEW, there is an alert that shows at the mid-top corner of your screen when there is a high pace of transactions on the Blockchain.
If this happens, you either boost your gas price or wait till there is a reduction in the activity pace before you continue. Gas prices are the highest when tokens are being created and this is simply in accordance with the rule of demand and supply.
Several ETHs gets thrown into the gas buying fray in such a way that those who offer the most gets the right to have their transactions processed on a priority basis by miners. The maximum gas limit is set at 50 Gwei. If you use MEW, you will notice that there is a slider limit of 50Gwei for the gas price in order to prevent transaction failures.
These are the Gas Price thresholds:
- A Gas Price of 40 GWEI can give you access to the next block
- A Gas Price of 20 GWEI is enough for the next set of blocks
- A Gas Price of 2 GWEI is just enough for a few minutes of Blockchain access.
Why Miners Prefer Higher Gas Limits
Miners are the people who get their hands dirty to get the job done on the Blockchain. They’re always looking for incentives. Miners earn a percentage of every fee paid for Blockchain transactions when they add/mine a block successfully.
Your high Gas price will entice a miner to work on your transaction and hash a new block. Except when transactions are short in supply, low gas limits will drive your transaction to the bottom of the waiting list.
Every miner knows the unwritten rule that says “rate transactions in ascending to descending order based on gas price before processing a block.” This is the procedure that every stakeholder on the Ethereum Blockchain must be familiar with in order to have the best outcome.
Always set your gas price higher so you can have a priority rating on the Blockchain and quickly bag your rewards. If you are taking it slow, just make sure your set price is high enough to entice a miner to get the job done for you.
Editor’s note: Just to give you some perspective, ETH transaction costs are far lower than BTC transaction costs, often below one-tenth of Bitcoin transaction costs.
I hope this article gave you a brief idea of what gas limit and gas prices for ETH transactions are. Share your views in the comments below.
Feature image: Paul Olek