You must be familiar with transaction fees on every investment or trading instrument. This is because companies that provide investment tools will definitely use the revenue to improve services and provide funding for employees.
Like investing in crypto, investing in stocks is called investment cost. And in forex trading you know the spread, so in cryptocurrency transactions You must know what is called gas fees.
Definition of gas fees
Gas fees are fees that users of the Ethereum blockchain must pay in order to successfully complete a transaction. In this cryptocurrency transaction Gas is the unit used to measure the computational cost of each transaction in order for the transaction to be successful.
The cost of this gas is calculated using a unit known as gwei or giga wei. One unit of gwei is equal to 0.000000001 ETH (10).-9 Conflicts of Interest) in addition to being used to prevent spam in the Ethereum ecosystem and maintain a level of security. Gas fees also serve as rewards paid to Ethereum miners who verify transactions using this crypto asset and in development are paid to traders who bet on Ethereum.
Traders or investors in crypto, NFT and other tokens need to understand the mechanics of these gas fees. Because most of the tokens are built on the ecosystem. Ethereum blockchain And the size of the oil cost will affect the level of profit that can be obtained.
How do gas bills work?
The formula for calculating the fuel cost is Gas cost = gas cost x (gas price + tip).
- Gas Limits: The estimated maximum work value that the validator requires to complete your transaction. The more you set the gas limit, the more The more you expect the checker to finish the job, the higher the volume.
- Gas price: Gas price is the value of gas to be paid per unit of work.
- Tip: Additional fees for validators or miners to complete your transactions faster.
In addition to the above variables There are three other factors you should consider when estimating your gas cost:
- supply and demand. The busier the Ethereum transaction is when you open a position. The more expensive fuel you have to pay. Because the digital currency network is busy.
- Item size. Gas fees are not paid only by traders or investors. but also paid by the development company dApps and DeFi. The bigger and more difficult your transaction is. The more fuel surcharges you have to pay.
- transaction speed Do you want stop loss with a market order strategy? And the more fuel you have to pay, the more the reason is, the higher the cost of fuel if you want your transaction to be completed quickly.
The cost of oil is paid in the form of ETH, so if the price of this crypto coin is expensive, the oil fee will also be expensive. and vice versa
Example of calculating the cost of fuel
For example, you buy an NFT music album for 1 ETH when you transact. The gas limit you set is 22,000 gwei, while the oil price is 250. To make the transaction happen faster, you add a tip of 150, so the fuel you have to pay is:
gas cost = 22,000 x (250+150)
= 22,000 x 400
= 8,800,000 gwei or the equivalent of 0.0088 ETH, which means that to buy an album you have to pay 1.0088 ETH.
Why is the cost of fuel necessary?
as mentioned above Oil fees are required for many essential requirements to maintain the quality of the Ethereum blockchain ecosystem, such as validators and reward miners. Rewarding investors for staking Overcoming spam and more
For investors, traders and developers of dApps and DeFi, the scale of gas costs needs to be known as a benchmark for determining profit (profitability) and avoiding losses. Profit 0.01 ETH, but the cost of oil is already 0.008 ETH.
What is a fair price gas fee?
One factor that determines the size of gas costs is gas prices. The fair value of the gas price must not be less than the base price (base price). Every Ethereum block is mined. base price which varies according to the value of gas required
The current lowest base value is 100 gwei for block number 1 and number 2, while the most expensive is 10302608.6 for block number 100. For every 1 number increment, the gas increase is set at 112.5% or 202.8. gwei’s price base of previous blog
in the previous discussion Obviously, there are three additional factors that cause oil prices to fluctuate. Coupled with the changes in the ETH price, some factors are the supply and demand of ETH, the transaction value. and transaction speed. So, here are some ways you can reduce the cost of this gas:
- weekend trading aka buying and selling crypto on Saturday and Sunday Although it is open 24 hours a day, 7 days, it is undeniable that Saturday. Sundays and public holidays are still break times for traders. As a result, the volume of crypto transactions, including ETH, generally declined over the past two days. A decrease in trading volume will increase or decrease the price of ETH and, of course, the cost of oil will also fall. But you have to remember If the transaction you are doing is trading Weekend trading is often quite risky.
- Transactions after 3 p.m. WIBOnce again, crypto trading is quiet at 3pm-24:00. Some sources say that midnight to 3pm WIB is the busiest time for crypto trading. Avoid the crowds of trading to reduce gas costs.
- Do not use market orders unless urgentThe speed of transactions also makes the cost of fuel more expensive. Use limit orders to execute take profits or stop losses to avoid high gas fees. However, using this type of order feature requires careful trading planning.
Use another blockchain NFT, dApps, or DeFi transactions not only require the Ethereum blockchain, you can use second-layer blockchains such as Polygon (MATIC), Scale (SKL), Luring (LRC), etc.
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