The price of Ethereum is closely linked to the cost of transactions. Starting from the price of ether, understanding where transaction costs come from and how to save becomes essential, not only to carry out low-cost transactions but also to understand how the waiting time for a confirmation of a transaction increases as the cost and spend according to your needs and timing.
Recently the price of gas has risen by a lot, forcing many to postpone transactions in order not to spend a fortune, a clear example of this is Publish0x which was forced to change the payment from once a week, to once a month, in order not to spend more on gas than on payments.
What is Gas
Gas is the unit of measurement of the cost of an operation on the Ethereum Virtual Machine. Since Ethereum is a blockchain where smart contracts are executed, it follows that each available operation (OPCODE) requires a certain amount of Gas. For example, for an ADD, or the addition of two integers, 3 Gases are required.
What is the Gas Limit
Without going into the specifics of all the possible operations on the Ethereum Virtual Machine, it is sufficient to know that each transaction has a base cost of 21,000 Gas, for the transfer of funds, plus all the costs necessary for the operations needed to interact with the contract. For this reason many applications require you to set the maximum Gas Limit.
How the cost of a single transaction is calculated
If the Gas needed for a simple transfer of funds, from one Ethereum address to another, is 21000 Gas, the cost varies according to the Gas Price, i.e. how much one is willing to pay for a single unit of Gas. Gas is usually expressed in Gwei, which corresponds to one billionth of Ether. The cost of a transfer is then calculated as follows: 21000 * Gas Price.
What is the right cost for a unit of Gas
Obviously, it is not possible to know in advance how much the cost of a unit of Gas is, as this varies depending on the market, or how much other users of the Ethereum network are willing to pay to send their tokens on the network.
However, the cost can be estimated thanks to the historian, for this purpose a fundamental site is https://ethgasstation.info/. Here you can find both the standard cost for each unit of Gas and the minimum cost called Safe low, which at the time of writing is 24 Gwei.
The minimum cost for a funds transfer will then be calculated as 21000 * 24 Gwei = 21000 * 0.000000024 = 0.000504 Eth.
The Safelow is the minimum price for the transaction to be successful: the transaction will have longer confirmation times, but always 10 minutes maximum, but will still be confirmed. The minimum price is estimated by calculating that at least 5% of the network's hash power accepts this price for gas.
The standard price, on the other hand, is the price currently accepted by top miners, who take part in at least 50% of the mined blocks.
In the figure below we show the gas price estimator that you can find on the aforementioned site, and it is very useful for estimating the confirmation time of a transaction as the Gas price changes.
How much can you save?
Translated into US Dollars, the savings between the use of a standard Gas price and a SafeLow Gas price is appreciable, and especially if you intend to transfer small quantities of Ethereum, it can make the difference as the cost for the transfer is constant.
At 52 Gwei per Gas unit the cost of a standard transaction is $ 1,437 at today's exchange rate, while the cost of a SafeLow transaction is $ 0.663.
If you are not in a hurry to conclude a transaction in less than 5 minutes (a rush which may however be necessary in some circumstances such as in the event of online auctions, ICOs or the like), you can then visit the EthGasStation.info website to check which Gas Price set on your wallet and save even more than 50% for every single transfer!
What do you think? Did you know EthGasStation? Will you use it? Let me know yours in the comments.
As always, thank you if you have made it this far, I hope you enjoyed the article and see you next time!
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