What Is Gas in Crypto and Why Does It Cost Money?

If you're new to crypto or using decentralized apps (DApps), you'll soon encounter a key concept: gas fees. Especially on networks like Ethereum or Polygon, “gas” is what powers every transaction – whether you're sending coins, swapping tokens, or using a smart contract.

But what exactly is gas? Why does it cost money to move digital assets? And how can you better understand and reduce these fees? This article gives you a clear and practical explanation.

What Is Gas?

Gas is a unit of measurement for the computing power required to perform actions on a blockchain. It’s not a real-world substance, but a virtual metric that reflects how much processing work is needed to complete a task. The more complex the action – like executing a smart contract – the more gas it consumes.

Gas fees serve as an incentive system for validators or miners who keep the blockchain secure and process transactions. Without them, the network would have no economic model.

How Are Gas Fees Calculated?

Every transaction on Ethereum (or similar blockchains) involves:

Gas Limit: The maximum amount of gas you're willing to use for a transaction.
Gas Price: The cost per unit of gas, measured in Gwei (1 Gwei = 0.000000001 ETH).

The basic formula:

Transaction Fee = Gas Limit × Gas Price

Since the Ethereum upgrade EIP-1559, gas fees consist of two parts:

Base Fee: A mandatory fee that's burned (removed from circulation) – it changes dynamically with demand.
Priority Fee (Tip): An optional amount you can add to speed up your transaction.

Why Do Gas Fees Fluctuate?

Several factors influence how much you pay in gas fees:

Network congestion: During busy times (NFT launches, token sales), demand spikes – and so do fees.
Transaction complexity: A simple ETH transfer costs less gas than a complex contract interaction.
Market behavior: Gas prices rise and fall based on competition for block space.

Example: Ethereum Transaction

Gas Limit: 21,000 (standard ETH transfer)
Gas Price: 30 Gwei
ETH Price: 2,000 €

Transaction fee = 21,000 × 30 Gwei = 0.00063 ETH ≈ 1.26 €

For DEX swaps (e.g. Uniswap), fees can easily exceed 100,000 gas – which means costs rise significantly.

How Can You Save on Gas?

Use Layer-2 or low-fee networks like Polygon or Arbitrum
Check live gas prices (e.g. via Etherscan Gas Tracker)
Send transactions during off-peak hours
Avoid unnecessary contract calls or retries

Floin Insight

At Floin, our mission is to make Web3 accessible and transparent. We display exact gas fees before every on-chain transaction, so you stay in control. Behind the scenes, we use optimizations such as transaction batching and support efficient networks like Polygon and Arbitrum – so your crypto journey is smooth, fast, and cost-efficient.