Ethereum Gas Explained

The four numbers that matter

• Gas units: how much work the transaction performs. A simple ETH transfer uses 21,000 units; contract interactions use far more.
• Base fee: set by the protocol for each block, rising when blocks are full and falling when they are not. It is burned rather than paid out.
• Priority fee: an optional tip to the validator that improves your position when blocks are in demand.
• Gas limit: the maximum units you authorize. Too low and the transaction runs out of gas and reverts; unused gas is refunded.

How the total is calculated

The cost is gas used multiplied by the sum of the base fee and the priority fee, denominated in ETH. Fee rates are usually quoted in gwei, where one gwei is one billionth of an ETH.

A worked example with round numbers: a transfer using 21,000 gas units at a combined 20 gwei costs 21,000 × 20 = 420,000 gwei, which is 0.00042 ETH. The figures here are illustrative, not current market rates.

Why the same action costs different amounts

• Contract interactions do more work than plain transfers.
• Writing new data to storage costs more than updating existing data.
• Approvals, swaps and multi-step routes each add work.
• Network demand moves the base fee independently of what you are doing.

Running out of gas still costs a fee: the work performed before the revert is paid for, even though nothing was transferred.

Units: wei, gwei and ETH

• Ethereum stores every value in wei, the smallest unit. One gwei is 1,000,000,000 wei.
• One ETH is 1,000,000,000 gwei, or 10^18 wei.
• Gas prices are quoted in gwei because wei is unreadable and ETH is too coarse for a fee.
• Converting carelessly between gwei and ETH is the most common arithmetic mistake people make when reading a transaction on an explorer.

Max fee, max priority fee and the refund

Wallets ask for two ceilings. The max priority fee is the most you will tip the proposer. The max fee is the most you will pay in total per unit of gas, covering base fee plus tip.

You are charged the actual base fee for the block plus your tip, not your ceiling. If the base fee comes in lower than you allowed, the difference is refunded. Setting a higher max fee therefore raises your headroom rather than your cost — but it does expose you to a genuinely higher base fee if demand spikes before inclusion.

Second worked example: a failed transaction

Suppose you authorise a gas limit of 120,000 units for a contract call, with a base fee of 15 gwei and a 1 gwei tip. The call reverts after consuming 45,000 units.

You pay for the work performed: 45,000 × (15 + 1) = 720,000 gwei, which is 0.00072 ETH. The remaining 75,000 units are never used and are not charged. Nothing was transferred, and the fee is still due. All figures here are hypothetical and chosen to show the arithmetic.

Practical ways to spend less

1. Delay non-urgent transactions until network demand falls.
2. Let the wallet estimate the gas limit rather than raising it arbitrarily.
3. Avoid unnecessary repeated approvals by reviewing existing permissions first.
4. Consider a Layer 2 network for routine, smaller transfers.
5. Set a sensible maximum fee so a demand spike cannot surprise you mid-transaction.

Sources

• Ethereum Foundation: gas and fees