In this lesson
- find out what gas is and how a fee is calculated
- understand the difference between the base fee and the tip
- learn why Ethereum fees swing so much
In 2021 an ordinary token transfer on Ethereum could easily cost 50 dollars, and people thought twice about sending a friend 20. Today an ETH transfer costs a cent or two. It is easier to see why if you picture Ethereum as a petrol station with a single pump and a long queue.
Gas: fuel for computation#
Every operation in the EVM has a fixed price in units of gas. A plain ETH transfer costs 21,000 units, a token swap on an exchange perhaps 150,000. Gas measures work, not money. How much you pay per unit depends on how busy the network is.
The price per unit is given in gwei. One gwei is a billionth of an ETH (0.000000001 ETH).
What a fee is made of#
fee = gas used × (base fee + tip)
- The base fee is set by the network itself. When a block is more than half full, the next block gets more expensive; when it is emptier, cheaper. This part is burned – the ETH disappears from circulation.
- The tip (priority fee) goes to the validator building the block. Whoever adds more goes first.
This system arrived with the London upgrade on 5 August 2021 (proposal EIP-1559). Since then wallets set both parts themselves and you just see an estimate in dollars.
Why fees swing#
A block has limited capacity – since November 2025 it is 60 million units of gas (during 2025 it rose step by step from 30 million). When everyone rushes for the same thing, the base fee rises block after block.
| Situation | Fee |
|---|---|
| 10 May 2021, the DeFi and NFT frenzy | the average transaction reached ~53 USD |
| 30 Apr 2022, the Otherside land sale | ~64,700 ETH spent on fees within hours |
| 11 Oct 2026, a quiet network | base fee 0.27 gwei, an ETH transfer ~1–2 cents |
Ethereum is quiet today mainly because most everyday transactions have moved to layer 2 networks (module 3).
A failed transaction costs too#
When a transaction fails inside a block – for instance because the price moved more than you allowed – the gas used is not returned. You pay for the work the network did, even if the result did not work out.
The fee is paid in ETH
Even when you send USDC or another token, you pay the fee in ETH. With an ordinary wallet, without a little ETH in the account you cannot even send a token you hold there. A common trap with new wallets.
Common myths#
- "Gas is a price in dollars." Gas is an amount of work; the price is gas × price per unit × the ETH price.
- "A higher tip gets me a better price." The tip buys a place in the block, not a price on the exchange.
- "Ethereum is always expensive." It used to be. Today a transfer costs cents – but in a rush it can get expensive again.
Summary
- Gas measures work; a gwei is a billionth of an ETH.
- Fee = gas × (base fee + tip); the base fee is burned, the tip goes to the validator.
- The base fee rises when blocks are more than half full and falls when they are emptier.
- A failed transaction in a block still pays its fee; fees are always paid in ETH.