What Are Gas Fees? How Transaction Costs Actually Work
A gas fee is gas used multiplied by the price per unit. This guide explains the EIP-1559 mechanism, why part of every fee is destroyed, what the Dencun and Fusaka upgrades did to costs, and how Ethereum compares with other chains in 2026.
Gas is the unit Ethereum uses to measure computational effort. Every operation — moving ETH, swapping tokens, minting an NFT — consumes a defined amount of gas, and you pay for that gas at a price set by demand.
The formula is worth memorising, because everything else follows from it:
Total fee = gas units used × (base fee + priority fee)
Ethereum's own documentation gives the worked example: a standard transfer uses 21,000 gas units, so at a base fee of 10 gwei and a 2 gwei tip the cost is 21,000 × 12 = 252,000 gwei, or 0.000252 ETH.
A gwei is one billionth of an ETH. Fees are quoted in gwei because quoting them in ETH would mean counting zeros.
The two halves of the fee, and why one is destroyed
Since the EIP-1559 upgrade, every fee splits into two parts that behave differently.
The base fee is set by the protocol, not by you. It rises when blocks are fuller than target and falls when they are emptier, moving by at most 12.5% per block. Critically, the base fee is burned — permanently removed from circulation rather than paid to anyone. This is why heavy Ethereum usage reduces ETH supply.
The priority fee, or tip, goes to the validator who includes your transaction. It is your bid for faster inclusion. When the network is quiet, a minimal tip is enough; when everyone is competing for the same block, tips rise.
You also set a max fee — the most you are willing to pay per unit. If the base fee comes in lower, the difference is refunded. You are never charged more than the market rate simply because you were willing to pay it.
The practical consequence: the base fee is what it is, and the only lever you control is how much you tip and when you transact.
What Ethereum actually costs now
The picture in 2026 is very different from the one most people carry in their heads.
On 26 July 2026 the Ethereum base fee stood at about 0.21 gwei, with the network's block gas limit at 60 million. The median mainnet transaction cost on 25 July was $0.0108 — around a cent. A simple transfer at that rate works out to well under a cent.
For context, the average gas price in March 2026 was 0.52 gwei, down about 77% year on year.
Two things drove this collapse.
Dencun and blobs. The Dencun upgrade activated on 13 March 2024 and introduced EIP-4844, adding a separate data type called blobs with its own fee market. Layer 2 networks post their data as blobs rather than as expensive calldata, and the effect was immediate and measurable: Optimism transaction costs fell from about $1.40 to roughly $0.04, and Base from about $1.50 to roughly $0.03 — reductions near 97–98%. Posting 125 KB as blobs cost about $3.98 against roughly $238 as calldata.
Blobs are pruned after about 18 days. They are designed for data availability, not permanent storage.
Fusaka and more block space. The Fusaka upgrade activated on 3 December 2025. It raised the block gas limit to 60 million, introduced PeerDAS for more efficient blob distribution, and capped gas per transaction at 16,777,216. Blob capacity then rose in scheduled steps: from 6 target / 9 max at launch, to 10/15 on 9 December 2025, to 14/21 on 7 January 2026.
More capacity at the same demand means a lower base fee. That is most of the story.
How other chains compare
Median transaction costs on 25 July 2026, from public chain data:
| Network | Median transaction cost |
|---|---|
| Optimism | $0.0000086 |
| Base | $0.00103 |
| Scroll | $0.00131 |
| Arbitrum | $0.00391 |
| Linea | $0.0348 |
| Ethereum mainnet | $0.0108 |
Other base layers use different models entirely:
Solana charges a base fee of 5,000 lamports per signature, half burned and half paid to the validator, plus an optional priority fee calculated from a compute unit price and limit. At SOL prices in late July 2026 the base fee works out to a small fraction of a cent.
BNB Chain quoted a gas price of 0.1 gwei on 26 July 2026, putting a simple transfer near a tenth of a cent.
Bitcoin does not use gas at all. It prices by transaction size — satoshis per virtual byte — in an auction for limited block space. On 26 July 2026 the recommended fee was 1 sat/vB at every priority tier, meaning there was effectively no competition for space. The average Bitcoin transaction fee on 11 July 2026 was $0.23, down about 85% from a year earlier.
Bitcoin fees are not always low. The record average of $128.45 was set on halving day, 20 April 2024, when the Runes protocol launched and flooded the network with demand. Fees fell to $34.80 the following day.
Paying less
Use a layer 2. This is the largest single saving available, and Ethereum's documentation names rollups as the primary initiative for improving gas costs. The table above shows the gap: two to three orders of magnitude for ordinary transfers.
Check before you send. Gas trackers show the current base fee and let you avoid transacting into a spike. Ethereum's documentation points to the Etherscan gas tracker, Blockscout, the Blocknative estimator and the Cryptoneur calculator.
Understand what you are paying for. A token swap consumes several times the gas of a plain transfer because it executes contract code. Approving a token, then swapping, is two transactions and two fees.
Do not set the max fee too low. A transaction priced below the base fee will sit unconfirmed rather than fail cheaply. Wallets default to sensible values; overriding them without understanding the mechanism usually costs time rather than saving money.
What people get wrong
"Gas fees go to Ethereum." No entity receives them. The base fee is destroyed and the tip goes to an individual validator.
"High fees mean the network is broken." High fees mean demand exceeds capacity at the current price. It is a market clearing, and it resolves as demand falls.
"Fees are always expensive." This was true in 2021 and is no longer true. Median mainnet costs in mid-2026 sit around a cent, and rollups are far cheaper still.
Sources
- Gas and fees, ethereum.org — EIP-1559 mechanics, base fee burning, 12.5% adjustment, gas trackers
- Dencun upgrade, ethereum.org — activation date, blob mechanics and pruning
- Layer 2 blockchains become cheaper after Dencun, CoinDesk — measured L2 cost reductions
- Fusaka mainnet announcement, Ethereum Foundation — activation, gas limit, blob schedule
- Fees on Solana, solana.com — base and priority fee model
- Bitcoin average transaction fee, YCharts — July 2026 fee levels
- Bitcoin average fee record amid Runes rollout, The Block — April 2024 spike
FAQ
What is a gas fee in simple terms?+
It is the price of computation. Every operation on Ethereum costs a set number of gas units, and you pay for those units at a per-unit price quoted in gwei. A plain ETH transfer always costs 21,000 gas units; what changes is the price per unit.
How much does an Ethereum transaction cost in 2026?+
Far less than most people expect. On 25 July 2026 the median Ethereum mainnet transaction cost about $0.011, with the base fee around 0.21 gwei — a simple transfer works out to under a cent. Costs vary with demand, so check a gas tracker before assuming.
Why are gas fees sometimes so high?+
Block space is limited and priced by demand. When many people want their transactions included at once, the base fee rises — up to 12.5% per block — until demand falls back. Spikes are usually short and driven by a specific event, such as a token launch.
Where does the gas fee go?+
It splits. The base fee is burned — permanently removed from circulation — while the priority fee, or tip, goes to the validator who includes your transaction. This split was introduced by EIP-1559.
How do I pay less in gas?+
Use a layer 2. Median transaction costs on rollups in July 2026 ranged from a fraction of a cent on Optimism and Base to under half a cent on Arbitrum. Ethereum's own documentation names rollups as the primary initiative for reducing costs.
Do all blockchains charge gas fees?+
All charge something, but the models differ. Solana charges a base fee of 5,000 lamports per signature plus an optional priority fee; Bitcoin prices by transaction size in satoshis per virtual byte; BNB Chain quoted 0.1 gwei in July 2026.
DISCLAIMER
All the content on this site should not be considered investment advice. Investing is speculative. When investing your capital is at risk.
Security & Education Lead
Marcus writes practical guides on wallets, keys and staying safe on-chain. He believes good security education prevents most crypto losses.
