Optimal Transaction Cost Strategy on Ethereum: From Gas Price to Layer-2 Solutions in 2025

Why is gas fee important for Ethereum users?

Ethereum (ETH) is currently the leading blockchain platform with the second-largest market capitalization globally, after Bitcoin. It provides an environment for thousands of decentralized applications (dApp) and smart contracts to operate. However, every interaction on the network requires paying a fee called gas – an essential mechanism to ensure the system’s security and stability.

Gas fees represent the computational cost that the Ethereum network must perform. For any trader, understanding this mechanism not only helps save costs but also allows you to choose the most appropriate time to transact.

Currently, ETH is trading at $2.92K with a 24-hour volatility of -1.01%, and the circulating market cap is $352.86B. This indicates that Ethereum remains a vibrant market with high transaction volume ($477.55M in 24 hours).

Gas fee mechanism: The numbers you need to know

Gas is a unit measuring the computational energy required to perform an operation. The basic formula is straightforward:

Transaction cost = Gas limit × Gas price

Where:

• Gas limit (Gas Limit): The maximum amount of gas you are willing to consume, e.g., 21,000 units for a simple ETH transfer
• Gas price (Gas Price): The amount paid per unit of gas, measured in gwei (1 gwei = 0.000000001 ETH)

A basic ETH transfer requires 21,000 units of gas. If you set the gas price at 20 gwei under normal network conditions, the total fee will be 420,000 gwei, equivalent to 0.00042 ETH.

Gas fees for different transaction types

The more complex the action, the more gas it consumes. For example, during the NFT boom or memecoin surges, users compete for priority, causing gas prices to spike, sometimes reaching tens of gwei.

EIP-1559: A breakthrough in gas fee structure

Before 2021, Ethereum used a fully auction-based model, where users proposed gas prices at will. The London Hard Fork (August 2021) changed the entire system through EIP-1559:

• A base fee is automatically adjusted based on network demand and cannot be set arbitrarily
• This base fee is burned (burn), reducing the total ETH supply and supporting the cryptocurrency’s value
• Users can add a tip (priority fee) to prioritize their transactions

This mechanism makes gas fees more predictable and stabilizes fee markets, replacing the previous sudden fluctuations.

How to monitor and predict gas prices?

Professional tracking tools

Etherscan Gas Tracker is the top choice. It provides:

• Current gas prices for Slow, Standard, and Fast tiers
• Estimated fees for different transaction types
• Historical data to help identify trends

Blocknative offers a forecasting tool, helping you determine the best timing to send transactions with the lowest costs.

Milk Road offers visual aids – a gas heatmap and charts, showing when the network is least congested, often during weekends or early mornings US time.

When should you transact?

Gas prices fluctuate constantly based on:

• Network demand: When many people are transacting, gas prices rise; when the network is quiet, fees decrease
• Transaction complexity: Smart contract interactions require more gas than simple ETH transfers
• Timing: Peak hours (usually during European-American working hours) tend to have higher gas prices

Layer-2 solutions: Escaping high gas fees

When Ethereum mainnet is heavily congested, Layer-2 solutions become a savior. These are protocols built on Ethereum but process transactions off-chain, then record the results on the mainnet periodically.

Two main types of solutions

Optimistic Rollups (Optimism, Arbitrum): Bundle multiple off-chain transactions, assume they are valid, then verify. Gas fees on Arbitrum can be just a few cents.

ZK-Rollups (zkSync, Loopring): Use mathematical (Zero Knowledge Proofs) to verify off-chain transactions. For example, Loopring can lower fees below $0.01 compared to a few dollars on the mainnet.

The development of Layer-2 not only reduces fees but also increases throughput from ~15 transactions/sec on mainnet to over 1,000 transactions/sec.

Ethereum 2.0 and Dencun upgrade: The future of gas fees

Eth2 with Proof of Stake

Ethereum 2.0 transitions from Proof of Work (PoW) to Proof of Stake (PoS), significantly reducing energy consumption and increasing transaction throughput. Upgrades like the Beacon Chain, The Merge, and sharding aim for a more efficient network.

Dencun upgrade

The latest upgrade – Dencun – introduces EIP-4844 (proto-danksharding). This:

• Expands block space
• Increases data storage for Layer-2
• Boosts throughput to 1,000 TPS

As a result, gas fees on Layer-2 continue to decrease, making Ethereum more user-friendly.

Practical gas fee management strategies

1. Continuous monitoring with tools

Use Etherscan, Gas Now, or wallet features like MetaMask to track fees in real-time.

2. Strategic timing

• Transact during low-demand periods (weekends, early mornings)
• Avoid congestion peaks like NFT or memecoin surges
• Use forecasting tools to choose the optimal fee window

3. Switch to Layer-2

For small or frequent transactions, Layer-2 (Arbitrum, zkSync) offers significant cost savings.

4. Set appropriate gas limits

Don’t set them too high (wasteful) or too low (transaction fails). Check transaction complexity beforehand.

Frequently Asked Questions

Q: Why do I still pay gas for failed transactions?
A: Because miners/validators have spent computational resources to process it. Fees are based on effort, not the outcome.

Q: What does “out of gas” error mean?
A: Your gas limit was set too low. When resending, increase the gas limit according to the transaction complexity.

Q: How do gas price and gas limit differ?
A: Gas price = the amount you pay per unit; Gas limit = the maximum units you allow to be consumed. Multiplying these gives the total fee.

Conclusion

Gas fees are an inseparable part of the Ethereum ecosystem. From understanding the EIP-1559 mechanism, smartly tracking gas prices, to leveraging Layer-2 solutions, you can optimize your transaction costs.

The future with Ethereum 2.0 and upgrades like Dencun promises significant reductions in gas fees. Until then, Layer-2 solutions such as Optimism, Arbitrum, zkSync, and Loopring are effective tools for cheaper, yet secure transactions.