May 15, 2021

How To Make Your Crypto Transactions Cheaper?

The last few days have seen skyrocketing Ethereum transaction costs draining many a wallet. Here are a few simple tips how to stop transaction cost from killing your crypto purse.

Gas cost basics

Most tokens run on the Ethereum network, often denoted as ERC 20. Each transaction on the network costs „gas“ - a fee which is paid to miners for processing the transaction. The gas fee market is competitive - most miners process transactions with the highest fees they can find. This naturally means the more people trading at a particular moment, the higher the fees. You can check the total gas fees paid by you here.

Gas fees are denominated in gwei, which are fractional Ethereum parts. Thus the recent price spike of the coin doubled the gas cost crunch on traders. While during the last 12 months gas prices increased to historical levels this week was particularly tough. Sending a token to another account set you back at least $100, while a Uniswap trade was thrice that. The squeeze was brought on by extreme activity of Shiba Inu traders. The memecoin quite literally went to the moon, congesting the network. So what are the simple ways to avoid events like this costing you a fortune in gas fees?

1️⃣ Postpone transactions

If you are not a day trader the easiest way to avoid high gas fees is evade them altogether. If you have tokens to claim or other operations which can wait, let them wait. If you want to trade a token but are not convinced of the necessity to do it now, postpone it. The expected value of your transactions will always be worse when encumbered by a $300 transaction fee.

Usually it is enough to postpone tranasactions for a few hours, as gas prices vary by time of day, as you can check here. Last week fees were sky-high around the clock so it was necessary to wait a few days to really save.

2️⃣ Use centralized exchanges as trading places

Gas fees are paid only for on-chain transactions, i.e. those done directly on the blockchain. Centralized exchanges are the one place where trades take place off-chain. Thus the exchanges are able to offer minimal trading fees. If you send crypto to an exchange, swap it there and withdraw it, you can sometimes conduct transactions cheaper than a straight Uniswap trade.

You need to check in advance if the exchange services the tokens you want to trade. Transfers to and from exchanges are usually quick, but for smaller exchanges you might want to google this as well.

3️⃣ Use alternative chains for trades

The Ethereum gas fee spike spurred the emergence of alternative blockchains and cross-chain technologies. The biggest challenger has been the Binance Smart Chain (BSC), with transaction fees well under a dollar. While BSC is centralized, many tokens have chosen it as a backbone. Other upstarts include Solana and Tezos, also boasting negligible transaction fees. Such alternative blockchains enable avoiding excessive fees by shifting transaction making to them.

To shift your transaction to a different blockchain you need to swap your tokens against their counterparts on another network. The easiest way to do this is via exchanges. Binance is a reasonable medium for that, enabling users to deposit Ethereum-based tokens and withdraw them via the Binance Smart Chain.

 

 

While gas fees are a cumbersome topic especially for smaller traders, the good news is the problem will not plague us forever. Ethereum upon introduction of its 2.0 version will adopt the Proof of Stake mechanism eliminating the cryptographic mining process and thus the gas cost. This should drive crypto adoption by reducing a significant bareer to entry. Crypto networks are a competitive market, so once legacy issues are solved it would be hard to expect any new entrant to create a setup allowing high gas fees. Also numerous cross-chain solutions are now coming into the market automating the processes described here. In hindsight the high gas fee period will at all probability be seen as a temporary glitch on the crypto growth pathway.