HomeCoinsMaker (MKR)Four Ways DeFi Users Can Pay Less in Ethereum Gas Fees

Four Ways DeFi Users Can Pay Less in Ethereum Gas Fees

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The content below is for informational purposes only, and you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

The success of the decentralized finance (DeFi) movement has placed enormous pressure on Ethereum, the network that hosts the majority of dapps. As DeFi activity has risen, users have had to pay miners higher and higher transaction, or gas, fees. This has made engaging with decentralized apps uneconomical for regular users. For example, as of this writing, the gas fee for a simple token transfer is around $67, while the transaction cost of opening a Yearn Vault is hundreds of dollars. 

The gas issue will ultimately be addressed with Ethereum 2.0. But the upgrade, which will roll out in stages and make wide-ranging improvements to the network, may take years to complete. In the meantime, there are several steps that users can take to pay less in Ethereum gas fees. 

Calculate and Research Your Way to More Affordable Gas Fees

Every interaction with the Ethereum blockchain requires users to pay a gas fee, which is measured in units of ETH called Gwei (1 billion Gwei = 1 ETH). The more complex a transaction is, the more Gwei required to execute it. While Ethereum wallets allow users to limit the amount of gas they pay for a transaction, there are minimum requirements. For example, a simple ETH transfer requires a gas limit of 21,000 units, and an ERC20 token transfer requires 65,000 units. Transactions associated with using DeFi apps will likely be higher still, because they are more complex for miners to process. 

Bottom line: Although there’s no avoiding gas fees if you want to use DeFi, there are ways to minimize the amount paid.

1. Organize transaction types efficiently

Every transaction requires gas to complete, and different types of transactions require different amounts of gas to complete. If you’re an active DeFi user, consider combining related transactions when possible to save on gas fees. 

For example, let’s say you have two Ethereum addresses, Account1 and Account2, each containing 1,000 tokens. You want to lock all of those tokens in a vault for a brand new dapp to earn on them, but doing so from each address separately will require a total of around 1,000,000 units of gas (500,000 units for each transaction), which at today’s gas rates amount to 0.23 ETH, or $380.* Instead, transfer the tokens in Account2 to Account1, and then lock all 2,000 tokens in a vault at once to save on fees. That one transaction would require only 565,000 units of gas amounting to $215.

Similarly, let’s assume that every week you want to purchase another 1,000 tokens and lock them in your vault. Each transaction would require 500,000 units of gas at a cost of  0.12 ETH, or $200. To save some money, first do a bit of math: If the value of the new tokens you will earn over the course of that week is less than $200, consider waiting until a later date to lock more tokens.

While these strategies are simple, they’re also easy to overlook in the moment.  

 *At the time of this writing, 1 ETH = $1655

2. Check the network for congestion and plan ahead when possible

The Ethereum Network is never quiet. While it can currently process around 15 transactions per second, that’s sometimes not fast enough. As a result, the number of pending transactions can get high during heavy use. During periods of congestion, transactions can be very slow to complete or can be held up for hours before ultimately failing. Worse, if miners start to process a transaction but the gas limit set by the user isn’t high enough to complete the job, the transaction will fail and the user will be charged for the work done. Not estimating enough gas is a common misstep of crypto users.

Ethereum transactions can peak on certain days—and even at specific times of days, raising Ethereum gas fees. If a transaction is not time-sensitive, waiting until the network is quieter can be a good way to save gas. For example, a user might be able to wait to open or close a vault, but not to make a more time-sensitive exchange transaction. 

Tools such as Ethereum Price allow users to view a week’s worth of network activity in line with their local time zone and gauge the best time to make their transactions. The chart below, which reflects results in GMT for a recent week, reveals that the weekend was quieter than weekdays, while weekday afternoons were the busiest.

Four Ways DeFi Users Can Pay Less in Ethereum Gas
Website ethereumprice.org/gas shows a heat map of gas prices for the week.

3. Calculate Ethereum gas fees according to the conditions

If network traffic is high and you can’t (or don’t want to) wait to make a transaction, you can try to come close to correctly estimating the amount of gas needed to complete it. While most Ethereum wallets provide users with an estimate of both the gas fee amount and the time needed to confirm a transaction, those numbers are just estimates and, importantly, don’t take into account real-time network conditions. 

1614193655 686 Four Ways DeFi Users Can Pay Less in Ethereum Gas
Most Ethereum wallets allow users to select an estimated gas fee based on speed.

Therefore, tools such as Gas Now and Etherscan’s Gas Tracker may help prevent users from overpaying based on wallet-provided transaction fee and speed estimates. These sites analyze the Ethereum mainnet pending transactions queue and display the different fees users might need to pay to ensure a transaction is confirmed within a certain time. As the screenshot below indicates, ensuring a transaction confirms almost immediately can be significantly more expensive than submitting a low-priority transaction.

1614193655 443 Four Ways DeFi Users Can Pay Less in Ethereum Gas
GasNow can help prevent users from overpaying gas fees.

If a transaction is not time-sensitive, a user can check a tracking tool, and then go back to their wallet and choose a preferred time frame and corresponding fee. The MetaMask wallet, for example, provides three speed choices (Slow, Average, or Fast), as illustrated earlier. Alternatively, wallet “Advanced Options,” when offered, allow users to enter the maximum gas fee they are willing to pay, rather than accept one of the standard options.  

4. Explore Ethereum Layer 2 platforms and technologies 

As users worldwide wait for the complete Ethereum 2.0 upgrade, new “Layer 2” solutions are being developed to help Ethereum scale. These include moving transactions to sidechains on the Ethereum network, and a set of technologies called Rollups. Both can help reduce gas costs and improve user experience in the immediate future. 

There are also developer-targeted frameworks, such as Loom, SKALE, and Polygon, that are designed for dapps that need to offer users fast, low-cost transactions. Blockchain game developers, for example, are drawn to those frameworks because their users need affordable ways to transfer very small amounts of crypto.

To learn more about Layer2 solutions and to discover some of the more popular projects, visit DeFiPrime and Ethereum.org.

1614193655 246 Four Ways DeFi Users Can Pay Less in Ethereum Gas
The CryptoZombies coding school (CryptoZombies.io) is built on Loom, a Layer 2 solution.

Making the Most of Ethereum and DeFi

High gas fees, which are a result of Ethereum’s success as the most popular platform for DeFi applications, can make simple blockchain transactions uneconomical for many users. But, as developers explore new ways to build and engage with dapps more efficiently, they open the door for users to discover ways to spend less on gas.

A lot is happening within the Ethereum ecosystem and DeFi movement. Stay updated by learning more about MakerDAO and its global community.

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