As you explore the new world of Ethereum and use your Rainbow wallet to travel around, you’ll quickly discover that there are transaction fees associated with doing things like swapping currencies, sending assets, minting NFTs, and more.
In this short guide, we’ll help you understand how these transaction fees work and explain why they can sometimes be so expensive!
The Ethereum blockchain is a giant decentralized ledger that records transactions. It’s like a huge spreadsheet where a new row gets added every time someone does something like send money.
Transactions are written on the blockchain by people called miners. Most normal people like us don’t actually interact with the blockchain directly; rather, a miner does it on our behalf in exchange for a small fee called Gas.
This Gas fee is always paid in Gwei which is a fractional amount of Ether (1 Ether = 1 Billion Gwei). You must have enough Ether in your wallet every time you want to make a transaction.
Important Note: Wallet apps like Rainbow don't control or receive this gas fee.
Gas costs fluctuate constantly based on supply and demand, and miners prioritize transactions based on the amount of gas that is submitted (the more you pay in gas relative to others, the greater your chances of your transaction being picked up by the miner).
During times of peak demand, so many people are competing for a miner’s attention that you have to pay a higher amount of gas in order to get through.
Rainbow automatically predicts the amount of gas that will likely be needed to successfully complete a transaction. This prediction is set by default but can be changed manually to increase or decrease the speed at which your transaction will complete. You can even set a custom gas fee.
If your gas fee is too low though or if the demand suddenly increases after submitting, your transaction might fail or take longer than expected.
The global community of developers are currently upgrading the Ethereum ecosystem to be more efficient. As these upgrades finish, more people will be able to use the blockchain at the same time without having to deal with expensive transaction fees.
Rainbow will also be introducing additional features and improvements that will make the entire experience a whole lot more practical and enjoyable. To learn more about these gas-saving features we are introducing, check out our Beginner's Guide to Layer 2 Networks.
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