The Complete Guide to On-Chain Transaction Fees: From Gas Fee Basics to Practical Operations

To operate efficiently within the Web3 ecosystem, understanding the mechanics of transaction fees is essential. Gas fees (also known as transaction fees) across different blockchain networks directly impact transaction speed and cost. Learning how to set these fees reasonably can help you avoid unnecessary expenses while ensuring your transactions are confirmed quickly. This guide will take you deep into the nature of Gas fees, the differences in fee calculation across various chains, and how to adjust fees within mainstream wallets.

What exactly are Gas fees? Why do transactions have to pay fees?

When you transfer assets on a blockchain or interact with smart contracts, miners or validators in the network need to consume computational resources to process the transaction. Gas fees are the “service charges” you pay to these network participants. Simply put, they are an economic incentive mechanism to keep the blockchain running smoothly.

Transaction fees serve multiple purposes. First, they incentivize network maintainers—miners and validators—by providing them with income through Gas fees, motivating them to continue providing hardware resources. Second, fee mechanisms effectively curb spam transactions, as any operation requires payment, making malicious attacks costly. Third, transaction fees determine priority—higher fees make miners more willing to include your transaction sooner. Lastly, some blockchains (like Ethereum) burn part of the Gas fees to regulate token supply.

What happens if you set your Gas fee too low? Your transaction may remain pending for a long time. This is because block space is limited, and miners prioritize transactions with higher fees to maximize revenue. If the network remains congested and your fee is not competitive, your transaction might even fail after hours or days and be returned to your wallet. Most modern wallets support “accelerate transaction” features, allowing you to resend with higher fees.

Differences in Gas fee calculation: Why do fees vary so much across chains?

Not all blockchains use the same fee system.

Auction-based model is the most common—chains like Bitcoin and Ethereum adopt this approach. When submitting a transaction, users “bid” to compete for limited block space; higher bids are prioritized. The downside is that users must guess current network congestion, which can lead to misestimating fees.

Fixed fee model is exemplified by Solana. It determines fees based on the number of signatures in the previous block, reducing guesswork for users. Additionally, Solana is experimenting with local fee markets—if a particular DApp experiences a surge in traffic, users can pay higher fees only for that app’s transactions rather than raising fees network-wide, allowing more granular congestion management.

Block size and block time are fundamental factors affecting fee levels. Larger blocks can hold more transactions, requiring higher transaction volume to cause congestion; shorter block times mean higher throughput, alleviating fee pressure. However, these designs must balance decentralization—larger blocks and faster block times demand higher hardware specs from node operators, which can lead to centralization risks. For example, Bitcoin SV (BSV) attempted to increase block size to TB levels, but by June 2022, it had only 22 nodes, exposing extreme centralization issues. In contrast, Bitcoin (BTC) with a 4MB block size maintains over 15,000 independent nodes, preserving good decentralization. This illustrates that blockchain design must balance transaction costs and network security.

Deep dive into Gas fee mechanisms: balancing costs and decentralization

The final transaction cost is influenced by multiple factors: block capacity limits, block interval, and current transaction volume. Most chains use an auction-based fee mechanism (originating from Bitcoin)—when there are fewer transactions waiting, even low fees can be included; when the mempool is full, fees rise.

This is a dynamic supply-and-demand relationship: block space is the “supply,” transaction demand is the “demand,” and fees are the “price.” During demand surges (e.g., popular NFT drops), competition intensifies, and fees spike. While this can negatively impact user experience, it also benefits network security—higher fees mean higher attack costs.

Many emerging blockchains are exploring alternative solutions to reduce user costs while maintaining network efficiency. Layer2 scaling solutions, sharding, multi-chain ecosystems, and other innovations aim to address this challenge.

How to set Gas fees in mainstream wallets

Most modern Web3 wallets support custom Gas fee settings across 20+ major blockchains, with similar operation steps. Here is an example of token swap on OKC network using a popular wallet.

Basic operation steps:

1. Open your wallet app and go to the transaction module
2. Select the target blockchain network
3. Enter swap details (source asset, target asset, amount)
4. Click “Preview Transaction” to review details
5. Confirm fee settings in the “Network Fees” section

By default, the system automatically selects a “Standard” fee tier, meaning your transaction should be confirmed within the next few blocks. If you need faster confirmation, choose the “Fast” tier and pay a higher fee; if not urgent, select “Economy” to lower costs.

Customizing Gas parameters:

Advanced users can manually adjust parameters, typically including:

• Gas Price (Gwei): The amount you’re willing to pay per unit of Gas. Increasing Gas Price improves the chance of priority processing, especially during congestion
• Gas Limit: The maximum amount of Gas your transaction can consume. Usually auto-estimated; non-developers generally don’t need to modify
• Gwei: The smallest unit of fee measurement on Ethereum and compatible chains (1 ETH = 1 billion Gwei)

When should you increase Gas Price? Typical scenarios include: urgent DeFi position management (e.g., rapid collateral liquidation), participating in hot NFT drops, or during severe network congestion to ensure your transaction is confirmed. Raising Gas Price rewards miners and validators with higher fees, speeding up processing.

After adjusting parameters, confirm with your wallet password, and the transaction will be submitted to the network. Actual confirmation time depends on the blockchain, current network congestion, and your set Gas fee.

Recommendations for choosing fee tiers rationally

New users are advised to stick with preset fee tiers (Economy/Standard/Fast) and avoid manual Gas adjustments. Incorrect settings can cause transaction failures or overpay.

For routine transactions (like token transfers or contract calls), “Standard” tier is usually sufficient. If you have time, “Economy” can save costs. Only when time-sensitive should you upgrade to “Fast.”

During peak congestion (e.g., major events), even the highest fee setting may result in delays. In such cases, the best approach is to wait for congestion to ease unless the transaction is truly urgent.

Summary

While Gas fee mechanisms may seem complex at first glance, their core logic is straightforward—they are an economic incentive to network participants. Miners and validators need to earn revenue to maintain the blockchain, and users pay Gas fees for transaction priority and network resources.

In times of congestion, users increase fees to compete for limited block space, raising overall costs but also protecting network security. Understanding this mechanism helps you make smarter fee decisions—avoiding overpayment and preventing long confirmation delays due to insufficient fees.

Mastering Gas fee knowledge enables you to operate more confidently and efficiently within the Web3 ecosystem, whether for trading, investing, or participating in DeFi applications. Get ready to step into the decentralized world!