Will Ethereum 2.0 Lower Gas Fees?

CryptoMode Ethereum Gas Fees

While the urge to buy bitcoin is on the rise, the increasing interest in decentralized finance has made the ethereum network quickly reach maximum capacity. The rise in Ethereum transaction fees has made the usage of Dapps much more expensive. This is affecting all developers using the blockchain for their different purposes. The high fees associated with Ethereum gas are creating a barrier to the widespread adoption of Defi. A lot of people prefer to stay away from ethereum and related projects not only in India but across the globe. Many people prefer to buy bitcoin in India because of the high transaction fee related to ethereum.

However, a solution seems imminent.

Ethereum 2.0 is an upgrade that addresses the transaction fee issue and other related problems, making the platform faster. With this upgrade, the platform will be able to handle thousands of transactions in a few seconds. The better performance and reduced fees will ultimately ease the use of the blockchain. 

What is ETH gas fee?

The blockchain is secured by a decentralized group of miners and to use this platform, users pay a certain fee which is called a gas fee to miners in charge of the process. The fees are determined by the miners based on the energy/gas needed to finalize a transaction. They have the power to ignore or even make a transaction priority depending on the amount of gas fees you are paying. So imagine what happens when demand is more than the network limit. The fees increase exponentially and small transactions become extraordinarily expensive.

This is the current situation and ethereum is looking for ways to mitigate this problem. At the moment, ethereum can only process 15 transactions in the space of one second. The fees are exponentially high and many projects within the network don’t yield great returns because of this problem. This definitely has an effect on the scalability and sustainability of many developments taking place on the network. The expensive gas fee is the reason why people prefer to cash out bitcoin to INR and other crypto assets ahead of ETH.  

What determines the ETH gas fees?

As explained earlier, the prices paid for power and network space on the platform are determined by the market. Gas fees differ based on the number of miners available and the number of Dapps and projects running at the time.

The amount of energy/gas used by different operations on the blockchain differs, and a single unit of gas has a set price. The price of the gas is referred to as GWEI.

When utilizing the ETH blockchain, the amount of gas is determined by the kind of operation, however, you decide the amount you are paying for the gas (gas fee). If you choose to pay a GWEI above the market price, you are guaranteed that your transaction will be done quickly. However, if you are not in a hurry, you can select a lower gas price and wait for when the transaction will be processed.

ETH 2.0

The Ethereum 2.0 also called Serenity is a better version of the existing ethereum blockchain. The purpose of this upgrade is to improve the speed and efficiency of the ETH network. There are some changes in the structure and design of ETH 2.0 that make it different from the original counterpart.

The Main Upgrades

Proof of stake

Ethereum functions on a proof of work (PoW) consensus algorithm just like every other crypto. However, with the proof of stake model (POS), the aim is to create new blocks, provide computing power, storage and bandwidth to validate transactions.

The PoW model requires participants to make a financial commitment in ETH to use the network. The participant must have at least 32 ETH for collateral to use the network. So basically the participants stake the funds. This implies that the funds will be locked while you perform as a block validator and you are eligible to receive block rewards. Having a form of collateral (staked funds) is to ensure that the users work with the interest of the network at heart and prevent malpractices.


Sharding is simply the process of splitting or partitioning a large chain into several chains called shards to improve scalability. Sharding aims at increasing the number of transactions the network can handle which will ultimately reduce the transaction fees by reducing network congestion. It improves the performance of the network as the workload is distributed among several validators assigned to different shards.

Will Ethereum 2.0 reduce gas fees?

Ethereum has great plans to increase the number of transactions it can handle per second to about 150,000 by the end of the year. Serenity aims to help fulfill this ambition and also make the network more secure.

The proof of stake model used by ETH2 reduces the energy/power-intensive problem of the PoW used by ETH. Sharding on the other hand will increase the number of transactions the network can handle as validation will be assigned to different validators overseeing different shards.

As explained earlier, congestion of the network is one of the main reasons for the high gas fees of ethereum. The upgrade is about to bring an increase in the transaction per second which will definitely reduce congestion of the network leading to a reduction in the transaction fees.

In conclusion, the high gas fee of ethereum is a big barrier for Defi, with more people choosing to buy bitcoin in India because of the favourable BTC to INR rate. Although ETH handles more transactions than bitcoin per second, you cannot neglect the fact that the high transaction fees are a hindrance to the growth of Ethereum and Decentralized finance.

If developers are successful with this upgrade, it will only mean great things for not only ethereum but also Defi as a whole.

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