Gas fees are the transaction costs paid to blockchain network validators for processing and confirming cryptocurrency transactions, calculated based on network congestion and transaction complexity. These fees are denominated in the blockchain's native currency (ETH for Ethereum, SOL for Solana) and fluctuate wildly from pennies during low activity to $50+ during peak congestion. Gas fees represent a significant cost for active traders and DeFi users, often making small transactions economically unviable.
Example:
You want to swap $500 USDC for ETH during peak network congestion. Ethereum gas fees are 150 gwei, making your transaction cost $45 in gas fees. Your $500 swap effectively costs $545 (9% overhead), and you'd need the ETH to appreciate 9% just to break even. The next day during low activity (15 gwei), the same swap costs $4.50 in gas, a 10x difference. This is why traders batch transactions during low-congestion periods, use Layer 2 solutions like Arbitrum ($0.50 gas), or choose lower-fee chains like Solana ($0.0001) for frequent trading.