Ethereum Gas Fee Calculation

Gas fees are a fundamental aspect of the Ethereum network, serving as the mechanism that prices computational resources and helps secure the network against spam and denial-of-service attacks. This document explores how gas fees work in Ethereum, their evolution over time, and how HashKey Chain implements its fee structure.

Gas Fundamentals

In Ethereum, "gas" refers to the unit that measures computational effort required to execute operations on the network. Every operation (transaction, smart contract execution, token transfer, etc.) consumes a specific amount of gas based on its complexity.

Key Concepts

• Gas Units: The amount of computational work required for operations
• Gas Price: The price per unit of gas, denominated in gwei (1 gwei = 10^-9 ETH)
• Gas Limit: Maximum gas a user is willing to consume for a transaction
• Transaction Fee: Gas Used × Gas Price

Historical Evolution of Ethereum's Fee Model

Ethereum's approach to calculating gas fees has evolved significantly over time to address scalability challenges and improve user experience.

Legacy Fee Model (Pre-EIP-1559)

Prior to August 2021, Ethereum used a simple auction-based model:

Transaction Fee = Gas Used × Gas Price (set by user)

Characteristics:

• Users specified their gas price, essentially bidding for inclusion in blocks
• Miners prioritized transactions with higher gas prices
• Led to unpredictable fees and "gas wars" during network congestion
• Users struggled to estimate appropriate gas prices

Technical Implementation:

// Legacy transaction structure (simplified)
struct LegacyTransaction {
    uint nonce;
    uint gasPrice;     // User-specified gas price in wei
    uint gasLimit;     // Maximum gas user is willing to pay
    address to;
    uint value;
    bytes data;
    // v, r, s signature values
}

// Fee calculation
uint transactionFee = gasUsed * gasPrice;

EIP-1559 Fee Model (London Upgrade, August 2021)

A major upgrade to Ethereum's fee mechanism was implemented in August 2021 through EIP-1559, which introduced a more predictable fee structure:

Transaction Fee = (Base Fee + Priority Fee) × Gas Used

Components:

• Base Fee: Algorithmically determined fee that adjusts based on network demand
  • Automatically changes by up to 12.5% per block based on how full the previous block was
  • Target is 50% full blocks (15M gas)
  • Gets burned (removed from supply) rather than paid to miners/validators
• Priority Fee (Tip): Optional fee paid directly to validators as incentive for inclusion

Technical Implementation:

// EIP-1559 transaction structure (simplified)
struct EIP1559Transaction {
    uint chainId;
    uint nonce;
    uint maxPriorityFeePerGas;  // Maximum tip to validator
    uint maxFeePerGas;          // Maximum total fee willing to pay
    uint gasLimit;
    address to;
    uint value;
    bytes data;
    // access list, signature values
}

// Fee calculation (in protocol)
uint baseFee = getCurrentBlockBaseFee();  // Determined by protocol
uint priorityFee = min(maxPriorityFeePerGas, maxFeePerGas - baseFee);
uint actualFeePerGas = baseFee + priorityFee;
uint transactionFee = gasUsed * actualFeePerGas;
uint burnedAmount = gasUsed * baseFee;
uint validatorPayment = gasUsed * priorityFee;

Benefits of EIP-1559:

• More predictable fees (base fee provides clear guidance)
• Better user experience (less guesswork in fee estimation)
• Economic improvements (ETH burning mechanism creates deflationary pressure)
• Reduced fee volatility

Post-Merge Fee Considerations (2022-Present)

After Ethereum's transition to Proof of Stake in September 2022 ("The Merge"):

• Validators replaced miners as transaction processors
• The EIP-1559 mechanism remained intact
• Priority fees go to validators instead of miners
• Block production became more consistent (exactly one block every ~12 seconds)

Gas Calculation Details

Gas Cost of Operations

Every operation in the Ethereum Virtual Machine (EVM) has a predetermined gas cost:

The complete gas costs are defined in the Ethereum Yellow Paper and have been adjusted through various Ethereum Improvement Proposals (EIPs).

Gas Estimation

Ethereum nodes provide a eth_estimateGas RPC method to estimate gas requirements for transactions:

// Web3.js example of gas estimation
const gasEstimate = await web3.eth.estimateGas({
    from: myAddress,
    to: contractAddress,
    data: contractFunction.encodeABI()
});

// Add buffer for safety (e.g., 20%)
const gasLimitWithBuffer = Math.floor(gasEstimate * 1.2);

HashKey Chain's Fee Model

HashKey Chain employs a dual-fee structure that builds upon Ethereum's model while optimizing for its Layer 2 architecture.

Dual-Fee Structure

Each transaction on HashKey Chain includes two distinct fee components:

Total Fee = L2 Execution Fee + L1 Security Fee

L2 Execution Fee:

• Covers computational resources on HashKey Chain
• Similar to Ethereum's gas model
• L2 Execution Fee = Gas Used × L2 Gas Price
• Typically more stable and predictable

L1 Security Fee:

• Represents cost of posting data to Ethereum mainnet
• Fluctuates based on Ethereum gas prices
• L1 Security Fee = Data Size × L1 Gas Price × L1 Gas Per Byte
• Often constitutes the larger portion of the total cost

Key Differences from Ethereum

1. Data Compression: HashKey Chain employs advanced data compression techniques to minimize L1 security fees
2. Fee Stability: The L2 execution component provides more stable fees than Ethereum mainnet
3. Economic Efficiency: Overall costs are significantly lower than equivalent transactions on Ethereum L1
4. Predictability: The separation of L1 and L2 fees provides clearer cost expectations

For detailed information on HashKey Chain's fee structure, optimization techniques, and current fee rates, refer to the HashKey Chain Transaction Fee documentation.