Ethereum originally used proof of work, but it transitioned to proof of stake in 2022. Proof-of-stake blockchains don't require computing to solve complex problems and use less electricity. As a result, processing these transactions is generally more cost-effective. In Ethereum's case, switching to proof of stake slashed its energy usage by more than 99.9%.
Why gas fees can vary
There are many factors that determine how much gas fees cost. One of the most important is the blockchain network. In the past, Ethereum gas fees were notoriously expensive, although they have decreased since its transition to a proof-of-stake model. However, it's still nowhere near as cheap as Solana (SOL -0.43%), which has gas fees of less than $0.001.
Not all blockchains are created equal -- or equally as efficient. Some are simply far more efficient, able to process transactions faster and at a much lower cost.
The type of transaction also affects how much gas fees cost. With more complex tasks, such as minting an NFT or validating transactions on a decentralized application (dApp), gas fees will generally be higher than they would be for a basic crypto transfer.
Network congestion is another factor that influences gas fees, and this is a reason why Ethereum gas fees used to cost so much. Every blockchain has a limit to the number of transactions it can handle per second. Busy network times can raise the gas fee to compensate for the demand.
How to reduce gas fees
If you expect to make cryptocurrency transactions regularly, consider choosing a blockchain with low gas fees. This is one of the reasons Solana has become so popular, particularly for creating meme coins. Its ultra-cheap gas fees mean you won't lose much of your crypto on transaction costs.
You can also monitor the network for lower activity levels before submitting a transaction. Evenings and weekends tend to be slower periods. By choosing the right time for your transaction, you could pay much cheaper gas fees.
