Ethereum Gas: Base Fee, Priority Fee and What a Transfer Costs

Two numbers, one fee

Ethereum prices computation in gas. A transaction declares how much gas it is willing to consume, the network records how much it actually consumed, and the fee is the product of that gas and a price per unit. The price is quoted in gwei. One gwei is one-billionth of an ETH, or 0.000000001 ETH, which is easier to write than the equivalent in wei.

The important consequence is that a fee estimate is not a single number copied from a dashboard. It is an estimate of two things: the gas an operation needs, and the price the next block will charge. A simple transfer has a known gas cost. A contract call does not, because its cost depends on the state it touches.

What 21,000 gas buys

ethereum.org gives the canonical example. An ETH transfer requires 21,000 units of gas. If the base fee is 10 gwei and the sender adds a 2 gwei tip, the fee is:

21,000 × (10 + 2) = 252,000 gwei = 0.000252 ETH

The sender is debited 1.000252 ETH, the recipient receives 1 ETH, the validator receives 0.000042 ETH of tip, and 0.00021 ETH of base fee is burned. The split matters: the base fee does not go to the validator, and the tip does not go to the protocol.

For a transfer, 21,000 is fixed by the transaction type. For anything more complicated, the gas limit is a budget rather than a price. Setting it too low causes an out-of-gas failure; setting it too high does not increase the fee, because unused gas is not charged. What the limit does is cap what the transaction is allowed to spend.

The type 0x02 transaction

EIP-1559 introduced a new transaction type, serialized with the prefix 0x02. Its field list separates the two prices:

The sender pays the base fee of the block that includes the transaction plus the priority fee they set, provided the two together do not exceed max_fee_per_gas. That is the whole bargain: the tip is a bid for inclusion, and the max fee is a ceiling that protects the sender from a base-fee spike between signing and inclusion.

This is why a wallet can show a maximum cost before you sign. It knows the gas limit and the max fee, so it can multiply them. What it cannot know is the base fee of the future block, which is why the actual charge is usually lower than the maximum.

Why the base fee moves

The base fee is not auctioned per transaction. It is a property of the block, computed from the parent block’s usage. ethereum.org describes the rule: the base fee is calculated by comparing the gas used in the previous block with a target equal to half of the block gas limit. If the parent block was above target, the base fee rises; if below, it falls. The change is capped at 12.5% per block in either direction.

That cap is what makes fees predictable over short horizons. A wallet quoting the next block’s maximum base fee can multiply the current base fee by 1.125 and be certain of the ceiling for that block. The same rule makes sustained congestion expensive: a full block raises the price, the next full block raises it again, and the sequence compounds until demand falls.

EIP-1559’s abstract states the mechanism in one sentence: the base fee increases when blocks are above the gas target and decreases when they are below it, and the base fee is burned. Burning removes the base fee from circulating supply rather than transferring it to the validator, which is a monetary decision as much as a fee decision.

What the priority fee is for

A transaction that pays only the base fee is valid but unattractive. ethereum.org puts it plainly: a transaction that only pays the base fee is technically valid but unlikely to be included, because it offers no incentive to the validator to choose it over another transaction. The priority fee is that incentive.

The correct tip is a function of competition for the next block. When blocks are quiet, a small tip is enough; when many transactions are waiting, the tip has to compete with theirs. There is no protocol constant for it, which is why wallets estimate rather than prescribe.

A useful way to read a wallet’s fee screen is to separate the two lines. The base fee is a fact about the chain and cannot be negotiated. The priority fee is a choice, and it is the only part of the price the sender actually controls.

Failure still costs

The fee is paid whether the transaction succeeds or fails. ethereum.org says so directly: the fee is paid regardless of whether a transaction succeeds or fails. A revert undoes the state change but not the computation, and the computation is what the network charged for.

This changes how to think about a failed contract call. The gas limit is a budget for an attempt, not a payment conditional on success. A transaction that runs out of gas halfway through still consumes the gas it used, and the sender still pays for it. The practical defence is to simulate or estimate before sending, and to leave headroom in the gas limit for a state change that costs more than the estimate assumed.

Reading a fee before you send

1. Identify the operation. A plain transfer is 21,000 gas. A contract interaction is not, and the wallet’s estimate is the starting point rather than a guarantee.
2. Read the base fee and the tip separately. The base fee is the protocol’s reserve price; the tip is your bid. Only the second is a choice.
3. Check the max fee against the base fee plus your tip. If the max fee is lower than the next block’s plausible base fee, the transaction may wait rather than execute cheaply.
4. Leave gas-limit headroom for contract calls. Unused gas is refunded; an out-of-gas failure is charged and changes nothing.
5. Expect the actual fee to be below the maximum. The maximum is a ceiling, not a quote.

The fee is not a tax on the amount transferred. It is the price of the computation, and it is set by a rule the protocol applies to every block in the same way. Once the base fee and the tip are separated, most of the confusion around Ethereum fees disappears: one number is given, the other is chosen, and both are multiplied by the gas the operation actually uses.

Risk note. The rules and worked example in this article were read from EIP-1559 and ethereum.org’s gas documentation on 2026-10-26. Gas costs for contracts vary with state and implementation, and fee levels change block by block. Nothing here is investment advice.