Published in · 3 min read · Oct 26, 2020
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A hurdle to using PoolTogether and other Ethereum based applications are transaction fees (officially referred to as “gas costs”). This article explains what they are and how to minimize their impact.
- When you make any transaction on the Ethereum network you must pay a transaction fee. 100% of this transaction fee goes to the computers that secure the Ethereum network. None of it goes to the application you are using. The transaction fee is paid in ETH (Ethereum).
- Transaction fees are the same regardless of how much you are transacting. Depositing $1 or $1,000,000 will have the same transaction fee. Therefore it is better to deposit larger amounts.
- There are two factors determining the transaction fee 1) how busy the Ethereum network is and 2) how complicated the transaction is.
- You can check how busy the network is by looking on Etherscan. If you see a “low” gas cost lower than 20 it’s the perfect time to make a transaction. If you see a “low” gas costs over 100 it’s a very bad time to make one. Finding something in the 30–70 range is about normal in October 2020.
- Transactions costs change every minute. When the network is very busy, it can cost $10 to $20 to deposit into PoolTogether, when the network is not busy, the exact same transaction can cost less than $4. If you see a high transaction fee, you can come back later and do the same transaction for much less.
- The actual amount you pay for your transaction will always be LESS than the estimated amount you see when you approve the transaction. This is because you are approving the maximum amount that can be used, with PoolTogether, expect the actual amount used to be 20%–30% LESS than this estimated total you see.
- The Ethereum network is typically the least busy on weekends, especially in the evenings. This is a good time to make transactions.
- Interacting with smart contracts is more complicated than simply sending tokens to a wallet. Because of this, you will find that sending tokens may be cheap while making a deposit into PoolTogether (or another DeFi product) will be more expensive.
Why it’s Worth it
No one likes transaction fees! But paying transaction fees is what makes “Decentralized Finance” a reality. When you’re paying transaction fees remember you’re getting access to an unstoppable, open financial system and that is worth supporting.
Looking Forward
The cost of making transactions on the Ethereum network is a big problem and there are lots of teams working to make it cheaper. It’s reasonable to assume that within the next 12 months or less new options will enable lower transaction costs.
Lowering transaction fees for the protocol is a big focus of the core team.
Until then your best bet is to:
- Try to make fewer but larger deposits
- Pay attention to the gas costs on ETH Gas Station and make transaction when costs are low (typically on weekends)
- Use the earning of deposit and referral rewards can offset the cost of gas
Join the pool! https://app.pooltogether.com/
