Gas price is the amount of ether (ETH) a sender pays for each unit of gas that an Ethereum transaction consumes. It is normally quoted in gwei, a billionth of an ether, and it is one of the two numbers behind every on-chain fee: the gas limit caps how much work a transaction may do, and the gas price sets what each unit of that work costs.
Since the London upgrade of August 2021, which implemented Ethereum Improvement Proposal (EIP) 1559, the price per unit is no longer a single bid. It is the sum of a base fee, set by the protocol and burned, and a priority fee (or tip) that goes to the validator proposing the block. The total amount a user ends up paying is covered in the gas fee entry; this entry explains how the per-unit price is formed.
Gas price in plain terms
Imagine a toll road where the toll changes every few seconds depending on traffic. When the road is busy the toll goes up, and when it is quiet the toll comes down. Everyone passing in the same moment pays the same toll, and the toll money is destroyed rather than kept by the operator.
On top of the toll, drivers can hand the gatekeeper a tip to be waved through first. In normal traffic a small tip is enough. During a rush, people offering bigger tips get through sooner. The gas price is simply the toll plus the tip, charged for every kilometre (unit of gas) the trip uses.
From first-price auction to EIP-1559
Until August 2021 Ethereum used a simple first-price auction. Each sender named a single gasPrice, and miners under proof of work generally picked the highest bids from the mempool. Users had to guess what others would bid; overpaying was common in busy periods, and fees were volatile from one block to the next.
EIP-1559, activated with the London hard fork on 5 August 2021, replaced that with a two-part price:
- Base fee. A per-gas price that every transaction in a block must pay. The protocol sets it from the previous block: if that block used more than its target (half the block gas limit), the base fee rises by up to 12.5%; if it used less, the fee falls by up to 12.5%. The base fee is burned, removing that ETH from supply.
- Priority fee. An extra amount per gas, chosen by the sender, that goes to the block proposer as an incentive to include the transaction.
- Max fee per gas. The most the sender will pay per unit in total. It protects the user if the base fee rises between signing and inclusion; any difference between the max fee and what is actually charged is never taken.
Older-style transactions with a single gas price are still accepted. For them, everything above the base fee is treated as the tip.
Fee formula and worked example
The price actually charged per unit of gas is:
The total fee for the transaction is then:
- is the protocol price per gas for the block, which is burned.
- is the tip per gas the sender offers the validator.
- is the ceiling the sender sets on the total price per gas.
- is the work the transaction actually consumed, never more than its gas limit.
Worked example: a simple ETH transfer uses 21,000 gas. Suppose the base fee is 20 gwei, the sender offers a 2 gwei priority fee and sets a max fee of 40 gwei. The effective price is 20 + min(2, 40 − 20) = 22 gwei. The fee is 21,000 × 22 = 462,000 gwei, which is 0.000462 ETH. Of that, 21,000 × 20 = 420,000 gwei is burned and 42,000 gwei goes to the validator. If the base fee had jumped to 39 gwei before inclusion, the tip would be cut to 1 gwei so that the total stays at the 40 gwei cap.
What moves the gas price
The base fee responds only to demand for block space. Busy periods, such as popular NFT mints, token launches, sharp market moves that trigger liquidations in decentralized finance (DeFi) or arbitrage between decentralized exchanges, push it up block after block until demand eases. Raising the block gas limit, as validators did several times in 2025, adds supply and tends to ease the base fee.
Priority fees matter most when timing does. Traders competing for the same opportunity bid higher tips, which links gas pricing to front-running and other forms of transaction ordering. For ordinary payments a small tip is usually enough.
Gas prices on Layer 2 networks such as Arbitrum and Optimism follow similar models but are typically far lower, because many transactions share the cost of posting data to the main chain.
Burning and the supply of ether
Because the base fee is destroyed, high network use reduces the amount of ETH in circulation, a form of token burning built into the protocol. Since the 2022 move to proof of stake, new ether is issued to validators while base fees are burned, so the net supply can shrink in busy periods and grow in quiet ones. Running totals of burned supply can be checked on a block explorer.
EIP-1559 did not make fees cheap. It made them more predictable, reduced overpayment, and tied fee revenue to the value of ETH itself. Critics at the time, including many miners, objected to losing most fee income; supporters argued it improved the user experience and the economics of ether as an asset.