In the context of the strong development of the decentralized economy, the concept of "blockspace" has become the most valuable digital commodity. The scarcity of block space, combined with skyrocketing transaction demand during key moments, has led to a unique phenomenon known as "Gas war". According to analysis from the team of experts at Tan Phat Digital, in essence, Gas war is not simply an increase in transaction costs, but a priority auction taking place in real time, where users compete fiercely for the right to authenticate transactions before others. Understanding Gas war requires an in-depth look at the fee structures of protocols, market psychology, and the entities hiding behind value mining algorithms.
1. The technical nature of Gas and the formation of the fee market
To decode the Gas war, it is first necessary to understand the unit "Gas" in systems such as Ethereum. Gas is a unit of measurement for the computational effort required to perform specific operations on the network, such as transferring tokens, interacting with smart contracts, or minting NFTs. Each operation on the Ethereum Virtual Machine (EVM) has a fixed gas consumption specified in the protocol's source code. However, the price of each unit of gas (Gas Price) fluctuates based on supply and demand.
1.1. Transaction fee structure and auction mechanism evolution
Before the London upgrade (EIP-1559) was implemented in 2021, Ethereum operated on a "first-price auction" model. In this system, users propose a gas fee they are willing to pay. Miners, which operate in pursuit of maximum profits, will prioritize selecting transactions with the highest price from the mempool (a reservoir of pending transactions) to include in the next block. This creates an opaque competitive environment where users often pay more than necessary to ensure transactions don't get stuck.
The introduction of EIP-1559 transformed this model into a more predictable system, consisting of a "base fee" and a "priority fee/tip". The base fee is automatically adjusted by the network based on the occupancy of previous blocks. If demand exceeds 50% of the block's capacity, the base fee will increase to 12.5% in the next block and vice versa. However, in extreme events, when a sharp increase in base fees is still not enough to reduce demand, "priority fee competition" becomes the main battleground.
1.2. Actual unit of measurement and cost calculation
Gas fees are usually calculated in Gwei, one billionth of an Ether (ETH) unit ($1 \text{ Gwei} = 10^{-9} \text{ ETH}$). The final transaction cost is determined by the formula:
$$Total Fee = (Base Fee + Priority Fee) \times Gas Used$$
In which, the base fee will be "burned" from circulation, creating a deflation mechanism for the original currency, while the tip will be transferred directly to the validator.
Important technical terms in Gas War:
Gas Limit: The maximum amount of gas a user is willing to spend on a transaction, which prevents unlimited resource consumption if the contract fails.
Gas Price (Gwei): The price the user pays per unit of gas. This is the main variable that is pushed up to compete for processing priority.
Mempool: Pool containing transactions waiting to be selected by the validator. This is where bots continuously scan for "front-running" opportunities.
Priority Fee (Tip): An additional fee paid directly to validators, acting as a tool to effectively "jump in line" in the block.
2. Causes and scenarios that trigger Gas War
Gas war is not a permanent state of the network but a consequence of sudden demand shocks. Analysis shows that there are three main sources leading to this situation.
2.1. Rare asset issuance events (NFT Mints and ICO/IDO)
This is the most common scenario of gas wars. When a famous project announces an NFT mint date, thousands of users and bots will simultaneously send transactions at the same time. Since the number of assets is often limited, the competition is no longer "who wants to buy" but "who can pay the highest fee to get the transaction done in the first few seconds".
During the Otherside event in 2022, demand was so great that users were willing to pay from 4,000 to 10,000 Gwei for a transaction, while the usual fee only fluctuated around 20-50 Gwei. This led to a situation where the Ethereum network was almost paralyzed for common users who did not participate in the event.
2.2. Market volatility and DeFi liquidation
When the prices of crypto assets fluctuate strongly, lending protocols like Aave or Compound need to carry out liquidation transactions to ensure system safety. Liquidation bots compete with each other for the right to execute these transactions because they offer significant profits from liquidation fees. Similarly, arbitrageurs also rushed in to equalize prices between DEX exchanges, creating a wave of high-fee transactions that clogged the network.
2.3. Impact of bots MEV (Maximal Extractable Value)
MEV is the maximum value that a validator or bot can mine by changing the order, inserting or removing transactions in a block. MEV bots use techniques such as "front-running" or "sandwich attacks". To carry out these attacks successfully, bots must set extremely high priority fees to ensure their transactions are directly before or immediately after the target's transactions.
See also: What are Gas Limit and Gas Price?
3. Who really benefits from Gas war
While ordinary users are often victims of Gas war, some entities in the ecosystem amass huge wealth from these events.
3.1. Validators and Miners: Those who hold the right to collect fees
In the blockchain consensus mechanism, validators are the most direct beneficiaries. They receive the entire "priority fee" where users compete for early processing. Statistics show that on days of major NFT mint events, validators' income from transaction fees can account for up to 50-80% of their total revenue. Although the underlying fees are burned, this increases the value of ETH through a reduction in supply, indirectly benefiting validators holding large amounts of assets.
3.2. Block Builders and Searchers: Value Extraction Experts
With the development of the MEV-Boost architecture on Ethereum, the role of the block builder becomes extremely important. Tan Phat Digital identifies this as the group of entities with the greatest influence on the current fee structure:
Searchers: Plays the role of detecting arbitrage, liquidation or sandwich opportunities. The main source of income comes from trading profits minus gas fees paid.
Block Builders: Optimize transaction order to create the most valuable blocks. Income comes from the difference between the fees collected from Searchers and the fees paid to Validators.
Validators:Play the role of selecting the block with the highest bid from Builders to receive block rewards and priority tips.
2024 data shows that the Builder market is concentrated on a few large entities such as Beaverbuild and Titan Builder, who are capable of processing thousands of transactions per second to Maximize fees collected from gas wars.
3.3. Projects and Platforms: Hype and Brand Recognition
Although it may seem paradoxical, the same projects that cause gas wars also benefit from this chaos. A fierce gas war is the clearest evidence of "hype" and actual demand for the project. It creates a powerful media effect, turning owning NFTs or project tokens into a symbol of status and luck.
See more: Why are gas fees suddenly increasing variable
4. Consequences and Negative Effects of Gas War on the Ecosystem
Gas war is not just a technical issue; it causes deep cracks in user experience and network sustainability.
4.1. Financial exclusion and barriers for retail users
The most painful consequence of gas war is pushing small users out of the network. When the cost of sending 100 USD tokens reaches 50 USD in gas, the transaction becomes uneconomic. This creates a "playground for the rich", where only people with large amounts of capital can perform on-chain operations.
4.2. Losses from failed transactions
During intense gas wars, the rate of failed transactions increases dramatically. A user can set a very high gas fee, but if someone else sets a higher one soon after, the first user's transaction will still be processed by the validator but will be "reverted". Even though the transaction fails, the user still has to pay gas fees for the consumed computing resources. During the Otherside event, it is estimated that more than 1,600 ETH were wasted on failed transactions.
5. Case Study: Otherside Mint Disaster (2022)
Yuga Labs' Otherdeeds NFT mint event on April 30, 2022 is the most epic example of a gas war getting out of control.
On-chain data analysis during the event:
Total gas fees consumed:Over 60,000 ETH (equivalent to more than 170 million USD at that time).
Highest gas price: Reached 45,556 Gwei within the first minute of the sale opening.
Median gas price: Maintained at 6,000 Gwei, about 150-200 times the normal level.
Transactions successful: 28,000 transactions representing 55,000 minted NFTs.
Failed transactions: 13,000 transactions costing users millions.
This disaster prompted Yuga Labs to issue a public apology and pledge to refund gas fees for failed transactions. At the same time, it also promotes the development of ApeChain, a Layer 3 built on Arbitrum Orbit to optimize performance.
6. Solana and Local Fee Markets
In contrast to Ethereum, Solana is designed to solve the global gas war problem through parallel processing architecture and local fee market.
Detailed comparison of Ethereum and Solana mechanisms:
Scope of influence: Ethereum affects the entire network (Global), while Solana only affects the local set for each account or application (Local).
Basic fees: Ethereum has fluctuating fees according to the EIP-1559 algorithm, while Solana maintains an extremely low fixed fee (5,000 Lamports).
Congestion handling: Ethereum pushes gas prices up to filter users; Solana uses priority fees combined with a parallel processing mechanism to minimize spillover effects.
Processing speed (TPS): Ethereum reaches about 15-30 transactions/second, while Solana achieves between 2,000 and 65,000 transactions/second theoretically.
Analysis of data from November 2024 shows priority fees Median fees on Solana hit a record high of 0.0003 SOL, but median fees remained low at 0.00000861 SOL, proving that the local fee market is indeed effective in protecting mainstream users.
7. Marketing Psychology and Technology Solutions
Gas war is often used by marketers as a psychological weapon based on the scarcity principle and social proof. However, to eliminate this situation, Tan Phat Digital notes that multi-layer solutions are being deployed:
Layer 2 and Rollups: Networks such as Arbitrum, Optimism, Base help reduce gas fees significantly. In particular, Arbitrum Nitro uses a "first come, first serve" Sequencer mechanism to eliminate the incentive to auction gas fees.
Account abstraction (ERC-4337): Enables "Gasless transactions" via Paymaster, where the project funds fees or users pay in stablecoins.
Intent-based transactions (Intent-based): Protocols like CoW Swap use batch auctions, ensuring all users in the same batch receive the same price, completely eliminating the possibility of front-running.
8. Typical Case Study of Gas War in Blockchain history
To better understand the impact of this phenomenon, Tan Phat Digital has compiled 10 typical real-life examples over the years:
CryptoKitties (December 2017): This is the first large-scale gas fee war. This virtual cat farming game has taken up 25% of Ethereum network traffic, stalling other transactions and sending gas fees skyrocketing, forcing miners to raise gas limits per block.
Black Thursday (March 2020): When the price of ETH dropped 43% in one day, the Ethereum network was seriously congested. Gas fees increased tenfold, causing oracle bots to be unable to update prices, leading to many assets being liquidated for 0 DAI in MakerDAO auctions.
Stoner Cats (July 2021): This animated series' NFT sale resulted in 344 ETH (about 790,000 USD) being wasted on failed transactions due to mergers. The smart coin was not optimal and users set the gas limit too low.
The Sevens (September 2021): In just the first hour of the 7,000 NFT sale, there were more than 26,000 failed transactions, costing users more than $4 million in transaction fees.
Doodles NFT Drop (Month) October 2021): The gas war at the public sale led to a transaction failure rate of more than 90%. Users wasted approximately 335 ETH ($1.26 million) in an unsuccessful attempt to "win the spot".
Adidas: Into the Metaverse (December 2021):The network was overwhelmed by extreme demand, causing 35,000 wallets to participate with a 59% failure rate. About 680 ETH ($2.6 million) in gas fees were wasted on failed transactions.
Pixelmon Mint (February 2022): This graphically controversial project also sparked an epic gas war, pushing the cost of minting an NFT into the thousands at the height of the hype wave.
Otherside (Otherdeeds) Mint (May 2022): The largest gas disaster in Ethereum history with more than 60,000 ETH (about 170-200 million USD) in gas fees paid in 3 hours. Some users have had to pay up to $14,000 in gas fees for an NFT worth $6,000.
PEPE Memecoin Frenzy (H1 2024): PEPE memecoin fever has pushed Ethereum transaction fees to a 12-month high. The fee to perform a swap on Uniswap sometimes reached 50-100 USD.
Jupiter (JUP) Airdrop (January 2025): On the Solana network, this event pushed the average priority fee to a record high of 0.0003 SOL, while the median fee was only 0.000008 SOL, showing competition Fierce competition between bots to receive airdrop early.
9. Frequently Asked Questions (FAQ)
Q1: What is a gas war in the simplest way possible? Gas war is a "right to go first" auction. When thousands of people want to do the same thing on the blockchain at the same time (like buying a limited NFT), whoever pays the higher tip to the validator will have priority to do it first.
Q2: Why do gas fees spike when there is a hot event? Blockchain has a limit on the number of transactions in each block (blockspace). When demand exceeds supply too much, users are forced to push up gas prices to "jump in line" for that limited block space.
Q3: Who benefits most financially from Gas war? Validator is the party that directly receives all of the priority tip. In addition, MEV bots and block builders (Block Builders) also earn huge profits from ordering transactions.
Q4: Where does the base fee in Ethereum go after payment? Unlike tips, the base fee is automatically "burned" by the system, that is, permanently removed from circulation. This helps reduce the total supply of ETH.
Q5: What is MEV (Maximal Extractable Value)? MEV is the value that a validator or bot can profit from by changing the order of transactions in a block to perform tactics such as front-running or arbitrage.
Q6: How does a sandwich attack work? A bot detects transactions. Buy yours in mempool. It places a buy order right in front of you (increasing the price) and a sell order right behind you (to take profit from the high price you just paid).
Q7: Why do I still lose gas fees when the transaction fails? Even if the transaction fails, the validator still has to use computing resources to check and process your order. Therefore, you still have to pay for that consumed resource.
Q8: How to know if a Gas war is about to happen? Usually related to events with a specific schedule such as airdrops, famous NFT mints, or when the market has extreme price fluctuations (like when BTC drops sharply).
Q9: How does Layer 2 handle Gas war? Layer 2s like Arbitrum use mechanisms "first come first serve" instead of auctioning fees. This means that paying higher fees doesn't make you faster, thereby extinguishing gas war momentum.
Q10: How does "Coincidence of Wants" (CoW) in CoW Swap help? It allows two people with opposite exchange needs (for example: A sells ETH for DAI, B sells DAI for ETH) to match orders directly with each other without going through a liquidity pool, thereby avoiding high gas fees and MEV.
Q11: Why are fees on Solana cheaper than Ethereum during hot events? Thanks to a “local fee market,” congestion in one application (like mint NFT) only increases fees for users of that application, while other transactions on the network maintain low fees.
Q12: Does Account Abstraction help eliminate gas fees? It allows for "Gasless Transactions", where projects can pay fees on behalf of users (Paymaster) or allows you to pay fees with the token you are trading (like USDC) instead of having to hold ETH.
trading market and uses APE tokens as gas fees, helping to protect the community from congestion and extremely high gas fees of the Ethereum mainnet.Q15: Is gas war always a sign of a bullish market? Not really, but it is a sign of extreme interest. It can happen both when the market crashes (everyone rushes to sell off) or when there is an extremely attractive NFT project.
Gas war reflects the scarcity of block space and the growing demand for decentralized trust. To optimize costs and avoid risks, Tan Phat Digital recommends that users:
Prioritize the use of Layer 2 and Layer 3 networks to conduct transactions.
Take advantage of wallets that support Account Abstraction (ERC-4337) for a more flexible experience.
Trade through intent-based DEXs to avoid being attacked by MEV
Monitor the network's heatmap to execute transactions during off-peak hours.
Ultimately, the continued evolution of technology promises to move the Web3 world toward a future where gas fees become an invisible concept, allowing blockchain to reach mass adoption.
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