Although there are several options available right now and more in the future, Ethereum gas fees are too costly for decentralized trading. The Ethereum blockchain has been severely congested and at times charges a $10 price for a straightforward transaction as activity on Ethereum-based decentralized marketplaces and on-chain transactions increase. Swaps on decentralized exchanges, like Uniswap, can occasionally cost more than $100 since trades on these exchanges are performed on the blockchain. So, are there any ways to avoid ETH gas fees on uniswap?
Why do fees cost so much in crypto?
Transaction fees increase along with the volume of transactions on Ethereum. The gas pricing and gas limit determine the costs on the Ethereum network. The gas price varies greatly, however the gas limit is quite consistent and relates to how complicated the operation is (for example, dealing with a smart contract will cost more than a basic transaction).
Blocks start to fill up on the network when there are too many transactions, and as a result, miners choose the blocks with the highest gas prices and leave the rest behind, lengthening the time it takes for them to process. Users who set the price or cap of gas too low risk having their transaction fail and losing the money they had originally agreed to pay.
Instead than using order books like centralized exchanges do to match orders, Uniswap uses liquidity pools and an automated market maker formula. The usage of a smart contract, which adds the token the user sells to the pool and gets the token the user wishes to buy from the same pool, ensures that all transactions take place on the blockchain.
However, Uniswap is the most popular decentralized exchange and the network's greatest gas guzzler, with over $6 billion in volume between February 5 and 11 alone. It's understandable that users would be willing to pay hundreds of dollars in transaction costs to exchange tokens that have not yet been listed on centralized exchanges given the gains generated by providing liquidity, yield farming, and merely holding DeFi tokens.
How to avoid ETH gas fees on uniswap
Although Uniswap continues to be the most well-known DEX, there are a number of other Ethereum-based exchanges that employ the same AMM architecture; nonetheless, they all share the same gas fee problem. However, depending on the liquidity available, certain exchanges provide a better rate for specific tokens, therefore it is feasible for users to obtain a better exchange rate than they would on Uniswap.
In order to retrieve the most tokens in a single transaction, the decentralized exchange aggregator 1inch splits the deal among different pools and seeks for the best rates on several DEXs. This can be quite helpful for large deals where it will be advantageous to go via several exchanges to assure a better exchange rate, compensating for part of the value lost in gas expenses.
While combining different exchanges does not, in and of itself, reduce the gas cost for swaps, 1inch uses the Chi, a gas token that is minted when the gas price is low and burned when the gas price is high, allowing the exchange users to save up to 40% in gas fees even if the trade uses another exchange, like Uniswap or SushiSwap.
Using Wrapped Ether (wETH) directly when exchanging tokens for ETH is another option to cut costs on Uniswap and other exchanges. Since ERC-20 tokens are used in every transaction on Uniswap, trades involving ETH-based pairs need wrapping ETH in order to obtain wETH. The user can save at least 20% on gas costs if they convert their ETH before using a decentralized exchange.
It's expected that DEX will gain more and more traction, particularly when sophisticated investment products like derivatives and margin trading become accessible through decentralized platforms.
