Networks and Gas -- How Transactions Actually Work

What is a blockchain network?

A blockchain network is the infrastructure that processes and records every crypto transaction. If you think of a transaction as a package, the network is the highway it travels on. Without a network, your transaction has nowhere to go.

Ethereum was the first blockchain to support smart contracts -- programs that run automatically and power everything from token swaps to lending protocols. It launched in 2015 and remains the largest decentralized finance (DeFi) ecosystem by far, with hundreds of billions of dollars locked in its protocols.

But Ethereum has limitations. It can process roughly 15 transactions per second. When millions of people want to transact at the same time, it gets congested, and fees skyrocket. This is not a hypothetical problem -- during the 2021 NFT boom and the 2024 memecoin surges, basic Ethereum transactions routinely cost $50 to $200.

So other networks were built. Some sit on top of Ethereum, bundling transactions to make them cheaper while still relying on Ethereum's security. Others were built from scratch with entirely different architectures. They are like different highways -- they all get you places, but tolls and speed vary wildly.

The critical thing to understand: your assets exist on a specific network. If you have USDC on Ethereum, that USDC is not automatically available on Base or Solana. Each network is its own world, and moving between them requires a deliberate step called bridging (which we will cover later in this lesson).

Why there are so many networks

Ethereum's 15-transactions-per-second limit created a problem that multiple teams tried to solve in different ways. The result is a landscape of competing networks, each with different tradeoffs between speed, cost, security, and ecosystem size.

Layer 2 networks

Layer 2 networks (L2s) are built on top of Ethereum. They process transactions off the main Ethereum chain, then periodically "settle" the results back to Ethereum. This means they inherit Ethereum's security guarantees while offering dramatically lower fees and faster speeds.

The most prominent L2s are:

• Base -- backed by Coinbase, making it easy to onboard from the exchange. Growing rapidly with major DeFi protocols launching there.
• Arbitrum -- the largest L2 by total value locked, with nearly all major DeFi protocols available.
• Optimism -- another major L2, home to the Superchain ecosystem and OP token governance.

Alternative Layer 1 networks

Alternative L1s are entirely separate blockchains built from scratch. They do not rely on Ethereum for security -- they have their own validators, their own consensus mechanisms, and their own ecosystems.

• Solana -- processes thousands of transactions per second with sub-second finality. Uses a different programming language (Rust) and architecture than Ethereum.
• Avalanche -- uses a unique consensus protocol for fast finality and supports multiple "subnets" (customizable sub-networks).

The tradeoff is clear: alternative L1s can be faster and cheaper, but they have smaller ecosystems and different (sometimes less proven) security models than Ethereum.

Network comparison

Notice the fee difference. Ethereum's average transaction costs 100x to 5,000x more than the same transaction on Base or Solana. For anyone working with small amounts -- say, under $1,000 -- this difference is not academic. It directly determines whether a strategy is profitable or not.

What is gas and why you need it

Gas is the fee you pay to validators (the computers that process transactions) for their work. Every single action on a blockchain -- sending tokens, swapping, depositing into a lending protocol, even approving a token for use -- requires gas.

Think of gas like postage. You want to send a letter (your transaction), and you need to pay the postal service (validators) to deliver it. No stamp, no delivery. No gas, no transaction.

Here is where beginners get tripped up: you must hold the network's native token to pay gas. It does not matter what other tokens you have. If you are transacting on Ethereum, Base, or Arbitrum, you need ETH. On Solana, you need SOL. On Polygon, you need POL.

• Ethereum, Base, Arbitrum, Optimism → need ETH for gas
• Solana → need SOL for gas
• Polygon → need POL for gas

This leads to the number-one beginner trap in all of crypto: you buy $100 of USDC on Base, it arrives in your wallet, and you try to swap it or deposit it somewhere -- but the transaction fails because you have zero ETH. You cannot do anything without gas money. Your tokens sit there, untouchable, until you get some native token into your wallet.

How gas fees actually work

Gas fee mechanics differ by network, but the core concept is the same everywhere: you pay for the computational resources your transaction consumes.

On Ethereum

Ethereum gas is calculated as:

Gas fee = gas units used × gas price (in gwei)

A gwei is one billionth of an ETH. A simple ETH transfer always costs 21,000 gas units. If the gas price is 20 gwei, you pay 21,000 × 20 = 420,000 gwei = 0.00042 ETH (about $1 at $2,400/ETH). A complex DeFi transaction might use 200,000+ gas units -- ten times the cost.

The number of gas units for a given operation is fixed. What fluctuates is the gas price. When the network is congested -- during a popular token launch, a market crash, or any event that triggers a rush of transactions -- gas prices spike because users bid against each other for limited block space. During quiet periods, gas prices can drop to 5-10 gwei. During peaks, they can hit 200+ gwei.

On Layer 2s and Solana

On L2 networks like Base and Arbitrum, fees work differently. They are composed of two parts: a small L2 execution fee and an even smaller L1 data posting fee (the cost of settling the batch back to Ethereum). The total is almost always under $0.01.

On Solana, fees are even simpler: a flat base fee of 5,000 lamports (0.000005 SOL, less than $0.001) plus optional priority fees during congestion. Fees are predictable and nearly flat -- you rarely have to worry about fee spikes the way you do on Ethereum.

The same action, wildly different costs

Bridging: moving assets between networks

Your USDC on Ethereum is not the same as your USDC on Base. They are technically different tokens, issued on different networks, tracked by different smart contracts. To move assets from one network to another, you use a bridge.

A bridge works by locking your tokens on the source network and minting equivalent tokens on the destination network. When you bridge 100 USDC from Ethereum to Base, the bridge locks your 100 USDC on Ethereum and creates 100 USDC on Base for your address. When you bridge back, the process reverses.

Bridge risks

Bridges are one of the highest-risk components in all of crypto. Because they hold large pools of locked tokens, they are prime targets for hackers. Some of the largest hacks in crypto history have been bridge exploits:

• Ronin Bridge (2022) -- $625 million stolen. North Korean hackers compromised validator keys.
• Wormhole (2022) -- $320 million stolen. An attacker exploited a vulnerability in the bridge's smart contract.
• Nomad (2022) -- $190 million stolen. A misconfigured update allowed anyone to drain the bridge.

These are not theoretical risks. Billions of dollars have been lost to bridge exploits. The more times you bridge, the more you expose yourself to these risks.

The beginner recommendation

For beginners, the simplest and safest approach is to avoid bridging entirely. Instead, buy assets directly on the network you want to use. If you want to use DeFi on Base, buy USDC on Coinbase and withdraw it directly to Base -- no bridge needed. If you want to use Solana, buy SOL on an exchange and withdraw it to your Solana wallet. Every major exchange now supports direct withdrawals to multiple networks.

Simulation: What a $5 experiment costs on each network

In our Start guide, we recommend experimenting with $5 in stablecoins to learn DeFi hands-on. Let us walk through what that experiment actually costs in gas fees on different networks.

Imagine you buy $5 in USDC, transfer it to your wallet, deposit it into a lending protocol, withdraw it, and do a token swap. Here is the total gas cost for that sequence of operations:

On Ethereum, your $5 experiment would cost more in gas than the experiment itself. You would need $20 to $55 just to run a $5 test. On Base or Solana, gas is essentially free -- a penny for the entire sequence. This is not a marginal difference. It is the difference between being able to learn by doing and being priced out entirely.

This is exactly why our course recommends Base as the starting network. If you use Coinbase, transferring USDC to Base costs zero fees, and once your USDC arrives, you can perform dozens of transactions for less than a cent in total gas.

How to check gas before transacting

Every wallet -- MetaMask, Rabby, Phantom, Coinbase Wallet -- shows you the estimated gas fee before you confirm a transaction. This preview is your last line of defense against overpaying.

What to look for

• The estimated fee. Your wallet displays the expected gas cost in both the native token (e.g., 0.003 ETH) and its dollar equivalent (e.g., $7.20). Always check the dollar amount.
• Fee relative to your transaction. If you are swapping $50 of tokens and gas is $15, that is a 30% fee -- almost certainly not worth it. If gas is $0.003, proceed without hesitation.
• Unusual spikes. If gas on Base suddenly shows $0.50 instead of the usual $0.003, the network might be experiencing unusual congestion. Waiting 10-15 minutes often resolves it.

Gas tracking tools

If you are transacting on Ethereum mainnet (where gas fees actually matter), consider checking a gas tracker before submitting your transaction. Sites like Etherscan's gas tracker show real-time gas prices and historical trends. You can see whether the current gas price is high relative to the recent average and decide whether to wait.

On L2s and Solana, gas tracking is rarely necessary because fees are consistently low. But it is still good practice to glance at the fee estimate in your wallet before confirming any transaction -- on any network.

Key takeaways

• Networks are not interchangeable. Your assets live on a specific network. USDC on Ethereum is not the same as USDC on Base.
• Always have native tokens for gas. ETH for Ethereum/Base/Arbitrum, SOL for Solana, POL for Polygon. Without gas tokens, your other assets are stuck.
• L2s and Solana offer 99%+ fee savings compared to Ethereum mainnet. For amounts under $1,000, there is almost no reason to use Ethereum directly.
• Do not bridge unless necessary. Bridges are high-risk infrastructure. Buy directly on the network you want to use.
• Start on Base or Solana. Sub-cent fees mean you can experiment freely without worrying about costs.
• Always check gas before confirming. Your wallet shows the estimate -- look at it every time.
• Gas on Ethereum fluctuates. If fees seem high, the network is congested. Wait and try again later.