WHO GETS RICH FROM THE GAS FEES I PAY WHILE TRANSACTING CRYPTO?🤔

Someone asked me this question yesterday: Wait a minute… Who gets rich off the transaction fees (gas) I pay when transacting on blockchains? Why do I have to pay fees like I do with the bank?

I smiled because I remember pondering over the same thing around 2018.

---

So here’s your answer:

When users pay gas (transaction) fees while transacting on a blockchain such as Bitcoin or Ethereum, the fees are primarily received by the network validators or miners who are responsible for processing and validating transactions. 

Here's a breakdown of who receives the fees and what they are used for: 

1. Miners/Validators:

 - Recipients: On proof-of-work (PoW) blockchains like Ethereum (prior to its transition to proof-of-stake), miners receive the gas fees. These miners use computational power to solve complex cryptographic puzzles to validate transactions and add them to the blockchain. 

- Use: The gas fees compensate miners for the computational resources they expend, including electricity and hardware costs, and incentivize them to maintain the network's security and integrity. 

2. Stakers/Validators: 

- Recipients: On proof-of-stake (PoS) blockchains like Ethereum 2.0 (post-merge), validators receive the gas fees. Validators are selected to propose and attest to new blocks based on the amount of cryptocurrency they have staked as collateral. 

- Use: The gas fees serve as an incentive for validators to act honestly and maintain the network, covering operational costs and providing a return on their staked assets. 

3. Network Sustainability and Development: 

- Base Fee Burn: With the implementation of Ethereum Improvement Proposal (EIP) 1559, a portion of the gas fee, known as the base fee, is burned (destroyed), permanently removing it from circulation. This mechanism aims to reduce inflation, stabilize transaction fees, and create deflationary pressure on the supply of Ether (ETH). 

- Use: While the base fee burn doesn't directly benefit miners or validators, it contributes to the overall health and sustainability of the Ethereum network by making ETH more scarce and potentially increasing its value. 

4. Tips and Priority Fees: 

- Recipients: Users can add a tip (priority fee) to their transaction to incentivize miners or validators to prioritize their transaction. This tip goes directly to the miner or validator who includes the transaction in a block. 

- Use: These tips ensure that transactions can be processed more quickly during times of network congestion by providing additional incentive for validators to include them. 

In summary, gas fees on a blockchain are received by miners or validators and are primarily used to compensate them for their work in securing the network and processing transactions. Additionally, mechanisms like base fee burns contribute to the economic sustainability of the blockchain ecosystem.