PRIOR TO THE LONDON UPGRADE
The way transaction fees on the Ethereum network were calculated changed with the London Upgrade of August 2021. Here is a recap of how things used to work:
Let's say Alice had to pay Bob 1 ETH. In the transaction, the gas limit is 21,000 units, and the gas price is 200 gwei.
Total fee would have been: Gas units (limit) * Gas price per unit i.e 21,000 * 200 = 4,200,000 gwei or 0.0042 ETH
AFTER THE LONDON UPGRADE
Let's say Jordan has to pay Taylor 1 ETH. In the transaction, the gas limit is 21,000 units and the base fee is 10 gwei. Jordan includes a tip of 2 gwei.
The total fee would now be: units of gas used * (base fee + priority fee) where the base fee is ...