> ## Documentation Index
> Fetch the complete documentation index at: https://docs.celo.org/llms.txt
> Use this file to discover all available pages before exploring further.

# Transactions on Celo

> Introduction to transactions on Celo.

In Celo's transition to a Layer 2 (L2) solution, several key changes have been proposed to the network's tokenomics, particularly concerning gas pricing and transaction fee allocation.

***

> [!NOTE]
>
> This section is a work in progress and based on the ["The Great Celo Halvening - Proposed Tokenomics in the Era of Celo L2"](https://forum.celo.org/t/the-great-celo-halvening-proposed-tokenomics-in-the-era-of-celo-l2/9701/1). Please check the [forum](https://forum.celo.org/) for the latest information.

## Gas Pricing Mechanism

Celo employs a gas pricing model based on **EIP-1559**, which dynamically adjusts the base fee to manage network demand. This mechanism ensures that gas prices respond to network congestion, increasing during high demand periods and decreasing when demand is low. The protocol sets a **base fee floor** to prevent the base fee from falling below a certain threshold, safeguarding the network against spam transactions and uncontrolled state growth.

## Fee Abstraction

A notable feature of Celo's network is **fee abstraction**, allowing users to pay transaction fees
using approved ERC-20 tokens such as USDT, USDC, USDm, and others, in addition to the native CELO
token. This flexibility simplifies the user experience by eliminating the need to hold a separate
CELO balance for gas fees. To utilize this feature, transactions include a `feeCurrency` field
specifying the token for gas payment. It's important to note that transactions specifying non-CELO
gas currencies incur approximately 50,000 additional gas units.

Celo allows paying gas fees in currencies other than the native currency. The tokens that can be
used to pay gas fees are controlled via governance and the list of tokens allowed is maintained in
FeeCurrencyDirectory.sol. Fee abstraction on Celo works with EOAs. No paymaster required! Learn all
about [fee abstraction](/build/fee-abstraction/overview).

## Transaction fee allocation

Celo governance sets how the FeeHandler splits collected fees; see [Transaction fees](/operate/specification/transaction-fees#feehandler) for the current split.

## Conclusion

Celo's transition to L2 introduces significant changes to gas pricing and transaction fee allocation, aligning with the network's goals of sustainability, user accessibility, and robust operational support. These adjustments are designed to enhance the overall efficiency and resilience of the Celo ecosystem.


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