What Is Gas in Ethereum?

October 13, 2020

Crypto World

Ana Rojas

Quick overlook

Initially, Ethereum was not created as a payment system, but rather as a tool for creating decentralized applications (DApps), in which any operation is managed through smart contracts. Therefore, in order to transfer funds from one address to another, a smart contract is created. Yet there is Ethereum blockchain and there is Ether (ETH) — a fuel that helps to run the blockchain. There are 3 kinds of actions available for you on the Ethereum blockchain: 

• Transfer Ethereum coins from one wallet to another. 

• Create a smart contract and add it to the blockchain. 

• Execute a smart contract.

For each of these actions you must pay a commission, the commission is expressed in Gas, and Gas is always paid in Ethereum (ETH) — that’s the order. No matter how well your transaction’s gone (even if it didn’t at all), you have to pay the commission because miners must check and verify your transaction and it is something that requires an amount of computing power, so you have got to pay for these calculations. After all, Gas is used to pay the miners (who secure transactions on the blockchain) for their efforts. The main principle here: the higher the price — the higher priority and favour for the transaction to be completed. 

Apart from being a reward for miners and maintaining high speeds of transactions, Ethereum Gas also provides a possibility to maintain simple transactions and moderate fees in a competitive environment. Because of this, the blockchain is saved from an excessive load. Thanks to this “sensible economy” a lot of users choose Ethereum to create decentralized applications and conduct ICOs.

In general, by the word “Gas” is meant Gas limit and Gas price. The total transaction cost is the Gas limit multiplied by Gas price. Gas limit can be presumed as units of vehicle fuel which the vehicle’s gas tank can hold. Thereafter, Gas’s price can be represented as the vehicle’s fuel price. For example, if you want to execute 10 lines of code on Ethereum, you’ll have to pay 10 Gas units. Think of it just like your car which consumes 10-gallons of gasoline for a 10-mile drive.

Gas limit

Having a Gas limit means that a limited number of transactions can pass through blocks per unit of time. Gas limit was created as a tool for error prevention, the correct Gas price directly affects the speed and success of the transaction. Using Gas limits, developers can make sure that their smart contracts run safely and surely over the network. 

Gas limits also protect the wallets of imprudent users from frauds, when scammers set up unlimited repetitions of transactions and get benefit of it. If a user tries to complete a transaction that exceeds their Gas limit, the transaction all way round gets canceled.

Services like The Gas Station or EtherScan will help you track the cost of gas. Every transaction requires at least 21,000 Gas according to this table, provided by Ethereum Yellowpaper:

Gas price

The more Gas you pay — the faster your process on the blockchain is done. Whoever initiates a transaction decides how much gas he’s willing to pay for it. There is a minimum and maximum of the Gas commission, depending on the complexity and significance of the transaction, the price may change.

The price per unit of Gas is represented in GWEI also known as WEI. WEI to ETH is equivalent in the way that a penny is equivalent to the dollar, it is the smallest denomination of the currency. One GWEI is 10^9 WEI and provides a much better user experience for calculating gas costs. The average Gas price on most joints is 20 GWEI, which should be optimal to get a transaction completed in a couple of minutes. 

Price & speed

The transaction fee is received by the miner who gets the block, it’s a reward for the job he’s done. When miners begin a block mining, they decide which transactions to include in it. They may choose to leave the block empty, or they may include randomly selected transactions. To incentivize miners to include transactions in blocks, you need to set the “gas price” so high that they want your transaction to be part of a block. 

Most miners have quite a plain strategy: they sort transactions from the highest gas price to the lowest, until either the block is full or they finally get to a transaction whose gas price is lower than the amount miners are interested in.

You need to set the gas price high enough for the miner to include your transaction in the block. If the time is limited, as in ICO, you can set the gas price even higher to take the first place in the queue. If you’re chill about the time, then you just need to set an average price so that someone will include your transaction in the block at last.

All in all

Gas helps to keep Ethereum blockchain secure and reliable. Gas, along with fueling the network, does the job of preventing accidental or scam loops. Gas is the heart and core of Ethereum, so it’s good to know that the system works so well that users don’t have to worry about their well-being in the crypto world.

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The views and opinions expressed here are solely those of the author. Every investment and trading move involves risk. You should conduct your own research when making a decision.

October 13, 2020