Find out what the term “gas” means by checking out the explanation below!
What Is Gas?
Gas is a term that refers to the fee required for executing transactions or smart contracts on the Ethereum blockchain. Gas fees are measured in tiny fractions of Ether (ETH), known as gwei (10-9 ETH), and are used to compensate validators for the computational resources needed to process transactions.
What You Need To Know About Gas
Gas fees were initially introduced to compensate miners for their contribution to maintaining and securing the blockchain.
However, after the implementation of the Proof-of-Stake algorithm in September 2022, they became the reward for staking ETH and participating in validation. This means that the more a user has staked, the more they can earn as a validator.
Without gas fees, there would be little motivation for individuals to participate in validation, putting the network’s operations at risk.
The gas definition is linked to two aspects that are crucial in determining the cost of a transaction on the Ethereum network:
- Gas limit – the maximum amount of computational resources that a validator will need to complete a transaction according to the user’s estimate.
- Gas price – the fee per unit of computational resources used by the validator.
The transaction cost is calculated by multiplying the gas limit by the gas price. Thus, if the gas limit equaled 30,000 and the price per unit was 300 gwei, the calculation would be as follows:
30,000 * 300 = 9,000,000 gwei (0.009 ETH)
Users can also include a “tip” in their transaction, which increases the gas price and can expedite the processing of the transaction.
It is important to note that gas prices are determined by supply and demand, and can fluctuate based on network congestion. High demand for transactions can result in higher gas prices, while low network traffic results in the opposite outcome.
