What is Gas (Ethereum)?

What is gas?

Gas is the fee required to execute a transaction or a smart contract on the Ethereum blockchain. This fee gets paid in small fractions of the cryptocurrency ether. The price of the gas is determined based on the supply and demand between the network’s miners.

The computational energy needed to process and validate the transactions on the Ethereum blockchain is compensated by the users in the form of gas fees. The miners are then awarded this fee, as they perform the task of processing and verifying these transactions.

Miners can ignore transactions if they feel the gas fee is low. Its price keeps fluctuating based on the demand and supply of computational power. The rates for the gas fee also increase as the transactions become more complex.

What is the gas limit?

In cryptocurrency, we term gas limit as the maximum energy you are willing to spend to execute a transaction. We refer to the gas fee as Gwei, which is 0.000000001 ETH. For every transaction you want, you need to decide the maximum gas fee you are willing to pay for it to be executed.

Where does the gas fee go?

As we mentioned above, the gas fee gets distributed to the miners who verify and process these transactions. The higher the gas limit set by you, the higher the chance of your transaction being executed at the earliest.

The reason behind setting a higher gas fee is that there is a lot of competition involved. Along with you, other users also want to have their transactions verified. But on one Ethereum block, only so many transactions can be added.

The transactions that aren’t yet verified get stored in a memory pool, aka mempool. When the miners select transactions to be added to the block, they are likely to select the transactions with the highest gas fees first.

Final Thoughts

On the Ethereum blockchain, gas is the cost needed to execute a transaction, and miners set the price of it based on the supply and demand of computational power. It is like a toll fee to carry out transactions and execute smart contracts on the Ethereum network. The miners that process and verify these transactions receive it as a reward.

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