Crypto Made Easy | Gas Fees
Welcome to our ‘Crypto Made Easy’ series, where we simplify the complex world of crypto so that you can better understand, be informed, and feel good about joining the future of web3, internet, and connectivity.
Blockchains store data in blocks that are all linked with cryptography. When transactions occur on the blockchain, that new information comes in and is entered into a fresh block. Once the block is filled with data, it is chained onto the previous block.
All of this, of course, takes computing power. Gas refers to the amount of computational effort required to execute specific operations on the network.
Since each Ethereum transaction requires computational resources to execute, each transaction requires a fee. Gas refers to the fee required to conduct a transaction on Ethereum successfully. Gas fees are paid in Ether (ETH, Ethereum’s currency). Gas prices are in units of gwei, which is a fraction of Ether — 0.000000001 (or 10^-9) ETH. A gas limit is the maximum amount of gas someone is willing to pay to transact on the Ethereum blockchain. A standard ETH transfer requires a gas limit of 21,000 units of gas.
Gas fees help to keep the Ethereum network secure. Gas fees help prevent bad actors from spamming the network. Gas fees can become higher as Ethereum’s popularity, and transaction-demand, grows. Also, increasingly complex smart contracts (code) will require more gas to execute, in the same way that a more powerful car takes more gas to run.
Ethereum upgrades should help address some gas fee issues, which will enable the platform to process many more transactions per second and scale efficiently. There are also emerging blockchains that aim to solve the problem and compete with Ethereum, which is no easy task as Ethereum is massive.