DEFINITION of Gas (Ethereum)

Gas refers to the pricing value required to successfully conduct a transaction or execute a contract on the Ethereum blockchain platform. (See also, Gwei (Ethereum) Definition.)

BREAKING DOWN Gas (Ethereum)

The concept of gas was introduced to keep a distinct value that solely indicates the consumption towards computational expenses on the Ethereum network. Having a separate unit allows maintaining a distinction between the actual valuation of the cryptocurrency, and the computational cost.

To draw an analogy, running a real-world car for X miles may require Y gallons of fuel, or moving X amount of money from your bank account to your friend’s credit card account may cost you Y dollars in a processing fee. In both cases, X indicates the utility value, while Y indicates the cost for performing the process of the car trip or financial transaction.

Similarly, a contract or transaction on Ethereum may be worth 50 ether (X), and the gas price to process this transaction at that particular time may be say, 1/100,000 ether (Y).

Ethereum miners, who perform all the important tasks of verifying and processing a transaction, are awarded this particular fee for their computational services. If the gas price limit is too low, miners can choose to ignore such transactions. (For more, see How Do You Mine Ethereum?)