What Is Gas (Ethereum)

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

The exact price of the gas is determined by the miners, who can decline to process a transaction if the gas price does not meet their threshold.

Key Takeaways

  • On the ethereum platform, gas refers to the cost necessary to perform a transaction.
  • Miners set the price of gas and can decline to process a transaction if it does not meet their price threshold.
  • Gas prices are denoted in gwei, with are worth 0.000000001 ether.
  • Having a separate unit allows maintaining a distinction between the actual valuation of the cryptocurrency, and the computational cost.

Understanding 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 of 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 might 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.