What is Crypto gas?
Ethereum blockchain is a decentralized database containing information about the states of all wallets. The network conducts part of its transactions on the basis of smart contracts. They are an agreement between two parties to an Ethereum transaction. Once the conditions specified in it are met, the smart contract is considered completed. Gas in cryptocurrency is used to operate the entire system. It is most popular in the Ethereum blockchain.
1. The concept of gas in the Ethereum network
2. What is Gas Limit
3. Ethereum Gas Station
4. How you can use gas in cryptocurrency
5. Ethereum gas fee
6. Writing a smart contract into the blockchain
7. How the commission for a transaction is calculated
8. The impact of DeFi
9. Calculating the amount of gas for a transaction
10. How to track the price of gas
11. How to set or lower the price of gas
13. The impact of gas in Ethereum
The concept of gas in the Ethereum network
This unit of measure is the amount of computational work done by miners (blockchain nodes that process all transactions in the network). It is used in calculating the cost of a transaction. The amount of gas for a transaction depends on its complexity. A simple transfer of Ethereum cryptocurrency (ETH) costs the user up to 21,000 Gas units. Sending tokens based on the ERC-20 standard will be more expensive. The price of launching a smart contract is even more.
What is Gas Limit
This is the largest amount of gas that the sender of a transaction is willing to pay. The purpose of Gas Limit is to protect the Ethereum user from a large coin debit from the account. This happens as a result of smart contract code execution errors. For simple ethereum transfers, Gas Limit will be set automatically – 21k.
Gas Limit is necessary for the use of smart contracts. Gas Limit should be specified with a margin. The remaining Gas will still return to the account. If there is not enough Gas to conduct the transaction when it is sent, it is used and the transaction will not be entered into the blockchain.
Ethereum Gas Station
Represents the current price of gas. Its size is calculated in Gwei (0.000000001 of an ETH coin). It affects the speed of transaction processing, and its value is specified by the user based on the desired priority. The official Ethereum Wallet and MyEtherWallet (MEW) offer 3 options:
- Standard (including the transaction in the block within 15 minutes).
- High (no more than 5 minutes)
- Maximum (faster than 2 minutes)
How you can use gas in cryptocurrency
Ethereum offers great opportunities. It allows you to run smart contracts, decentralized applications (dApps) and create cryptocurrency on the ERC-20 standard. Any transaction in the blockchain requires computing power. They are provided by miners for a fee. Gas in cryptocurrency is created to pay for the work done by users. Ethereum cannot operate without it.
Ethereum gas fee
Gas is used to reward miners for processing transactions. Before the London hardfork (network protocol change), they received the entire transfer confirmation fee. Now a base fee mechanism has been introduced, burned after a new transaction is executed. Its rate changes when a new block is formed. The main reward for miners has become a “tip” – a fee for a high priority of performing a coin transfer.
Ethereum is a programmable platform. Transaction fees provide the necessary level of network security. In another case, any developer could create a program to perform an infinite number of transfers between wallets.
Writing a smart contract into the blockchain
Its inclusion in the Ethereum network costs more gas than a simple transfer. The price of writing a smart contract depends on the complexity and number of operations performed in it. Therefore, developers reduce its algorithm to a minimum. In a good smart contract, some of the calculations are done outside of the Ethereum blockchain.
How the commission for a transaction is calculated
The cost per gas is 125 Gwei (as of November 25, 2021). It will take 21k Gas to put an ETH transfer on the blockchain. Knowing these values, we can calculate the transaction fee in ETH coins. The following formula is used: 21,000 x 125 Gwei. The average commission for sending cryptocurrency in these conditions is 0.002625 ETH ($11.81 on November 25, 2021). The cost per unit of Gas varies depending on the load on the system. As the number of transactions in the network increases, the price rises.
The impact of DeFi
Decentralized finance peaks in 2020-2021. DeFi is an ecosystem that enables services based on smart contracts.
The growth of the DeFi marketplace has increased the complexity of the Ethereum system. Transaction fees on the network have become higher than in Bitcoin. Additional growth in the number of users is associated with Yield Farming. This tool allows receiving tokens from investing cryptocurrency in the project. Some of them offer returns of up to 2000% per year.
The holding of the London hardforge in 2021 corrected the high fee situation for a while. The maximum fee increase was set at 12.5% per block. This made commissions more predictable.
Calculating the amount of gas for a transaction
A simple ETH coin shipment costs the user 21,000 Gas units. Other transactions may have different fees. Smart contract developers usually specify the recommended amount of gas in the cryptocurrency themselves. This also applies to projects involving ICOs (initial digital coin offerings).
The estimateGas function allows you to calculate how much gas will be needed for the transaction. The value is not exact. You need to use this function carefully. First of all you need to set gas limit with reserve. The work is in the Solidity programming language, which is used to create smart contracts in Ethereum.
How to track the price of gas
You can see its price on special sites and channels in Telegram. Popular price monitoring services are listed in the table below:
|Etherscan||A platform that includes many features. It collects information about the state of the Etherium blockchain and the operation of the network. It is a service for monitoring the price of gas.|
|EthGasStation||The site captures the actual cost and waiting time. It also collects data on network complexity and allows you to see the queue of transactions to be processed.|
|Etherchain.org||A simple resource for price monitoring, working with data from EthGasStation. There are no additional features.|
|EtherDrops||A bot that monitors the price of Gas. The user can turn on notifications when the price of a commission drops to a certain level.|
How to set or lower the price of gas
Demand for ethereum is falling due to high transaction fees. Since the beginning of 2020, their average size has increased 12-fold. It has become expensive to transfer small amounts into ETH. Because of this, the issue of Gas’s high unit cost is relevant.
It is possible to pay less commission at certain times. The number of transactions on the Ethereum network varies throughout the day. The lowest blockchain load is at night.
The official Ethereum Wallet and MyEtherWallet service do not allow you to set the desired price of Gas. They offer recommended prices based on the priority of the transaction. The services’ own algorithms are used to calculate them. The user is left to select the price with the desired transaction confirmation rate.
The MetaMask wallet gives an opportunity to set any price (not less than 1 Gwei) of gas in the cryptocurrency by yourself. The project recommends that only experienced users do this. A small price can affect the speed of the transaction. However, if the complexity of the network is low, there is a probability of a transaction even with a Gas price of 1 Gwei.
The impact of gas in Ethereum
It is often difficult for users to understand what this unit is. Its purpose is to keep the network running. The main purposes of gas are to keep the system safe, to calculate fees to miners for mining blocks and processing transactions. Let’s talk more about the impact.
Gas encourages nodes to use their own and connect new processing power, without which the Etherium blockchain cannot operate. Miners are rewarded for this in the form of cryptocurrency. The speed of transaction confirmation depends on its size. Priority is given to the transactions from which the miner will make the most profit. Higher commission – faster processing speed.
On network stability
An important task of cryptocurrency gas is not only to provide rewards to miners, but also to increase the level of network security. It makes the probability of an attack on the blockchain quite low – ETH coins will run out and the transaction will be rejected.
The Ethereum 1.0 blockchain does not have time to process all transactions. The main goal of the Ethereum network is to replace the actual financial system with a decentralized one. But high fees make that less likely. In 2022, the blockchain will be upgraded to Ethereum 2.0. This will solve the problems:
- High fees.
- Low transaction confirmation rates
- There will also be an increase in the security of network users
Which cryptocurrencies use gas
Ethereum is not the only platform that uses such a unit. Users call the NEO project the “Chinese ether. In addition to the main cryptocurrency, it created a separate token GAS. It is necessary for the operation of smart contracts and rewards for miners. Eight tokens are generated when new blocks are mined. They are distributed among users who have NEO coins.
Ethereum Classic was launched as a result of the hardforcing of the Ethereum network in 2016. The principle of gas in the system remained the same, but the amount of gas required for various transactions is different.
Gas in cryptocurrency is a unit of measurement of the amount of calculations needed to conduct a transaction. The cost of these processes is calculated in ethereums. Depending on the number of unprocessed transactions, the price of Gas often changes. It helps the system, provides security and remuneration to miners.