With Ethereum, you must pay gas fees to post transactions or execute a smart contract. It’s similar to paying a toll to utilize the network, but why is it needed and how does it work?
What is gas?
In Ethereum, gas is a unit that measures the amount of computational effort that it will take to execute certain actions. To conduct a transaction or execute a smart contract, you must pay gas fees. Regardless of the wallet you use, it will always be necessary to pay for gas when conducting transactions.
You can think of gas fees as payment for mining operations on the Ethereum blockchain. Therefore, the price is set by the market because gas has a dynamic price which changes based on supply and demand. As gas is consumed per transaction, your gas price will be lower if you include a higher gas limit.
So whether you want to gift your Grandma some Ethereum for her birthday or buy your favourite rapper’s newest NFT, you will need to use gas.
How gas fees work
The gas requirement depends on the transaction type and gas price, limit and cost (the total amount paid). The gas fee is the only thing you need to take into account when paying for gas. You can adjust your gas price if it’s too expensive or not high enough.
Gas is set per transaction and it’s paid in gas units (Gwei). Gwei represents gas used and each unit is equivalent to 1 million gas, which roughly equals 0.000000001 ETH. This amount goes to the miners that carry out your transactions on the blockchain.
What are gas limits?
The gas limit is the maximum gas you are willing to pay for your transaction or smart contract. This ensures that gas isn’t wasted if an error occurs in the middle of execution. So, if there’s not enough gas to complete all of the transactions, then none of them will be executed.
When it comes to gas limit, the higher the price you set, the more you are willing to spend! The gas cost will vary depending on how much you want your transaction to use. Furthermore, gas price and gas limit are directly related – if you increase one of them, the other will decrease.
Gas Limit Tip: Always check the Ethereum gas calculator before sending a transaction, this can help you avoid a failed transaction due to an insufficient gas limit!
You should now have an understanding of how gas fees work in Ethereum and why they exist. If you want an Ethereum wallet with gas fees clearly displayed download the Gridlock Wallet today