What is Gas in Ethereum? Understanding the Work Principle

Ethereum network is known by everyone but not everybody understands how it works. In order to get the full understanding of this principle, it is important to understand what gas in Ethereum network is, what elements it has, and which functions it serves in the network. Let’s start with the definition first.

What is gas?

As we all know, gas is a fuel. In the Ethereum network it serves the same function – it works as a fuel. But what does it provide power to? The answer is to EVM – Ethereum virtual machine. EVM is the environment for smart contracts based on Ethereum. It is a platform which is run by independent computers from all over the world. These computers solve mathematical problems and EVM seeds them. Successful transactions are then recorded by EVM, and gas here is the transaction fee.

Now, when we know what gas is used for in general, we are moving on to the detailed principle.

How does gas work?

Confirmation of transactions on EVM can be very difficult, or less difficult; it depends on different factors such as computational power vs. number of transactions waiting to be confirmed at once. So, if the confirmation is difficult, transaction fees are high; if it is less difficult, transaction fees are lower. And don’t forget that these transaction fees are gas because every transaction costs gas, just some require more, others require less.

Gas includes two elements that you can control: gas limit and gas price.

Let’s look at gas limit first.

Gas limit refers to the total amount of gas fee which you will send with your transaction. Why do you need to do it? This is the way to reward Ethereum miners because they solve mathematical problems, and you decide how much you give for reward. But here you should not be greedy – do not set low gas limits.

If you determine the gas limit to be too low, your transaction will not be completed. More than that, that low amount of money which you set will be lost with no return. Here, it is always better to overestimate a price a little bit. Do not worry – the remaining amount will be returned to you. Much better, right?

Okay, now we know that greediness in gas limit is bad, and what about the gas price?

Gas price is the amount you are willing to pay per unit of gas. The price is measured in gwei (for better understanding, think of ETH and gwei as of dollar and cents). When you request a transaction, you need to pay for units of gas, and how much you pay you set yourself as well. What is this needed for? It should be done to give the gas a value, which you pass to the miner, again for reward.

Remember, miners should confirm your transaction. If you set the price too low, nobody will confirm it, right? Or you will just have to wait for a very long time until some miner will finally add you to the blockchain. So, if you set a high price, your transaction will obviously get verification very quickly. Remember, the principle is quite similar to the gas limit, just don’t be greedy and set both higher.

How to know how much gas is too much or not enough?

The amount you have to set is not created without logic. There is the average price in the market which you can look up at huge number of various portals. Standard transaction costs around US $0.04 from the start of 2018, but in order to make sure, follow the mark of the average price.

Also, remember we were talking about the raise of transaction confirmation difficulty level due to the huge number of transactions at the same time? So, this is why if you participate in ICO, you will likely have to set much higher gas limit. At the time of initial coin offering, tokens are being sold only for a certain period of time, so the network gets overloaded by transactions that are waiting to be verified. So, set a higher limit – you will get everything verified quite fast (but never forget to check the reliability of the ICO since they may be risky in general).

Why does Ethereum has this complicated system?

Yes, Ethereum differs, for example, from Bitcoin in this sense but the system is not that complicated and makes sense. Remember that Bitcoin mostly deals with simple mathematical problems while Ethereum has to deal with smart contracts. Gas system is necessary and is doing its job good because it enables the network to work fast and makes it more secure, protecting from hackers.