Why Does the Ethereum Ecosystem Use Gas?

Cryptocurrency enthusiasts venturing into the world of Ethereum for the first time will have to learn a thing or two at first. Although the learning curve is not difficult by any means, there are some things people need to take into account. One of the most confusing aspects is how the network uses “gas” to perform transactions and contracts on the Ethereum network. Now is a good time to take a closer look at what this “gas” even means in the first place.

Explaining The Necessity of Ethereum’s Gas

Any cryptocurrency network uses some form of fee to perform transactions or actions on the network. In the Bitcoin world, this is a small amount of BTC which is paid to the miners for including the transfer in the next network block. On the Ethereum network, this fee is known as “gas”, which indicates an internal pricing for every transaction or contract on the blockchain. This “gas” amount is very small, though, but it needs to be included in every action regardless.

Gas was introduced as part of the Ethereum ecosystem so it could scale on demand. To be more specific, miners can increase or decrease the gas amount based on how thing are looking on the overall network. More specifically, it is designed in such a way a higher ETH price would not require all gas prices to be changed. Contrary to the Bitcoin ecosystem where fees go up during congestion periods, miners can decide what to do on the Ethereum network.

One could argue there is a correlation between Ethereum’s gas price and the way we measure the use of electricity in Kilowatts. However, the Ethereum network is superior in this regard, since the person creating the transaction or contract action sets the price of gas. Miners are then free to accept or reject this proposal as they see fit. Moreover, the gas price is quite dynamic, as can be seen on the Etherscan website.

Do not be mistaken in thinking Ethereum’s network does not have a block size limits, though. The gas price is designed to ensure transactions will be included in the next network block, similar to how Bitcoin operates. Bitcoin miners prioritize transactions with the highest fees out of personal gain. Ethereum miners can do the same, as it is their own choice to include lower-gas transactions or not. A favorable gas price will get your network actions confirmed that much faster, as is to be expected.

Gas is designed to deal with Ethereum’s Turing Complete nature and the Ethereum Virtual Machine Code. The smallest denomination of gas should – in theory – allow anyone to execute a line of code. Accounts who do not contain enough gas to perform the transaction will not be able to execute said action. By using this method, the Ethereum developers aim to nullify denial-of-service attacks and encourage efficiency in the protocol code. Making an attacker pay dearly for the resources turned against the Ethereum network should prevent most attacks.

As is to be expected, more complex operations of the Ethereum network will require a higher gas price. Forming contracts, for example, is far more complicated than just sending funds directly to a different account. More complex contracts require more computing power, which will also result in a higher gas price most times. It is an interesting take on things, that much is certain.

If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.

  • At first I was skeptical of the use of gas in Ethereum, but I have become a fan. It keeps you from having issues like the following that is currently happening with NEM: NEM listed the price of a namespace at 5000 XEM, which was completely reasonable a few months ago. Now, with the surge in price of XEM, it costs the equivalent of $924 USD. Yes, a surging price of your token falls into the “problems we like to have camp” but it still causes strain on the network. Compare that to the price rise of ETH, multiple $10M+ USD ICOs on the network, and the launch of the Ethereum Name Service (which can get you the equivalent of cheaper namespace for a few dollars USD) that have all performed fine on Ethereum thanks to gas.