{"id":480,"date":"2018-05-09T14:15:56","date_gmt":"2018-05-09T14:15:56","guid":{"rendered":"https:\/\/2miners.com\/blog\/?p=480"},"modified":"2020-06-10T16:42:41","modified_gmt":"2020-06-10T16:42:41","slug":"what-is-gas-in-ethereum-ethereum-transaction-fees","status":"publish","type":"post","link":"https:\/\/2miners.com\/blog\/what-is-gas-in-ethereum-ethereum-transaction-fees\/","title":{"rendered":"What is Gas in Ethereum? Ethereum Transaction Fees"},"content":{"rendered":"

\u201cTransaction Failed \u2013 Out of Gas. What does it mean? What to do?\u201d \u2014 these and other similar questions are frequently asked by Ethereum users. Gas, Gwei, contracts \u2013 indeed, it\u2019s all overcomplicated. Let\u2019s get into it!<\/p>\n

1 ETH = 1000000000000000000 wei = 1000000000 gwei (shannon) = 1000000 szabo = 1000 finney<\/em><\/p>\n

Ethereum founders named Ether denominations after prominent figures in the history of cryptocurrencies.<\/em><\/p>\n

Hal Finney<\/em><\/a> \u2014 the first Bitcoin user after Satoshi Nakamoto<\/em><\/p>\n

Nick Szabo<\/em><\/a> \u2014 developed the concept of smart contracts<\/em><\/p>\n

Wei Dai<\/em><\/a> \u2014 created the concept of <\/em>b-money<\/em><\/a> that may be considered Bitcoin\u2019s predecessor<\/em><\/p>\n

If you want to learn more about the origins of the names, <\/em>check out this article<\/em><\/a>.<\/em><\/p><\/blockquote>\n

As a rule, new Ethereum users get confused when they come across the \u2018gas\u2019 concept for the first time. In fact, it is much more simple in Bitcoin \u2013 one should just set the transaction fee and wait for the transaction to come through. If the transaction fee is low, then your waiting time is longer, if it\u2019s higher \u2013 your waiting time lessons. Bitcoin is a cryptocurrency intended for the transfer of monetary values between users directly.<\/p>\n

The main difference between Ethereum and Bitcoin is that Ethereum provides a decentralized Virtual Machine (EVM). It allows you to execute any program\/smart contract (mainly written in Solidity<\/a>) if there is enough time and memory (more details here<\/a>). Unlike Bitcoin, Ethereum was not created as a cryptocurrency for transactions, but as a platform that can execute applications (with payments in the form of Ethers \u2013 ETH).<\/p>\n

\"\"<\/p>\n

The official Ethereum wallet usually overloads the computer operating system. It happens because of the EVM that operates on your PC and because it executes various programs.<\/p>\n

What Can You Do in Ethereum? Introducing the Gas Concept<\/strong><\/h2>\n

For the sake of simplicity, we\u2019ll narrow down the list of what you can do to 3 things:<\/p>\n

    \n
  1. Send ETH to another user.<\/li>\n
  2. Create a smart contract (program) and add it to the blockchain.<\/li>\n
  3. Execute a smart contract (program).<\/li>\n<\/ol>\n

    Every transaction has its price. In Ethereum, you pay in gas. You pay a certain amount of gas (fuel) for every transaction. Here\u2019s a car analogy that might help: you need a small amount of fuel to go to a nearby shop, and you need a lot more of it to go out of town.<\/p>\n

      \n
    1. Sending ETH from one wallet to another costs 21,000 gas.<\/li>\n
    2. The cost of creating a smart contract may vary, so let\u2019s choose a random contract<\/a> as an example:<\/li>\n<\/ol>\n

      \"\"<\/p>\n

      Every contract has a creator address that you can find in the Contract Creator<\/em> field, along with a creator transaction hash (inside the red rectangle above). If you look at this transaction<\/a>, you\u2019ll see that it cost 219,780 gas.<\/p>\n

        \n
      1. The cost of smart contract execution may vary as well, because a contract (program) may execute an indefinite number of transactions in the process. If you look at the contract we chose<\/a> as an example, you\u2019ll see that every user paid 22,968 gas for its execution. Below there is information about every transaction:<\/li>\n<\/ol>\n

        \"\"<\/p>\n

        You can find detailed information on how much gas is needed for every transaction in the Ethereum Yellow Paper (Page 20)<\/a>. For example, you need much more gas to record data on the blockchain than merely multiplying two numbers together.<\/p>\n

        Creating smart contracts is an exciting topic, especially for developers. Etherscan might be very useful in this regard \u2013 it shows you everything you want to know, even transaction code<\/a>, so you can check what happens there at any time.<\/p>\n

        Transactions in Ethereum<\/strong><\/h2>\n

        Every transaction in Ethereum needs items of information:<\/p>\n

          \n
        1. Recipient address<\/li>\n
        2. The sent amount of ETH (maybe 0)<\/li>\n
        3. The gas limit for the transaction<\/li>\n
        4. Additional information<\/li>\n<\/ol>\n

          In MyEtherWallet<\/a>:<\/p>\n

          \"\"<\/p>\n

          In the official Ethereum wallet<\/a>:<\/p>\n

          \"\"<\/p>\n

          When you add the transaction to the block, the required code will be executed (if we are talking about a smart contract). The amount of gas used for the contract is then converted to ETH and charged to your account as miner reward.<\/p>\n

          In a way, the gas limit serves as a transaction fee limit. If you set your limit at 1,000,000 gas and the smart contract needs only 50,000 gas, then you will pay only 50,000. The purpose of the gas limit is to secure users from spending more than they can afford (a smart contract may cause an infinite loop, which would get a user in trouble).<\/p>\n

          Unfortunately, if the contract needs 1,000,005 gas to execute the transaction, then you would spend gas, but the program would not finish its work. As a rule, developers specify how much gas is needed to execute their smart contract.<\/p>\n