In this post, you are going to read about what ethereum gas is, how the gas price is determined and why it is important to track it.
What is Ethereum Gas ?
Every operation taking part in Ethereum, whether a transaction or smart contract execution, costs computational effort through its execution. This computational effort can be expressed with a unit named Ethereum Gas expressed in Gwei.
A complete operation/transaction is succeeded with the help of Miners which execute them and get paid through gas fee.
This is how it works in the Ethereum ecosystem:
- Nodes: Components taking inputs and performing a function leading to an output
- Network: Interconnection of nodes
To execute operations in the Ethereum ecosystem, users must provide gas in order to:
- cover its intrinsic gas
- cover its entire computation
To do so, Ethereum is dependent on the hashrate of their miners. More the miners leads to more the hashrate and faster the system.
How is the Gas Price determined ?
This gas price depends on lots of factors:
- the amount of transactions on the network
- staking and investing
- the amount of operation to be processed
The following chart shows you the average Ethereum Gas price in the past 10 months:
Source : Etherscan
Gas fees are compensations for the computational work needed for transactions and smart contract executions. It is awarded to miners, who operate it.
The lower the gas price will be set by the user, the more likely the transaction will take time to be processed. On the contrary, if the gas price is set high, the operation will be verified faster.
It is up to the miners to process any transactions they like, generally the highest gas price set first.
In Ethereum, the sender of the transaction must specify a gas limit before they submit it to the network in order to get an operation done. When specifying this limit, some points have to be considered such as:
- all operations will not have the same gas costs
- the miners will stop processing the moment the gas runs out
The following chart shows you the average Ethereum daily Gas used in the same period showed before:
The gas used was fairly increasing up until August 2020 in which a pump of 20% has been made on July 2020. Thereafter, the daily use has stabilized.
Why it is important to track the gas price ?
Tracking the gas price fluctuation is important to find the optimal time to submit a transaction if not in a hurry.
Moreover, by specifying a gas limit when sending a transaction, it is important to know the gas price to make a correlation between its entire computation and the time needed.
In other words, knowing how much to pay and understanding what confirmation time the fee costs are going to be, will be made by tracking the gas price.
Feel free to comment on this post, particularly if something was explained wrongly.