Welcome to Crypto-4-Beginners, in this guide we will talk about transaction fee's on the Ethereum blockchain.  

A gwei is the smallest unit of an Ether.  Ether, or more popularly known as ETH is the currency of the Ethereum blockchain and a billion gwei is equal to one ETH.   Think of it as one-hundred pennies equals one dollar, or hundred-million Satoshi's equals one Bitcoin.  In short, a gwei is a unit of measurement.  

Gas, in terms of the Ethereum blockchain refers to the amount of gwei paid as a transaction fee to the network.  

Gas is a unit that measures the computational effort it takes to execute and secure an operation/transaction on the Ethereum blockchain. 

Every single operation, whether it's a simple transaction of sending ETH from one wallet to another, or a series of actions such as a smart contract, requires some amount of gas.  

Miners/Validators get paid an amount of ETH for every operation they secure based on the computational difficulty, or the amount of "work" that needs to be done.  

For example, a simple transaction cost 21,000 gwei, where as a more complex smart contract with more than a single operation would cost more in gwei.  

What is the Purpose of Gas?  

To answer that, you'll need to understand how new ETH is created.  

Ethereum currently works on a Proof of Work (PoW) consensus algorithm.  This means that transactions are secured and validated through individuals connected to the network called "Miners".  "Miners" use computers and specialized equipment to solve complex cryptographic equations, and upon solving these equations secure and validate transactions on the network and issue recorded data to the blockchain.  By doing this, they are awarded a fee and this fee creates new ETH added to the network.  

The purpose of gas is to incentive miners to mine on the Ethereum blockchain.  There's also another reason, and thats to prevent malicious attacks on the network such as spamming, which could plug up the network and halt all trading, even crashing the network.  

Gas isnt specific on the Ethereum blockchain, it's more suggestive.  While each transaction will require a gas fee, the sender has the option of how much gas they are willing to spend for a transaction.  Alternatively, the miner/validator can choose which transactions they want to work on securing, and will often chose the transaction that offers the most rewards. 

However, one issue is, when there are a lot of people using the Ethereum network, and there are a lot of transactions, senders are trying to out bid each other to have their transaction secured first, and as a result, the gas price is inflated and a single transaction will have extremely high fees. 

If a sender puts the gas fee too low, its a good chance their transaction will be ignored, in which case after an amount of time it will be cancelled, or a miner works on the transaction, but because there wasn't enough gas to complete the operations, the transaction fails, and the amount of gas paid is absorbed by the network. 

As you can imagine, the more popular Ethereum becomes and more people use the network, the more gas is required.  In addition, the higher the price of ETH, the higher the price per gwei, and thus the more expensive transactions become.  

In an effort to solve this dilemma, Ethereum is moving to Ethereum 2.0 by 2022~2023, where it will change its consensus algorithm from Proof of Work (PoW) to Proof of Stake (PoS), which would change miners to validators, which offers solutions to the scaling issues by speeding up and increasing the amount of transactions that can be done.  In addition to that, EIP-1559 protocol will be enacted in July that will put a cap on the amount a sender can bid for gwei, effectively putting a max amount to how much gas is required.