Ethereum’s digital asset is Ether (ETH). It is a cryptocurrency whose fiat counterpart would be the Dollar (USD $), Euro (EUR Є) or Yen (JPY ¥). Ether can be spent on electronic payment systems, just like a form of digital medium of exchange.
Its balance is then updated on a blockchain, where a digital wallet maintains a history that logs all transactions from the beginning to the present. Just like the Dollar, Ether can also be broken down into smaller denominations for units of accounting.
The Dollar can be divided into cents, with denomination in penny (1 Cent), nickel (5 Cent), dime (10 Cent) and quarter (25 Cent). Ethereum also has its own denominations that are smaller than 1 ETH. Even Bitcoin (BTC) has smaller units of denominations called Satoshis (1 sat is 100 millionth of a Bitcoin).
The following table lists the various denominations of Ether, starting with its lowest unit called Wei. The table lists the values in Wei and Ether.
Figure A. The units used in Ethereum
The units are expressed with nicknames taken from pioneers in computing (Ada Lovelace, Charles Babbage, Claude Shannon, Nick Szabo, Hal Finney, Wei Dai) and Ethereum’s co-founder (Vitalik Buterin). The smallest denomination is Wei, which would be written as 0.000000000000000001 Ether for 1 Wei. That is 10 to the negative 18 in exponential form.
1 x 10^-18
The more commonly used denomination is Gwei, which is a billionth of a Wei or 10 to the negative 9 in Ether. It is the unit used for calculating gas costs, which is a fee charged for transactions that use the Ethereum network.
To get a better understanding of denominations, here are the values of 1 unit in Ether.
1 Wei = 0.000000000000000001
1 Kwei = 0.000000000000001
1 Mwei = 0.000000000001
1 Gwei = 0.000000001
1 Twei = 0.000001
1 Pwei = 0.001
1 Ether = 1
Figure B. Units of conversion to Ether
When calculating gas fees, which is the unit of account for computation on the Ethereum blockchain, an entire Ether would be too much value. Therefore, like the way a Dollar can be divided into cents or a fraction of the currency, Ether can be denominated into smaller values.
Denominations of a currency are a more fundamental way of dividing it. It is also a characteristic of a currency, which makes it divisible to smaller units of accounting for more precise calculations.
Rather than a whole Ether to spend, a smaller denomination can be used as fees. This makes it more viable for use in payment transactions.
