What Is Gas?

Gas is the fee paid on the Ethereum network in return for using the platform’s computational power. Activities that require gas include launching decentralized applications (DApps) and simple transactions like sending ETH between traders. The fee is paid using Ether (ETH), the platform’s native currency.

Gas is consumed in small bits called gwei. One gwei is equal to 0.000000001 ETH. How much ETH is paid in a single transaction depends on the amount of resources required to carry a transaction to completion on the EVM (Ethereum Virtual Machine) and the blockchain’s congestion level.

The cost of processing transactions was brought to the blockchain to make it easier to compute the resources used when executing a transaction. Furthermore, it differentiates between computational costs and the digital currency.

Additionally, charging a fee on every transaction prevents spamming incidents from malicious actors, hence, securing the network. Ethereum users can use ETH Gas Station to estimate their gas costs. Unfortunately, the lower the price, the more time it takes to be processed. This is because miners prioritize transactions with higher costs as it earns them more.

To make it easier to understand, let’s use an example of moving funds between traditional bank accounts. James moves $500K from his account to Susan’s account and pays $5 as the fee. On the ETH-powered network, the lump sum from James’ account is the total amount of ETH involved in a single transaction, and $5 is the gas charged to honor the transaction.

Note that gas on the Ethereum network is different from GAS on the NEO blockchain. On NEO, GAS is a currency on its own, while on Ethereum, it's a cost of running transactions.