Ethereum and EVM Concepts

Gas and Transactions

  1. What is Gas?

    Gas is a fee required to perform transactions or execute smart contracts on the Ethereum network. It ensures fair allocation of resources and prevents spam or abuse of the network. The cost of any operation, like sending tokens or executing smart contracts, is measured in gas units.

    • Gas is priced in gwei (1 gwei = 0.000000001 ETH).

  2. Gas Price and Gas Limit

    • Gas Price: The price per unit of gas you're willing to pay. Higher gas prices incentivize miners to prioritize your transaction.
    • Gas Limit: The maximum amount of gas you are willing to spend. Simpler transactions, like sending ETH, have a standard limit (e.g., 21,000 gas units), while complex smart contracts may require more gas.

  3. Why Gas is Needed in Transactions

    Miners need computational resources to validate and include transactions in a block. Gas fees ensure miners are compensated for their work, maintaining the Ethereum network.

    For example:

    • Simple transaction (sending ETH): Requires about 21,000 gas units.
    • Smart contract execution: Requires more gas due to complexity.

  4. How a Transaction Works

    1. Create a Transaction: Set the recipient, amount, gas price, and gas limit.
    2. Broadcasting: The transaction is sent to the network and picked up by miners based on your gas price.
    3. Mining: Miners validate the transaction and include it in a block.
    4. Gas Used: The amount of gas used depends on transaction complexity. If the gas limit is too low, the transaction will fail, and the gas is still consumed.

  5. Gas Fees vs. Transaction Fees

    The total cost of a transaction in Ether is calculated as:

    Transaction Fee = Gas Used × Gas Price

    Example: If a transaction uses 21,000 gas and the gas price is 100 gwei, the total fee would be:

    Fee = 21,000 × 100 = 2,100,000 gwei = 0.0021 ETH

Some Questions on Gas & Transactions

  1. Who sets the gas price and gas limit?

    Gas Price: The user initiating the transaction sets the gas price, not the smart contract developer.

    Gas Limit: The user sets the gas limit, which varies based on the complexity of the transaction. Developers often estimate gas requirements for their contracts, but the user decides the final limit.

  2. Who pays the gas price after making a transaction?

    Who Pays: The user initiating the transaction pays the gas fee. Unused gas is refunded, but used gas is non-refundable.

    Who Receives: The gas fee is awarded to miners (in Proof of Work) or validators (in Proof of Stake) as compensation for processing the transaction.

  3. Do other cryptos have the concept of gas?

    Bitcoin: Bitcoin doesn’t use gas but has transaction fees based on transaction size.

    Solana: Solana has transaction fees similar to gas, but they are much lower due to the network’s scalability.

  4. How is the gas fee set, calculated, paid, and used?

    1. Smart Contract Creation: Developers write the smart contract but don’t control gas fees.
    2. User Initiates Transaction: Users set the gas price and limit.
    3. Transaction Broadcast: The transaction is sent to the network and picked up by miners/validators.
    4. Gas Used: Gas is consumed based on the operations in the smart contract.
    5. Miners/Validators Paid: The gas fee is paid to miners/validators for processing the transaction.
    6. Unused Gas Refunded: Any unused gas is refunded to the user.