Gas system on the Ethereum blockchain network

20 September 2022
Gas system on the Ethereum blockchain network

Gas, for the Ethereum network and all of its tokens, is a kind of fuel that keeps the ecosystem running. It is a unit of measure that was introduced to simplify the calculation of efforts to keep the Ethereum blockchain network operational. Gas helps calculate both the miner’s reward for joining a new block to the network and the transaction processing costs.

To better understand the importance of gas, it is worth defining the main features of the Ethereum blockchain and cryptocurrency mining in it. Ethereum is a decentralized network, supported by its users. It uses the PoW protocol, which requires a lot of computing resources to process all requests within the ecosystem. Gas is used to calculate miners’ rewards and, consequently, transaction fees. In Ethereum, tokens are used not only for payments, but also to ensure the operation of smart contracts, and the use of gas to calculate fees allows separating the computing costs of EVM and the real value of ether. But the price of gas is not static, it is set by the sender of the transaction based on two parameters: Gas Limit and Gas Price.

Why Gas Limit is needed on Ethereum

The order in which gas is charged and spent on Ethereum directly depends on the complexity of the transaction. Let’s make an analogy: you drive your car (transaction) into a gas station (miners) to fill it up with fuel (gas). The more powerful the car or the higher the speed, the more fuel you have to spend.

To avoid burning all the fuel when processing the transaction, the Gas Limit parameter is used, it sets a limit to the gas that can be written off during the operation. This feature is mostly important to developers, as it protects against unreasonably huge expenses in case of an error in the smart contract that makes the calculation cycle huge or infinite.

How Gas Limit works:

  1. The user sets a transaction fee (e.g., 30,000 gas).
  2. The actual cost of the settlements amounted to 20,000, the balance will be returned to the wallet.
  3. If more than 30,000 gas was required for the settlement, it will be burned, but the transaction will not be performed.

Both the limits and the cost of the transaction in a gas are set by the user. It is important to achieve a balance between the price and its limit to avoid burning gas aimlessly and not overpaying for the transaction.

What is the Gas Price on Ethereum

The Gas Price parameter gives users the ability to regulate the speed of transactions with their tokens inside the cryptocurrency network. The principle of price priority applies here: the more gas is paid for, the higher the processing speed is.

The price rises for two reasons:

  • there are many transactions on the queue, so miners choose the ones they will be paid more for;
  • users set a high price to speed up processing, triggering its overall growth according to the auction principle.

The AKRA token is optimized for transaction costs. The default formula applies average cost = average transaction processing speed. Such a scheme ensures sufficient speed for comfortable token circulation of all operations while minimizing gas costs. Manually increasing the Gas Price in the transaction settings will also increase the transaction speed.

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