Cryptocurrency & Blockchain Business

What is Ethereum and How Does Gas Work?

Common questions that have come up recently from newbie investors have been asking what ethereum gas is, what it is used for, and what happens to it after the transfer is complete. So, I wanted to offer an explanation that is simple to understand and an answer these basic questions.

What is Ethereum?

Before we can go into what “gas” is, we have to understand what Ethereum actually is beyond being one of the most popular coins and also a higher valued coin by the market place.

Developers at Ethereum are working to build a “world computer” that can essentially decentralize the existing client-server model. Ethereum wants to take the information of the people back from big companies like Google or Apple and give it back to the people.

One example is if you look at a smartphone app store and choose to download a certain app but then Apple or Google decides to not support that app anymore. You then lose all of your information and access to that app.

Ethereum is trying to make apps that are decentralized so that you can always have access to them as a user, even if they get deleted from a particular service provider. The team behind Ethereum wants to give the power back to the user and to the author/creator of the content.

And one cool part is that if you make a change it gets backed up onto every node in the network so you can’t really lose your data.

Keep in mind that this is a very simple explanation of some of the features of Ethereum.

Ethereum Virtual Machine (EVM) and Gas

The EVM is a virtual environment where smart contracts and other such operations may be conducted. All transactions that become listed on the Ethereum network require some amount of operation in order to perform the transaction.

Each transaction that is conducted requires “gas” in order to carry it out. Simple transactions require less gas while more complex transactions require more gas. It is similar to fueling your car for a trip to the grocery store versus going on a long road trip.

The cumulative sum of all total operations in the transaction gives us the total gas required to complete the transaction.

Setting Gas Limits

If you use something like MyEtherWallet, you are asked to set a Gas Limit, which indicates the maximum amount of gas that you are willing to spend on a transaction in order for it to go through. Keep these points in mind though when choosing your max:

· Each transaction is different and will need different amounts of gas to go through.

· If you do not give your transaction enough gas to go through the transaction will fail and the gas you paid is kept by the miner. There is not a refund on this!

· Unspent gas is refunded to your account automatically after the transaction is processed.

Do I Get My Gas Back If I Don’t Set a High Enough Limit?

Short answer is no. Longer answer is that your transaction will start on the road to execution but will run out of gas and stop. You will not get back any of the gas spent, the transaction will not be recorded, and your funds will be left in the main account.

So I Should Just Set the Gas Limit At the Maximum Then, Right?

Unfortunately, no. Let’s say the max limit is 21,000 gas that can be designated for a small transaction but the blocks of the blockchain also have a gas limit that gives the max amount of gas that all transactions in that block may consume. If you set your max gas limit too high then it won’t be processed on that block so it will be delayed.

So, trying to trick the system by offering more gas, you may actually screw yourself and stop your transaction from going through.

Gas Price Explained

Smaller amounts of Ethereum are called Wei or Gwei. 1 Gwei= 1000000000 wei. The gas price will change so check websites like Etherscan.io or EthGasStation for the current price in order to come up with the amount that you should set as your maximum gas limit.

This is a basic explanation of Ethereum and the gas limit needed for Ethereum transactions. I hope that this helps shed some light on this and prevents anyone from losing their Ether. If you found this helpful, share with your friends so others that need access to it will have it. Thanks so much for reading!

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Ivy Riane

Ivy Riane

Crypto day trader, personal finance guru, lover of chocolate, dog mom, blogger, and Editor at WesPostDotCom on Medium.com

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