Settle Portfolio

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What is gas?

What is gas?

Gas is the fee you pay to submit transactions to the Ethereum network. Whether you’re transferring ETH, sending tokens, or interacting with a smart contract, you owe gas in the form of Ether (ETH), the native currency of the Ethereum network. Think of gas fees as fueling the network.

Why do you pay gas?

First, let’s dig into what it actually means to submit a transaction to the Ethereum blockchain. When you submit a transaction, nodes on the network check to see if its valid. And if it is, your transaction is added to the pending pool of transactions. Then, miners validate and execute your transaction using their copy of the blockchain. 

Validating your transaction, mining the block, and eventually storing the data requires the miner to purchase and maintain hardware. You pay gas to the miner as a form of compensation for putting in the computational work necessary to complete your transaction. The cost of transactions also serves as a deterrent against spamming the network with low value or junk transactions.

gas fees

How much do gas fees cost?

There are two parts that determine the cost of your transaction: your gas limit and gas price. Your gas limit is how many units of gas you’re willing to spend on this transaction. And, you’re gas price is the amount of ETH you’d pay for each unit of gas. In other words: gas price * gas limit = total cost. GWEI is the unit of ETH typically used to denominate gas prices.

While gas limits are fairly standardized and require little attention, gas prices constantly fluctuate. As we mentioned before, your gas fees are paid to the miner which mines the block including your transaction. Only so many transactions fit into each block which means that miners are incentivized to choose the transactions paying the highest fees. And so, prices will fluctuate depending on how congested the network is.

Generally, the more gas fees you pay, the faster the transaction will be completed. That being said, we highly recommend you check the standard gas price at ETH Gas Station before sending a transaction. Otherwise, your transaction might get stuck for a while.

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