Cryptocurrencies are part of very big blockchains and they consist of many different parts. In order for these blockchains to operate, they need miners or stakers, depending on which protocols these blockchains are using. These miners and stakers are the ones who confirm transactions, and since miners use a large amount of electricity and stakers are locking their tokens in for confirming these transactions, they take a portion of the transactions as fees for their work.
Gas is one of these fees, and probably the most commonly paid fee in the crypto space. But what exactly is it and why is it one of the most common fees in crypto? This is exactly what we will be discussing in this guide today.
What is Gas
Ethereum is the largest and most commonly used blockchain in the world. Being this popular and widely used, there is a large number of transactions that happen on the Ethereum blockchain each second. Essentially it is similar to major currencies like USD or EUR in Forex, and for these transactions, people need to pay fees called “gas”.
If we look at it from a more technical point of view, gas refers to the amount of computational effort required to complete transactions or any other operation on the Ethereum network.
The way gas fees are calculated nowadays is a bit different from how it was in the past. Until the London update which took place in August 2021, gas fees were calculated based on the gas price per unit, but after the London update, this moved to base fees, which slightly decreased these gas fees, but not by much.
The Ethereum Merge’s effect on Gas prices
If you are not completely new to crypto, there is a good chance that you have heard that gas prices on the Ethereum network are notoriously expensive, especially when there is a big load on the chain. This was commonly attributed to the proof-of-work protocol used by the Ethereum blockchain, which is slow and expensive. But when Ethereum announced their Merge and move to proof-of-stake protocol, many believed that this will make Ethereum transactions faster and cheaper.
But as the Merge has rolled out and comments from developers have been published, everyone who thought that Ethereum will become faster and cheaper, realized that this was not the case. There were big comments made by Ethereum’s founders on this subject, but to put it simply, the main goal of this update was to make Ethereum more energy efficient, 99% efficient to be exact. But this does not mean that blockchain will expand, and because of this there were no significant changes. Yes, it is a bit faster and cheaper, but compared to some other similar networks, Ethereum remains very expensive. So we still need to pay a high amount of gas to make transactions on the Ethereum network.
FAQs on What is Gas
Is Gas only on Ethereum?
While gas is only present on Ethereum, it does not mean other blockchains don’t have fees. Gas is simply the name given to the unit of measurement that determines the fees on the Ethereum network. While other blockchains and networks will simply call them “fees” or any other name. So the answer to this question is yes, gas is only on Ethereum.
Are Gas prices low after the Ethereum Merge?
No, gas prices are still high even after the Merge. Before the Merge people were speculating that the upcoming update will lower gas prices significantly. But Ethereum developers soon ended the rumor by stating that the goal of this update is to lower electricity consumption by 99%. This update does not include the expansion of the Ethereum network or any update that will make transactions cheaper. But proof-of-stake still did its work and gas fees are slightly lower than before, but they are still high compared to other networks.