The cost of the computational effort behind every transaction on the Ethereum blockchain. You can think of it as a transaction fee.
The Long Explanation
The term ‘gas fee’ or ‘gas price’ is specific to the blockchain networks. It is the fee paid for every transaction in exchange for the computational power behind the platform.
Gas fees are used to calculate everything from the cost of performing a transaction (think token swap or ETH transfer), to the cost of executing a smart contract, or even the cost of launching a decentralized application (DApp).
While ETH is the primary currency of the Ethereum network, gas measures the computational resources powering the network using ‘gwei’. Gwei is a small bit of ETH, equivalent to 10-9 ETH or 0.000000001 ETH.
The amount of gas paid for each transaction varies according to the task or congestion level on the network. More computationally demanding tasks draw higher gas prices, as do tasks completed at peak hours when demand for computational resources is high.
Despite the added cost of doing business brought about by gas fees, there were many reasons for its introduction. For starters, it differentiates computational cost from the digital currency. More importantly, though, it prevents transaction spamming by malicious actors on the network.
Unfortunately, gas prices in the Ethereum blockchain have attained a reputation for being notoriously high – sometimes hitting $200 or $3000. Although you can set your preferred gas price, miners prioritize transactions with higher gas prices as they earn more from these. As a result, low-cost transactions may stay unprocessed for days, even months.
You can think of this as the laborer’s pay for carrying your luggage from one position to another. The more money you offer to pay, the happier the laborer is to abandon the other items on the queue and prioritize your work.
It is important to note that the general gas price for each blockchain differs. Gas in Ethereum blockchain can be hundreds of dollars, whereas on Solana or Harmony blockchains the gas fees could be a couple of cents.
The price of gas then, is another obstacle for the scaling of Ethereum as it may be too costly for individuals.
