What is Gas?
Before we understand Gas it’s important for us to understand Ethereum itself.
In essence Ethereum is a decentralized, open source blockchain that has smart contract functionality at its core.
Ethereum is also a network that provides developers with the tools they need to build decentralised applications. Projects created on Ethereum are created using the ERC-20 standard. ERC-20 is most famous for both DeFi (Decentralised Finance) & NFT (Non Fungible Tokens).
In very simple terms, Gas is to Ethereum as gasoline is to vehicles; it is the fuel that is needed for Ethereum to run, much like how gasoline allows cars to run. Everything on the Ethereum network requires gas to operate including every transaction.
The price of gas is determined by the demand for resources on the Ethereum network.
Two factors determine how much gas is required:
- Firstly the size of your contract will determine the amount of gas required.
- Secondly the speed at which you want this transaction executed will also determine the gas cost, (slower transactions cost less than faster ones). If you are happy to wait for your transaction or contract to be executed you can save a fair bit of gas.
Every transaction that takes place on the Ethereum network requires computational resources for execution, this in turn means that each transaction requires a fee. Gas is the fee needed to facilitate this transaction.
The miners on Ethereum’s network providing the computational resources get paid a certain amount of Ether (Ethereum’s native currency), that equals the amount of gas to complete the transaction.
All Time High Gas Costs
On September 17th 2020, average gas prices reached an all time high at over 500 GWEI per transaction, as a result of Uniswap’s UNI token airdrop.
If you have used Uniswap recently, you will appreciate just how expensive gas is; often individual transaction cost over $100! This is due to the ongoing altcoin bull run that has brought a much larger number of traders and investors on to the Ethereum network.
A very useful website to check the current gas cost is Etherscan.io
The Future – Ethereum 2.0
At the moment Ethereum seems absolutely unstoppable, it reached its all time high price of $2,152 just 3 days ago on the 2nd April 2021.
The one thing holding it back is high gas costs; however this should soon be resolved by the roll out of Ethereum 2.0. This upgrade to Ethereum’s network improves the speed, efficiency and scalability of the whole network.
Ethereum 2.0 will dramatically increase the network’s bandwidth and reduce gas costs, making it much cheaper to send and swap Eth.
Overall, we think that Ethereum and the gas that it uses for transactions make an excellent system, this system can only be further improved with Ethereum 2.0. If you are interested in investing, have a look at our Best Ethereum Exchanges page.