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What is “Gas” in Ethereum?

Gas in Ethereum

Gas is the cost for creating a transaction or running a smart contract on the Ethereum blockchain.  The cost varies depending on the computational effort.  The formula for the transaction cost or “TX fee” is the Gas Price * Gas Limit.  The TX fee is the primary method for which miners process smart contracts will get paid.

The Gas Price is the amount the person sets for transacting on the Ethereum blockchain.  The Gas Limit is the amount the person will pay for the computation needed to execute the transaction on the blockchain.

For our example we will use the Ethereum unit of measure, Gwei , which is a smaller denomination of Ether, at 1X10-9 ETH.  The smaller version of this is a wei, which is the smallest unit of Ethereum, at 1×10-18 ETH.

Example:

With a car, it’s $3.00 (price) per gallon (unit).
With Ethereum, it’s 30 GWEI (price) per gas (unit).

This unit is actually, units of Ethereum Virtual Machine (EVM) work.  Each instruction sent to the EMV to process a transaction or smart contract will cost. If the required amount is not provided to the transaction, it will not complete.  When someone is preparing to send a transaction, a “bid” on how much Ether is created for how much the person is willing to pay to process the smart contract or transaction.

Related Terms

Smart Contract Definition A smart contract is a coded contract that is stored on the blockchain.  The contract, once signed, can not be altered and will execute on the programmed conditions. 
Block Reward A block reward is the amount of Bitcoin or cryptocurrency that is awarded to a miner for confirmation of transactions in a block.
What is an ICO? An Initial Coin Offering (ICO) is a way for a company to crowdfund and distribute a token or coin for cryptocurrency prior to release on exchanges.
Block Height The block height of a blockchain is the sequential number of blocks that comes before that the last block that has been confirmed.