The blockchain is one of the most interesting technology breakthroughs. In a nutshell, it’s the foundation on which all cryptocurrency is built. The Ethereum blockchain ranks second , right after Bitcoin, in its market cap and importance. You often see Ethereum linked with “Gwei” and wonder why the hell is crypto so confusing. Wonder no more, we will break down the term Gwei and give you some insights into gas fees.
What is GWEI?
First things first: Gwei is to Ethereum what a penny is to a dollar.
- The Ethereum blockchain hosts most of the NFT purchases and transactions.
- Ethereum is a cryptocurrency and you can track everything about it and its blockchain on Etherscan.
- Every transaction you do on the blockchain requires gas fees.
- You pay these gas fees to miners who perform these transactions through validation mechanisms. So, Gwei is a unit to measure these gas fees.
At the time of writing 1 ETH = $1,861.84 and gas fees are at 22 Gwei (0.86$). As you see gas fees are much less($0.86) than Ethereum($1,861.84).
- Gwei is a subunit to measure smaller values of Ethereum.
- For example, instead of saying that gas costs 0.000000001 ETH, you can say gas costs 1 Gwei.
- GWEI is a combination of the words “Giga” and “Wei”.
- Gwei is also called “nano-ether” because nano is the prefix used to denote one billionth of something.
1 ETH = 1 billion Gwei (1,000,000,000; 9 zeros)
How To Calculate Gas Fees in Gwei?
This is the basic equation for calculating gas fees in Gwei :
Gas Fees = Gas Units (Limit) x (Base Fee + Tip)
- Gas Units(Limit):
It’s the maximum amount a single transaction consumes. This limit guarantees the execution of the transaction and is fixed at 21,000 gas units for a simple ETH transfer. Check out this detailed guide on NFT Gas Limits.
- Base Fee:
It’s the minimum amount recording a transaction on the Ethereum network needs. It’s not fixed therefore it will decrease or increase according to demand and engagement on the blockchain at a certain time. You can always find the Base fee on Etherscan gas tracker and currently, it’s 21 Gwei.
A tip or priority fee is an optional payment. For example, in case of gas wars, you may need to pay a tip to make your transaction happen first. There’s no limit or range for this fee because the more you tip the bigger incentive Ethereum miners get to prioritize your transaction over others.
Check out this guide for detailed examples of gas fees, gas wars, and tips.
Owners of staked ETH receive minor rewards as compensation for assisting in the maintenance and security of the blockchain. Gas fees, measured in Gwei, are very essential to the ecosystem and future of Ethereum‘s blockchain. So, the following factors affect the price of gas fees:
- volume of network traffic
- availability of validators
- demand for transaction verification