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What are gas charges?
You may have noticed that every time you make a transaction in your cryptoWallet perform like z to push through. Believe it or not, this “gas fee” is an integral part of the entire process of conducting cryptocurrency transactions.
First of all, and most importantly, why are they called “gas charges”? We are talking about digital transactions and Blockchain-Technology, so why should “gas” be needed?
Well, “gas charges” are actually a product of the Ethereum Creativity of the developer. They are not related to the petroleum, fossil fuel, or diesel that you put in your car. The term is simply a metaphor for the fuel or gas that does the code and the calculations on the Ethereum network. “Gas Fees” are the fees we have to pay to conduct any type of transaction on the network.
How does Ethereum gas fees work?
As we all know, the Ethereum network isn’t just decentralized, digital money. In contrast to Bitcoin (BTC)Being just a store of value, it is programmable. Ethereum has more utility as it is able to create smart contracts that can perform various calculations on the blockchain.
And for the Ethereum To function perfectly, it needs computers all over the world to handle the various transactions and calculations for the Ethereum Virtual Machine (EVM). Gas fees give these computers, also known as “miners”, an incentive to transfer the computing power of their laptops and PCs to the Ethereum blockchain platform.
The calculation of gas fees is based on the gas price, which is based on supply and demand at the actual time of the transaction. This means that it will change over time based on how many transactions are taking place in the system.
What are transaction costs?
The transaction cost, or the actual cost of gas charges per transaction, is constantly changing, but it is based on a relatively simple formula. It is the gas costs multiplied by the gas price.
The “gas costs” are already in. preset Ethereum Code and it doesn’t change. It costs three “gasoline” to add two numbers, 400 “gasoline” to check the balance of a wallet, and 21,000 “gasoline” to complete each transaction.
However, the “gas price” is based on Ethereum‘s smaller unit, known as the “gwei”, which changes based on the current market value of ETH. The price of gas is higher or lower depending on whether the Ethereum blockchain is overloaded or not. The denser it is, the higher the gas requirement. In addition, the price of gas depends on the willingness of the person to spend more or less money in order to expedite transaction confirmation, which is known as the “gas limit”.
What is “gwei”?
“Gwei” is the abbreviation for “Giga Wei”, which corresponds to a trillion of Weis Ethereum, or, expressed in numbers, 0.000000001 ETH. The term was created due to the fact that it is such a small term that it would be very difficult to use on its own in everyday life. The shorter, more concise term “gwei” is needed to refer to the number. It is much easier to say “1 Gwei” instead of “0.000000001 ETH”.
Why are Ethereum gas fees so high?
The simplest reason why gas fees are so high in Switzerland Ethereum Blockchain these days is due to its record volume, immense popularity and a rapidly increasing number of use cases. The Ethereum network has developed into a hub for innovations in the digital, decentralized cryptocurrency space.
DeFi has brought the traditional financial process to the decentralized world, along with the simplicity and accessibility of staking, investing, trading, lending and borrowing on the blockchain. NFTs have brought the art and cultural community into the world of the with the emergence of new NFT marketplaces Cryptocurrencies which boosted the record number of NFTs sold last year.
These are just two of the many factors that lead to a lot of traffic jams Ethereum Network. Imagine hundreds of thousands of transactions blocking the network. That is what makes gas charges so high these days.
As a result, several Layer 2 solutions have emerged in the form of scaling solutions that address the problem of high gas charges in the Ethereum network. Blockchains like Polygon (MATIC) and 1inch have provided enhancements that dramatically reduce transaction fees on their networks.
The Ethereum Network has also developed the EIP-1559, short for Ethereum Improvement Plan, which aims to change the current Ethereum gas tariff model. It performs sharding and a proof-of-stake model on an Ethereum.
Source: Crypto News Deutsch