What Is Gas Price? A general reference for approximate transaction fees on the Ethereum blockchain, gas price refers to the amount of ETH (in a small unit called gwei) that must be paid to miners for processing transactions on the network. One gwei equals 0.000000001 or 10-9 ETH. The gas price is determined by an auction-type mechanism, where the miners look for the highest fees attached to a transaction, then process these transactions from there in descending order. Gas prices fluctuate considerably over time and are naturally higher during high activity periods and decrease during periods when the network is underutilized. Most Ethereum wallets provide general references for gas prices with processing time comparisons with different gweis. Most other blockchains and cryptocurrencies use similar mechanisms for managing and prioritizing which transaction will get processed first on the network. This mechanism ensures healthy competition and security for the blockchain by enacting a fair market mechanism and incentivizing more entities to provide computational power to the network. Blockchain security and stability improves with the addition of computational power (measured in hash/second or h/sec and its metric denominations), since potential attackers would need to exceed this power to breach the blockchain’s security Exorbitant gas prices have long been a major crux for Ethereum users, and hampers the network’s ability to scale. As more popular DeFi projects, DApps and decentralized exchanges (DEX) like Uniswap and SushiSwap operate on Ethereum, the more “congested” the network becomes and the higher gas prices climb. At the peak of the 2020 DeFi boom, Uniswap users paid up to $50 in gas fees per transaction! Ethereum’s gas problem will likely be solved when the new proof-of-stake Ethereum 2.0 network finally rolls out in 2021 and uses staking instead of computational power to validate transactions.
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