Ethereum Gas & Lemon juice

The variance in Ethereum gas pricing makes the platform hard to adopt for anyone that need to strategise and plan ahead for sustainable success.

Let's do this step by step

Imagine Ethereum as a giant playground where everyone wants to play games. These games are transactions people want to do, like sending money, playing with unique digital pets, or trading virtual items. But there's a twist – to play these games, and you must pay with "gas."

1. What is Gas??Think of gas as a special token or ticket that you need to use to participate in the games. Each game (transaction) requires a different number of tickets (gas) to play. The more complex the game, the more tickets you need. And just like in real life, tickets cost real money!

2. Gas Auctions:?When you want to play a game (send a transaction) on Ethereum, you have to enter the "gas auction." It's like an exciting bidding game where you compete with other players (users) to get your transaction processed by the Ethereum network.

3. Setting the Bid:?You decide how much you're willing to pay for each ticket (gas price). If you offer more, your transaction will likely get processed faster because the playground referees (miners) prefer higher-paying players.

4. Gas Limit:?You must decide how many tickets (gas limit) you want to buy for your game (transaction). Some games require more tickets than others. If your game needs more tickets than you bid for, it'll be like running out of gas in a car – it won't work!

5. Winning the Auction:?Once you submit your bid (gas price) and the number of tickets you want (gas limit), your bid goes into the auction. When a referee (miner) sees your bid and thinks it's good enough, they pick it up and start processing your game (transaction).

6. Miners' Reward:?The referees (miners) get to keep the tickets you paid for (gas) as their reward for making the game happen. So, they're motivated to pick transactions with higher ticket prices (gas prices) because they'll earn more!

Lemon juice

Now let's dive into variable costs and why they are crucial for any business striving for success. Imagine you have a lemonade stand, and you're selling glasses of lemonade to your friends. Your lemonade business now has two types of costs: fixed and variable.?

Fixed costs stay the same, no matter how much lemonade you make. For example, the cost of your lemonade stand, pitchers, and initial ingredients like lemons and sugar would be fixed costs. On the other hand, variable costs are like "flexible" expenses that change depending on how much lemonade you produce. These might include the cost of additional lemons, sugar, cups, and other ingredients for each glass of lemonade.

Estimating your variable costs is essential because it helps you understand how much each glass of lemonade truly costs. This knowledge is like having a secret superpower that allows you to make better decisions for your business.

1. Pricing Strategy:?By knowing your variable costs, you can set the right price for each glass of lemonade. If your variable costs are too high, you might sell at a loss, which isn't great for business! But if you estimate them correctly, you can add a reasonable markup to ensure you make a profit.
2. Profitability:?Variable costs directly impact your profitability. If you can lower your variable costs, you'll keep more money in your pocket from each sale. Finding ways to reduce the cost of ingredients or getting better deals from suppliers can help you boost your profits.
3. Production Planning:?Let's say you're having a huge party and want to prepare a lot of lemonade. Understanding variable costs will help you plan how much to produce without wasting money on excess supplies.
4. Budgeting and Forecasting:?Businesses need to plan for the future, and estimating variable costs is critical to budgeting and forecasting. You'll know how much money you need to keep the lemonade stand running and how much you might expect to earn in the future.
5. Competitive Advantage:?Knowing your costs gives you a competitive edge. Suppose you can produce lemonade at a lower cost than your competitors. In that case, you might be able to offer a lower price or invest more in marketing to attract more customers.
6. Decision Making:?You'll face various daily decisions in the life of a business wo(man). Knowing your variable costs will help you make informed choices about expanding your business, introducing new flavours, or participating in events like fairs.

How do we reconcile how Ethereum gas pricing works and the requirement for low variance pricing that most users will have?

Any thoughts, insights and hints are very welcome!