FuturProof #148: Blockchain Vocabulary - Gas (9/30)

Gas refers to the fee paid to process and secure a transaction on the blockchain.

The blockchain is maintained by a network of computers called nodes and gas is their compensation for their contribution to the network.?

Instead of a centralized company like Facebook paying to maintain the infrastructure, blockchain networks have a distributed group of nodes providing that service in return for gas.??

Gas is usually paid in the native asset of a blockchain, such as Ether (ETH) for Ethereum. This connection creates a natural demand for the native asset as all users must hold and transact a certain amount of the native asset for gas.

Gas is usually determined by 1) the complexity of the transaction, i.e. how much computational work is required, 2) the supply and demand of computational capacity on the network, and 3) the fee model used by the blockchain.?

The price is set in a free market as processing the transaction has to be profitable for the nodes. So the users must offer a high enough gas until a node is willing to process the transaction for them. The higher the gas offered, the higher the chance your transaction is prioritized and processed first.?

For users, the decision is similar to driving a car for X miles (the benefit) as it requires Y gallons of fuel (the cost). For nodes, the decision is similar to accepting a gig (the cost) for a certain compensation (the benefit). Both parties have to receive a higher benefit than their cost to convince them to work together.??

As cost represents a critical part of the user experience, achieving low fees while maintaining security and infrastructure is important for all blockchain networks.

Disclaimers:?https://bit.ly/p21disclaimers

Not any type of advice. Conflicts of interest may exist. For informational purposes only. Not an offering or solicitation. Always perform independent research and due diligence.