What is Gas fee, Gas limit, Ethereum Virtual Machine (in Ethereum Network)?
What do you need to pay in Bitcoin Network? All miners validating the blocks to the chain are paid ‘block reward’ along with the transaction fees, right? While Bitcoin is PoW, Ethereum has shifted to PoS (Proof of Stake) since September, 2022. Therefore, ‘transaction fee’ in blockchain in PoS and the the ‘transaction fee’ called ‘gas fee’ are the same. ‘Fees’ in Ethereum network are the tiny fractions of the cryptocurrency ether (ETH) denominated by gwei (10 to the power of 9) ETH. Therefore, Gas is the fee required to successfully conduct a transaction or execute a contract (on smart contract) on the Ethereum blockchain platform. The transaction prices depend on the gas limit and the gas price.
Note: The transaction fee/ or the gas fee is similar to the fee that you pay during the transfer of money over Foreign Exchange for using their services.
The concept of ‘gas’ was introduced to compensate miners for their word done on maintaining and securing the blockchain (similar to PoS in blockchain). Thus, the more the user stakes, the more they can earn. This is similar to blockchain again viz., if the transaction fee is high, the transaction will be executed very fast.
What is the ‘gas limit’?
Gas is the amount of work that miners provide to maintain a blockchain network. The Gas limit represents the maximum amount of work a validator will put into a transaction. GAS fees determine the importance and priority miners give to a transaction. This means that the more Gas fees a user pays, the faster the transaction will be processed.
"Gas limit" is the maximum amount of work you're estimating a validator will do on a particular transaction. A higher gas limit usually means the user believes the transaction will require more work.
What is Ethereum Virtual Machine (EVM)?
Ethereum (as a platform and system) is designed to be used by others to create more use cases for blockchain and cryptocurrency. Thus, known as Ethereum Virtual Machine (EVM) is a large virtual computer (like cloud/AWS) that runs blockchain-based applications. Many decentralized application, cryptocurrencies and tokens have been created using the cloud application/or the EVM. Since Ethereum blockchain is the part of EVM, the cryptocurrencies build on that blockchain requires gas fees.
Why is there Gas fee on NFTs? And why do I need to pay the Gas fee?
Let me ask you. Do the taxi drivers carry the passengers to your preferred destination for free? No of course as it’s their business to keep running as they need to sustain. Their taxi/car also has cost implications such as wear and tear, as well as fuel costs. Similarly, network validators will not secure the blockchain network if free, if they are not paid anything in return. In addition, if there are no incentives in return, no one would be ready to ‘stake’ their ETH (remember PoS?). Eventually, the network would be at risk without validators as they would not do the work if not being paid.
How’s the gas fee calculated?
The gas fee is calculated as (Gas Limit * Gas price per Unit). For example, if the gas limit is 20,000 and the price per unit is 200 gwei, the gas fee would be 20,000*200=4,000,000 gwei or 0.004 ETH. However, gas fee is not fixed as this would depend upon several factors such as the network congestion. Typically, it is said that a standard ETH transfer requires a gas limit of 21,000 units of gas.
Will review your comment and get back!