Note
If you are new to the blockchain technology, taking our Introduction to Blockchain Technology self-paced course is highly recommended. Also, for a comprehensive coverage of blockchain development in Ethereum or mastering Solidity programming, taking our below self paced courses is highly recommended:
Recap
In our previous article (How Smart Contracts Work in Ethereum), we learn how blockchain smart contracts work in Ethereum.
In this article, we discuss how Ether and Gas are used in Ethereum.
Ether and gas
The Bitcoin network uses Bitcoin as the cryptocurrency to bootstrap the network and has a sophisticated algorithm to control the coin supply. The miner, by providing computing capacity for costly mining processes, gets rewarded with new-minted coins and transaction fees in Bitcoin.
Ether is the cryptocurrency powering the Ethereum blockchain network. ETH is the officially listed symbol for ether. Gas is the energy fueling smart contract execution in EVM and can be purchased with ether. To obtain ether, you either need to trade for ether from the crypto market or sign up as the miner. In Ethereum, the supply side will be lowered with the move to PoS, simply because there is no expensive mining anymore that we need to compensate for. Ether will be issued at a constant linear rate during the block mining process. Interested readers can check out online discussions and blogs here, http://ethdocs.org/en/latest/ether.html, for more information about the pros and cons of supply limitations.
Wei is the smallest denomination of ether in Ethereum. One ether is one quintillion
or 1018 weis. The following table is a list of the named denominations and their value in wei:
|
Unit |
Wei Value | Wei |
| wei | 1 wei | 1 |
| Kwei (babbage) | 103 wei | 1,000 |
| Mwei (lovelace) | 106 wei | 1,000,000 |
| Gwei (shannon) | 109 wei | 1,000,000,000 |
| microether (szabo) | 1012 wei | 1,000,000,000,000 |
| milliether (finney) | 1015 wei | 1,000,000,000,000,000 |
| ether | 1018 wei | 1,000,000,000,000,000,000 |
Ethereum is a general-purpose decentralized computing platform powered by ether. In addition to mining, all Ethereum nodes need to perform all computational steps as defined in the smart contract as part of the transaction and block verification process. The Ethereum protocol charges a fee per computational step in exchange for the computing resources supplied by the network nodes for the contract execution.
The execution fee is dynamically determined based on the total gas needed for the execution, and the gas price within the network. Gas in Ethereum is an internal virtual machine token to identify relative cost between operations (calculations, storage, and memory access) of contract execution. The gas price per ether is determined by the miners and generally fluctuates as a result of supply and demand on the network. The sender can purchase the gas from the miners using ether. The sender creating a transaction needs to set both a gas limit and price per gas-unit, which together becomes the price in ether that is paid.
One-to-One Live Blockchain Classes
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When a smart contract is compiled into bytecode, it is actually assembled as encoded opcode and loaded into the EVM. Each opcode is identified as specific operations. The total gas cost of those operations will be the cost of your transaction. Every time the sender sends a transaction to a contract, the following two inputs need to be provided:
- gas: The gas limit the sender allows for processing a transaction
- gasPrice: The unit gas price the sender is willing to pay
The execution fee the sender offers for the transaction will be calculated as follows:
gas * gasPrice (in eth/g) = ether
It is recommended to set a large enough gas limit since all unused gas is returned to the sender. If there is not enough gas, the miner still collects the fee even though the transaction execution will be rolled back. In the next article about the EVM, we will talk more about these computational steps and the gas associated with each step.
Next Article
In our next article (How Ethereum Virtual Machine works), we discuss how Ethereum Virtual Machine works.
This article is written in collaboration with Brian Wu who is a leading author of “Learn Ethereum: Build your own decentralized applications with Ethereum and smart contracts” book. He has written 7 books on blockchain development.
Resources
Free Webinars on Blockchain
Here is the list of our free webinars that are highly recommended:
- Hyperledger Fabric for system admin versus developers
- How to harness blockchain for environmental and corporate sustainability
- Review of Initial Coin Offering, Security Token Offering and asset tokenization use cases and best practices
- Hyperledger Fabric Deployment on Cloud
- Hyperledger Fabric for entrepreneurship- 21 blockchain business use cases
Free Courses
Here is the list of our 10 free self-paced courses that are highly recommended:
- IT Career Roadmap Explained
- Web Design with Bootstrap
- User Experience Best Practices
- Intro to Search Engine Optimization
- Web Design with WordPress
- Introduction to Drupal CMS
- Intro to Joomla CMS
- Intro to Cybersecurity
- Introduction to Cloud Technology
- Recorded Live Webinars and Classes
Self-Paced Blockchain Courses
If you like to learn more about Hyperledger Fabric, Hyperledger Sawtooth, Ethereum or Corda, taking the following self-paced classes is highly recommended:
- Intro to Blockchain Technology
- Blockchain Management in Hyperledger for System Admins
- Hyperledger Fabric for Developers
- Intro to Blockchain Cybersecurity
- Learn Solidity Programming by Examples
- Introduction to Ethereum Blockchain Development
- Learn Blockchain Dev with Corda R3
- Intro to Hyperledger Sawtooth for System Admins
Live Blockchain Courses
If you want to master Hyperledger Fabric, Ethereum or Corda, taking the following live classes is highly recommended:
- Live and self-paced blockchain development with Ethereum
- Live and self-paced blockchain development with Hyperledger Fabric
- Live and self-paced blockchain development with Corda
- Immersive Blockchain Bootcamp with live and self-paced courses
- Live crash course for learning Ethereum with Solidity
- Live crash course for building DApps with Hyperledger Fabric
- Live crash course for building DApps with Corda
- Live full-stack blockchain development in Hyperledger and Ethereum
Articles and Tutorials on Blockchain Technology
If you like to learn more about blockchain technology and how it works, reading the following articles is highly recommended:
- History and Evolution of Blockchain Technology from Bitcoin
- Overview of Blockchain evolution and phases from Ethereum to Hyperledger
- Comprehensive overview and analysis of blockchain use cases in many industries
- Blockchain Crowdfunding Security Token or Initial Coin Offerings
- A beginner Guide to Blockchain Technology
- How Decentralized Peer-To-Peer Network Works
- How blocks are added to the blockchain
- How Public and Private Keys of Cryptography Work
- What Is A Cryptographic Hash Function
- How Digital Signature Works In Blockchain
- The role and types of consensus mechanism in blockchain
- How Proof-of-Work Consensus Works in Blockchain
- How Proof of Stake Consensus works in Blockchain
Articles and Tutorials on Ethereum and Solidity
If you like to learn more about blockchain development in Ethereum with Solidity, reading the following articles and tutorials is highly recommended:
- Review of Architecture and Components of Ethereum
- Comprehensive Blockchain Ethereum Developer Guide from Beginner to Advance Level
- How to Write Ethereum Smart Contracts with Solidity in 1 hour
- Review of Architecture and Components of Ethereum
- How Ethereum Manages Accounts
- How Ethereum Manages Transactions
- How Smart Contracts Work in Ethereum
- How Ether and Gas Work in Ethereum
- How Ethereum Virtual Machine works
- How address and wallet work in Ethereum
- How mining works in Ethereum
- List of Tools and Technologies in Ethereum Ecosystem
- Review of challenges in distributed systems
- Review of Cap Theorem in Distributed Systems
- Horizontal Scaling versus Vertical Scaling in Distributed Systems
- How to Scale up Ethereum Blockchain Applications
- Review of scaling solutions for Ethereum
- How to Manage Ethereum State Channel with Raiden
- How Plasma Chains Work in Ethereum
- How Sharding and Gasper work in Ethereum
- How Proof-of-Stack Consensus Works in Ethereum
- A roadmap for Implementing Ethereum 2.0
- How to work with Decentralized Data and Content Storage in Ethereum
- How Decentralized Messaging with Whisper Works in Ethereum
- Review of Infura for Ethereum Development
- Review of Infura Ethereum API
- How to Use Remix with Infura for Ethereum Development
- How Ethereum Client API Works
- How Ethereum IPFS Storage Works
- How to Install and Start Ethereum IPFS Storage
- How to Run Ethereum IPFS Storage
- How to Work with Ethereum Swarm Storage
- How to Install Ethereum Swarm Storage
- How to Handle Ethereum Messages with Whisper
- Review of Popular Ethereum Smart Contract Libraries
- Review of Private and Permissioned blockchain
- How to Set up a Local Private Ethereum Blockchain
- How to Run Geth on a Local Private Ethereum Blockchain
- How to Build a Local Private Ethereum Blockchain with Mining
- How to Run Geth on a Local Private Ethereum Blockchain with Mining
- How to Create an Account on a Local Private Ethereum Blockchain
- How to Use Ethereum Optional Flags with New Chains
- Review of Ethereum Options for Development and Testing
- Review of Ethereum Developer Chain Options
- Review of Ethereum API and Console Options
- Review of Ethereum Networking Options
- Review of Ethereum Transaction Pool Options
Articles and Tutorials on Hyperledger Family
If you like to learn more about blockchain development with Hyperledger, reading the following articles and tutorials is highly recommended:
- Introduction to Hyperledger Architecture, Projects, Tools and Libraries
- Complete Review of Hyperledger Fabric Architecture and Components
- Hyperledger Fabric for System Administers versus Developers
- How to use Prometheus and Grafana to monitor Hyperledger Fabric
- Blockchain Developer Guide- How to Install Hyperledger Fabric on AWS
- Blockchain Developer Guide- How to Install and work with Hyperledger Sawtooth
- Blockchain Developer Guide- How to Install Hyperledger Burrow on AWS
- Blockchain Developer Guide- How to Install Hyperledger Iroha on AWS
- Blockchain Developer Guide- How to Install Hyperledger Indy and Indy CLI on AWS
- Blockchain Developer Guide- How to Install Hyperledger Seth and Docker on AWS
- Blockchain Developer Guide- How to Configure Hyperledger Sawtooth Validator and REST API on AWS
- Blockchain Developer Guide- How to Build Transaction Processor as a Service and Python Egg for Hyperledger Sawtooth
- Blockchain Developer Guide- How to Deploy Ethereum Smart Contracts with Hyperledger Burrow
- Blockchain Developer Guide- How to Create Cryptocurrency Using Hyperledger Iroha CLI
- Blockchain Developer Guide- How to Explore Hyperledger Indy Command Line Interface
- Blockchain Developer Guide- Comprehensive Blockchain Hyperledger Developer Guide from Beginner to Advance Level
- Introduction to Hyperledger Sawtooth Blockchain Development
Articles and Tutorials on R3 Corda
If you like to learn more about blockchain development on Corda , reading the following articles and tutorials is highly recommended:
Articles and Tutorials on Other Blockchain Platforms
If you like to learn more about blockchain development in other platforms, reading the following articles and tutorials is highly recommended: