In crypto, gas can mean one of two things:
- Gas coin, a cryptocurrency;
- A unit that measures how much computer power is required to perform an action on the Ethereum network.
Gas coins are tokens generated on NEO, a decentralized app platform based in China and originally called Antshares. NEO’s aim is to create a smart economy by using blockchain technology and smart contracts to issue and manage digital assets.
Gas coins are one of two types of tokens created on NEO, the other one being NEO tokens. Gas coins are utility tokens, not assets. This means that, rather than having value as a medium of exchange, they grant the holder access to specific services.
Users need Gas coins to execute smart contracts and pay for the cost of transaction fees on the NEO network.
On the Ethereum network, gas is a unit of measurement. It’s the fee required to execute a smart contract or perform a transaction.
Gas compensates miners — the network users that carry out the complex mathematical calculations necessary for processing and verifying transactions on the Ethereum network — for the computing power required to perform the action. It’s worked out as a fraction of Ethereum’s cryptocurrency Ether and typically referred to as gwei.
The minimum amount of gas, or gwei, required in a given situation is determined by the miners themselves. A transaction may fail or be declined if the amount of gas the user offers doesn’t meet the threshold the miners set.
- It’s no coincidence that Gas coins share the same name and purpose as gas on the Ethereum network. NEO is a direct competitor of Ethereum, to the point where it’s been dubbed the “Chinese Ethereum”
- According to the Ethereum yellow paper — a more technical version of the white paper Ethereum’s inventor Vitaliki Buterin wrote in 2013 — every transaction on the Ethereum network requires at least 21,000 gwei. This is equal to 0.000021 Ether
- The rising popularity of decentralized finance apps — apps aimed at cutting out intermediaries from financial transactions — is increasing network congestion. In turn, this is increasing gas fees, because more congestion means more computing power is needed to perform an action. On 1 September 2020, Ethereum miners earned a whopping $500K in gas fees in one hour.
Want to know more?
If you want to learn how gas works on Ethereum, this article stands out for its thoroughness. It starts with what prompted the idea for Ethereum in the first place and goes on to explain smart contracts, the Ethereum Virtual Machine — which developers use as a sandbox for building and testing decentralized apps — and how gas fits into the picture.
Want to learn about Gas coin? This article is an excellent introduction to it and to the NEO network.
The METACO view
“Rising gas prices are exposing some scalability issues for Ethereum, which could have negative implications on the network’s usability and the viability of many of its most exciting use cases. On the upside, rising gas prices create the incentive for miners to invest in more and better technology to improve scalability as well as opening the door for competitors to swoop in and steal market share.”