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Gas (Ethereum) is the internal pricing (metering system) for running a contract or in general any transaction in Ethereum. Gas is a unit of measurement for the amount of computational effort required to perform operations on Ethereum. The more computation and storage needed to complete a transaction, the more gas that is required to perform and complete that transaction. Metering the amount of Gas required per operation. For example, addition (3 Gas), multiplication (5 Gas), storage operations (200-20,000 Gas), or stack operations (2-3 Gas) all require different amounts of Gas.
Ethereum uses Solidity to run its smart contracts on the Ethereum Virtual Machine (EVM) and every line of code that gets executed in Solidity requires a specific amount of Gas. Gas is paid to miners on the Ethereum network who perform necessary computational work to execute transactions. The purpose of implementing the Gas system to complete transactions using Ethereum is to incentivize miners to perform computation. Gas and Ethereum work together to complete a proof-of-work peer-to-peer system where miners mine blocks and get block rewards through becoming temporary dictators of their own mined blocks on the blockchain.
The fee paid to miners is the gas used multiplied by the Gas price. The Gas price per Gas by default is 0.02uETH (micro ether) per Gas, but Gas price may also be specified by the user. If a higher fee (price per Gas) is set by the user, then this increases the reward for miners which will likely increase the speed at which transactions with higher fees to be processed. This Gas price system allows users to pay more for faster transaction completion times on Ethereum.
EIP 1559: Ethereum's Fee Market
In July, Ethereum is expected to undergo a backwards-incompatible upgrade, also called a "hard fork." One of the most highly anticipated code changes in the upgrade dubbed "London" is Ethereum Improvement Proposal (EIP) 1559. At its core, EIP 1559 is designed to make transaction fees less volatile and more predictable.
In the words of CoinDesk’s Christine Kim, EIP 1559 replaces “Ethereum’s auction-style fee market with an algorithm that automatically sets the gas price.” According to a report from Kim, there are four significant purposes for the proposal, including counterbalancing ether’s increasing supply, preventing economic abstraction of ethereum (ETH, -0.22%), reducing fee volatility and increasing fee market efficiency.
All stakeholders of the Ethereum network will be affected by EIP 1559 to some degree. Users of the network will now have a new fee market that will change how their transactions are prioritized and will add predictability to transaction fees.
EIP 1559 will also introduce greater block size variance, meaning block sizes can fluctuate up to two times the current maximum limit during times of high network congestion. When it comes to the amount of transaction data able to fit in a block, this flexibility is intended to improve fee market efficiency and help alleviate some of the pain points caused by Ethereum’s limited transaction throughput, or how fast the network can process transactions.
