If you are a newbie and have just started trying your hands on trading or sending cryptocurrency, then you would have definitely come across terms like Ethereum, Ether, Gas, Gas limit and so on. But if you want to dig a little deeper about these terms, especially if you are planning to invest in an ICO, then this write-up will be of a great help to you. Let’s have a detailed look at these terms.

What is Ethereum?

Ethereum is an open software platform that is based on blockchain technology. It enables developers to build and deploy decentralized applications. Like Bitcoin, Ethereum is a distributed public blockchain network and in some cases, it might sound similar to Bitcoin. But there are some technical differences and the most important is that both the currencies differ substantially in purpose and capability.

Bitcoin provides a peer to peer electronic cash system that enables online Bitcoin payments. Its blockchain is used to track ownership of Bitcoins. In the Ethereum blockchain, Ether is mined, which is a type of crypto token that fuels the network. This blockchain focuses on running the programming code of any decentralized application. Apart from being used in trading, Ether is used to pay for transaction fees and services on the Ethereum network.

What is Ether?

As discussed above, Ether is a unique piece of code that is used to pay for the computational resources that run an application or program. It is a digital bearer asset that doesn’t require a third party to process or approve any transaction. Most importantly, it provides fuel to the decentralized apps on the network.

Let’s take an example of a decentralized online notebook, to see how Ether powers a user experience. For posting, modifying or deleting a note, user will have to pay a transaction fee in Ether for getting the network to process the change. So, Ethereum transaction fees are calculated based on how much gas the action requires. This is why Ether is denoted as the digital oil.

Additionally, Ether can be programmed for many use cases like for generating tokens during ICOs, making DApps, making standard P2P payments and for enabling smart contracts.

What is Gas Limit?

Gas or Gas Limit means fuel that is required to execute an operation or run a particular smart contract code. It is a unit that gets translated into Ether as a cost of performing a transaction. This cost is paid by the requestor to the miner, who actually mines and validates that transaction.

The gas limit is measured as ‘gas’ in unit. For instance, if you execute five lines of code on Ethereum, you will require five gas units. Gas limits are already defined depending on how much code needs to be executed on the blockchain for a particular operation.

What is Gas Price?

If you want to pay less for your transaction, you can vary the other variable that determines the final cost of the transaction. This variable is known as gas price. But lowering the gas price makes the transaction take longer time for mining, as all miners prefer mining a transaction that has higher mining reward. So, in short, gas price is measured in the unit of Gwei. For five lines of code that need five units of gas, would cost five Gwei.

What is Transaction fees?

Generally, when an ICO is not going on Ethereum, the standard transaction is 21,000 gas limit. On the contrary, an ICO uses a 200,000 gas limit.

Three types of gas prices suggested during regular times for P2P transactions include:

  • Slow (0.6 Gwei) – Your transaction will be picked after several minutes.
  • Average (4 Gwei) – Your transaction will be picked up in next few blocks.
  • Fast (40 Gwei) – Your transaction will be picked up in the very next block.

However, during an ICO, the average gas price shoots up to astronomical levels. If you are willing to keep an eye for the latest Ethereum price, gas price and gas limit, you can always refer to some trustworthy options accessible on the web.


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