UNDERSTANDING TRANSACTION FEES ON THE MOST POPULAR BLOCKCHAIN
From EurocoinPay we have been exploring the concept of Gwei, a very small unit of measurement used in the Ethereum network to quantify transaction fees and whose pronunciation is “gui”.
What is a Gwei?
It is a tiny fraction of Ether (ETH), Ethereum’s native cryptocurrency. It is used to pay miners for the work they do in processing and validating transactions.
| Unit | Nickname | Value Wei | Value Gwei | Value Ether |
| Wei | Wei | 1 Wei | 10-9 Gwei | 10-18 ETH |
| Kwei | Babbage | 103 Wei | 10-6 Gwei | 10-15 ETH |
| Mwei | Lovelace | 106 Wei | 10-3 Gwei | 10-12 ETH |
| Gwei | Shannon | 109 Wei | 1 Gwei | 10-9 ETH |
| Twei | Szabo | 1012 Wei | 103 Gwei | 10-6 ETH |
| Pwei | Finney | 1015 Wei | 106 Gwei | 10-3 ETH |
| Ether | 1018 Wei | 109 Gwei | 1 ETH |
The term Gwei comes from the combination of Giga (billion) and Wei, where Wei is the smallest unit of Ether.
What is it used for?
Gwei serves as a market mechanism to determine the price of transactions. The higher the Gwei fee a user pays, the faster their transaction will be processed.
How is the price of Gwei determined?
The price of Gwei fluctuates depending on network demand and transaction complexity. When the network is congested or a transaction is complex, users must pay more Gwei to have their transactions processed.
Importance of Gwei
Gwei is essential to the functioning of the Ethereum blockchain network, as it allows users to compete for network processing capacity and ensures that transactions are processed fairly and efficiently.
Example
Imagine that a transaction on Ethereum costs 18 gwei. This means that the sending user must pay 0.000000018 ETH (18 gwei divided by 1,000,000,000,000 gwei per ETH). This example helps us to understand what we pay when we move our Ether.
Disclaimer: The information set out herein should not be taken as financial advice or investment recommendations. All investments and trading involve risk and it is the responsibility of each individual to do their due diligence before making any investment decision.
