Table of Contents
What is Gwei? 📖
The term is the short form of Giga-Wei. Giga is denoting a factor of 10^9 while Wei is named after Wei Dai who is a great cryptographer with several significant contributions to cryptocurrency.
Gwei is also referred to as a Shannon. The term Shannon refers to Claude Shannon who, like Wei Dai, is regarded as one of the greats in information technology. His contributions as a mathematician and cryptographer have led him to be known as the father of information technology.
Fun fact 🎉: Ether is also referred to as Buterin – which is named after Vitalik Buterin, the creator of Ethereum.
Why did the Ethereum founders feel the need to introduce Gwei?
By now, it must be clear that Gwei is a measuring unit for the gas used to carry out a transaction in a blockchain, especially the Ethereum blockchain.
Gwei has solved a big problem in the Ethereum blockchain. How? Because the gas price in Ethereum fluctuates wildly. Network demand and congestion factor in here. By using Gwei, users can specify a precise amount of gas they are willing to pay for a transaction or smart contract execution, which allows them to control the speed and cost of their transactions.
Moreover, Gwei is more convenient and standardized, which makes it an important feature.
Gwei breakdown 🧮
One Gwei is equal to 0.000000001 Ether (1 Billionth of an Ether). The smallest unit for 1 Ether is 1 Wei.
It is usual for some cryptocurrencies like Ethereum to have these denominations because of the high fiat currency exchange rate.
As Gwei is based on the Ethereum blockchain, the price of 1 Gwei varies on the current price of the Ether token.
Let’s try an analogy 🎲
One way to best understand how Gwei is used for gas prices is to consider it like cents. Cents are handy and good for smaller purchases. For the same reason, it is also helpful when measuring small values which is why they are being used for calculating gas prices.
Gwei is mainly used for Ethereum Gas. Gas fees are important to run the Ethereum network as they allow the network to operate and help in processing transactions. These gas fees are calculated and based on the type and complexity of the transactions.
Vitalik once proposed to charge 1 Gwei for transactions (tx) sent through wallets.
I propose we consider supporting a community norm that client/wallet devs can/should charge a 1 Gwei/gas fee for txs sent through their wallet
Vitalik Buterin, Ethereum Founder
Miners who spend their time and electricity validating transactions and blocks on the Ethereum Blockchain receive Gwei in return as a reward for their work.
Interested in knowing how Ethereum moved from miners to validators? Read The Merge.
During heavy network congestion, you can pay higher Gwei (gas fee) to have your transaction carried out more quickly than other transactions.