Cryptocurrency ABCs: Gas
Entering the world of cryptocurrency for the first time can be difficult. Learning all the terminology can be confusing and it is easy to feel overwhelmed. In this series, Cryptocurrency ABCs, we are going to cover important cryptocurrency terms and concepts from A-Z! Each post will cover a topic based off a letter in the alphabet.
Let’s cover the letter G!
What is Gas?
Have you heard cryptocurrency traders use the term gas, and not known what it meant? I mean, it seems weird to hear a term like gas in cryptocurrency, so what is it?
Gas originally referred to the Ethereum blockchain. Gas is the internal pricing for running a transaction or contract in Ethereum. It is a measurement of how much processing is required by the Ethereum network to process a transaction. Simple transactions, like sending Ether to another address, typically do not require much gas. More complex transactions, like deploying a smart contract, require more gas.
Here is a simple way to think of it without getting lost in the technical details. You can think of gas as the “fuel” for the Ethereum network. If you want to use any of Ethereum’s services you need gas.
Gas price is the amount of Ether to be spent for each gas unit on a transaction. The initiator of a transaction chooses and pays the gas price of the transaction. Transactions with higher gas prices are prioritized by the network.
In the Ethereum world, gas is used as a transaction fee and is still denominated in Ether.
Gas vs Gas
If you weren’t confused yet, well you will be now. As with all things crypto there are exceptions and complications. One of these complications is NEO. NEO, formerly known as Ant Shares also has “Gas”. This article by The Merkle explains how Antshares worked:
“There were Antshares themselves, which allowed holders to collect Antcoin or ANC. The value of ANC was expected to increase as the AntShares platform became more popular. It would also be used to collect transaction fees through both ANC and fiat currency. Holding ANC would give users voting rights to change the fees in the future, if necessary. It would also be a way to introduce charges for “extra services” rendered by ANS holders.”
This all made sense but then Antshares rebranded as NEO and all of sudden Antcoins (ANC) became Gas. So now there is Gas, an asset used on the NEO platform and gas as it refers to a transaction fee for Ethereum.
NEO has been called the “Chinese Ethereum” and it is also a platform for smart contracts. If someone wants to use NEO’s services they need Gas.
One of the cool things about NEO is that if you hold NEO in a NEO wallet you can earn Gas. That’s right, you can earn tokens just for keeping NEO in your wallet.
Gas is a Proof of Stake like incentive generated with each new NEO block. The release will be 8 Gas per block reduced by 1 each year (So year 2 will be 7 GAS, year 3, 6 and so on). This will go until 100 million Gas are produced after which there will be no further Gas produced.
What You Need To Know
Here is what you need to remember:
- Gas originated as an Ethereum term
- Ethereum’s gas is the “fuel” for the Ethereum network and is a fee that is still denominated in Ether.
- Gas is the “fuel” for the NEO platform. On the NEO platform Gas is a totally separate asset.
- By holding NEO in a NEO wallet you generate Gas
- NEO’s Gas and Ethereum’s gas are totally separate.
Hopefully this helped clear up some confusion. Next time you read a cryptocurrency forum post that refers to “Gas” you will know what they are talking about!
*Image credit: https://steemit.com/cryptocurrency/@secret-guru/what-the-neo-is-gas