Spend any time whatsoever looking into the cryptocurrency Ethereum, and you’ll inevitably find yourself asking one simple question: what is Gwei? Instinct will likely have you gravitating toward “acronym,” but that’s not quite right.

In the following article, we’ll be completely demystifying this word. More importantly, we’ll be showing you why it is important to understand it if you plan on using Ethereum to execute smart contracts on the blockchain. Let’s begin!

What Is Gwei?

Understanding Gwei or Ethereum isn’t possible until you have some understanding of what blockchain itself is. Since this article is a 101, let’s keep it simple.

Blockchain, you’ve probably heard of by now. It is, of course, a digital ledger that publicly documents transactions from cryptocurrencies. As a decentralized platform, it has great potential to put power back into the hands of the individual so contracts are not so given to the whims of government agencies.

As you study about blockchain, you’ll hear the word “smart contract.” This is essentially a computer protocol that makes execution, control, or documentation automatic. These require some transfer of cryptocurrency to perform, and Ethereum is one of the most widely adopted.

Ethereum

As a cryptocurrency, Ethereum is similar to money. From the US perspective, money comes in a variety of denominations, from cash to coin. “Ether,” the measurement for Ethereum, is no different.

Now, the function of Ethereum to smart contracts is not unlike a vending machine or jukebox. You drop ether into the contract to get it to execute.

“Miners” handle each of the transactions. They refer to the cost of that transaction as the “gas price.”

Gas Prices

This is where the Gwei to ETH comparison can get a little tricky. Miners on the blockchain determine which contracts will execute. They use gas prices (or Gwei) to determine the order in which those transactions occur.

Gwei is short for gigawei, which, in fractional terms, is 1/1,000,000,000 wei. One ether coin is worth 1,000,000,000,000,000,000 wei, so a gigawei is pretty much a fraction of a single ether coin.

Why We Distinguish Between Gwei and ETH

If you’re still with us to this point, it should start to become apparent as to why we distinguish Gwei and ETH from one another. Essentially, there are two important values in the Ethereum blockchain:

  • The amount of ether needed to execute a smart contract on the blockchain (ETH)
  • The amount needed to prioritize that smart contract (Gwei)

In this regard, it’s like the commission a broker makes on a stock trade. Albeit, that commission is of a much lower percentage.

Getting Noticed

Figuring out how to get your smart contract executed is key. That’s a much more involved topic. You can check out this article for more tips and information if you’re ready to advance out of this beginner’s course.

Start Trading Cryptocurrency Today

At day’s end, you need to answer the question of “what is Gwei?” for yourself before getting involved in a blockchain. This will allow you to place your bid on a smart contract and improve its chances of processing.

Understanding Gwei can also help you earn a lot of money, so start trading cryptocurrency today!

For more explainers on cryptocurrencies, blockchain, and the complicated lexicon, check out some of our additional posts.

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