What is gas?

Why do you pay fees when you send a token, even if you’re not using an exchange? Because the network needs to process your transaction. On Ethereum, every action, from a transfer to executing a smart contract, consumes a specific amount of gas.

Think of it like fuel for a car: the gallons a trip needs are one thing, and the price per gallon is another. Likewise, the amount of gas and its cost are two different things. A complex transaction usually requires more gas than a simple ETH transfer. When demand for block space rises, the price per unit of gas can go up without any change in the work the same transaction requires.

On Ethereum, the execution fee is calculated as the gas consumed multiplied by the final price per unit of gas. That price is usually shown in gwei, a denomination of ETH, and the payment is made in ETH. Gas isn’t a separate coin you buy.

Why it matters

If you hold a token in your own wallet on Ethereum, its balance isn’t necessarily enough to transfer it. In the usual case, you also need ETH for network fees. Other networks may use a different coin for the payment.

Gas also puts a cost on using shared computational resources. Without such a charge, someone could much more easily flood the network with useless work. For us, that’s the essence of it: you pay for the processing, not in proportion to the value you send.

What to watch out for

The gas limit is the maximum amount of gas you allow the transaction to consume. It isn’t its price. If the limit turns out to be too low, execution may fail, but the gas consumed is still charged. The same can happen when a smart contract rejects the action.

Before confirming, check the network, the estimated fee and the maximum cost your wallet shows. An exchange’s withdrawal fee isn’t necessarily the same as the transaction’s actual gas fee.