Ethereum Fundamentals
Learn the fundamentals of Ethereum to get started with programming in Solidity.
We'll cover the following
Ethereum is an open-source platform that’s decentralized and built on blockchain technology. It facilitates the running of smart contracts. As a crucial aspect of learning, Solidity involves understanding how miners work to collect Ether, the digital currency essential for operating the Ethereum network. Beyond being a tradable cryptocurrency, Ether is used by app developers to cover transaction costs and fees on the Ethereum network.
Gas
On the Ethereum blockchain, gas is the charge or price value needed to complete a transaction or carry out a contract. The gas is used to distribute the EVM resources so that decentralized applications like smart contracts can self-execute in a safe but decentralized manner. It’s priced in tiny fractions of the cryptocurrency Ether (ETH), also known as gwei and occasionally termed nanoeth.
The network’s miners, who can refuse to execute a transaction if the gas price doesn’t match their threshold, and users of the network looking for processing capacity establish the precise price of the gas through supply and demand.
What is gwei?
Nano is the prefix used to represent one billionth of anything, and nanoether is another name for gwei. Some cryptocurrencies have fiat currency conversion rates so high that small amounts are required. These micro denominations enable smaller transactions while allowing a cryptocurrency’s market value to rise as high as supply and demand will allow.
Because gas pricing is expressed in gwei, it’s the most often used Ether unit. The Ethereum network refers to transaction costs as gas. Users must give it some gas for a transaction to take place, which costs gwei. Users must pay gas fees to cover the cost of the processing power used by miners and validators to process and validate transactions on the Ethereum network.
Ether denominations
The table below provides an overview of the various denominations of Ether, ranging from the smallest unit, wei, up to tether:
Denominations of Ether
Ether | Denominations |
1 Ether | 1000000000000000000 wei |
1 Ether | 1000000000000000 kwei |
1 Ether | 1000000000000 mwei |
1 Ether | 1000000000 gwei |
1 Ether | 1000000 szabo |
1 Ether | 1000 finney |
1 Ether | 0.001 kether |
1 Ether | 0.000001 mether |
1 Ether | 0.000000001 gether |
1 Ether | 0.000000000001 tether |
The following illustration describes the step-by-step process of how a typical Ethereum transaction takes place, from purchasing Ether (ETH) to the eventual receipt of ETH by the seller. Here’s an explanation of the process:
Buying ETH: The process begins with the purchaser buying Ether from a cryptocurrency exchange or another source.
Using private key for the transaction: After obtaining Ether, the purchaser uses their private key to initiate and sign a transaction.
Waiting for the mempool: Once the transaction is signed, it’s sent to the mempool, which is a holding area for all pending transactions.
Picking the transaction from mempool: A mining node selects the transaction from the mempool to include it in a new block.
Bundling the transaction in the block: The mining node combines the chosen transaction with others in a new block, which is then added to the blockchain.
Verifying block as the mining proof: The block undergoes a verification process, commonly known as proof-of-work or proof-of-stake, depending on the blockchain protocol.
Rewarding the miner: After successful verification, the miner is rewarded with both the block reward and the gas fees from the transactions.
Completing the process: Finally, the seller receives the Ether from the transaction, which completes the process.
This illustration provides a clear understanding of how an Ethereum transaction is processed from start to finish.