Blockchain Fundamentals

What is Blockchain?

Blockchain is a database of transaction history. This transaction history is stored inside a block, these blocks contain information regarding the previous block thus linking them together to create a chain of blocks, otherwise known as a Blockchain.
Blockchain is widely used due to two main reasons:
  • blockchains are decentralized - this means there are no 3rd parties involved in approving your transactions on the chain, this also means blockchain is immutable (Tamper Proof) as they rely on all parties in the network agreeing on the blockchain (This is known as consensus).
  • Blockchain is highly secured due to its use of cryptographic keys and signatures - this prevents fraud such as other users pretending to be you as they would not be able to replicate your private keys.

What is Gas?

  • A gas unit is the smallest type of work that is processed on the Ethereum network.
  • Validating and confirming transactions on the Ethereum blockchain requires a certain amount of gas, depending on the size and type of each transaction.
  • Gas measures the amount of work miners need to do in order to include transactions in a block.

How does gas affect transaction confirmation?

  • Miners are paid for their work validating transactions and adding blocks to the Ethereum blockchain in fractions of ether (ETH). These fractional units are called gwei, and comprise the gas price for the transaction.
  • If a transaction needs to be confirmed urgently or as soon as possible, a higher gas price should be included with the transaction.
  • It is important to communicate to the miners how much work needs to be done in order to process a transaction. This is done with the gas limit, which the Wallet calculates automatically to ensure that transactions go through successfully. The limit also prevents overspending on mining fees.
  • If the gas limit is set too low, a transaction can fail, or get rejected, which would result in losing the gas paid for the transaction. If a transaction is processed before the limit is reached, the rest of the gas will be returned to the sending wallet.