Gas Fees

We always pay gas, but what is it exactly?

Gas fees within a blockchain are the fees required to perform transactions and execute smart contracts within that blockchain network.

On MaxxChain, for example, every operation or action, such as sending tokens or interacting with a dApp, requires a certain amount of computational work.

Gas fees are paid, in PWR coin, by the users who initiate the transactions or smart contract executions. The fees are calculated based on the complexity and computational intensity of the operation, measured in gas units. Each operation has a specific gas cost associated with it.

The purpose of gas fees is twofold. First, they act as an incentive for miners who validate and process transactions on MaxxChain. Miners are rewarded with gas fees for including transactions in the blocks they mine. Secondly, gas fees help prevent spam or abusive usage of the network by requiring users to pay for the resources they consume.

The cost of gas fees is determined by the gas price, which is denominated in a small fraction of the network's native cryptocurrency (e.g., PWR in the case of MaxxChain). Users can set the gas price they are willing to pay, and miners prioritize transactions with higher gas prices to maximize their earnings.

Higher gas fees generally result in faster transaction processing, as miners have a greater incentive to include those transactions in the next block. However, during times of network congestion or high demand, gas fees may increase due to competition for block space.

Here's a more detailed explanation of Gas Fees:

1. Transaction Processing:

On a blockchain, transactions involve sending funds or interacting with smart contracts. Each transaction requires computational resources and time to process. Within a Proof of Work Blockchain such as MaxxChain, gas fees are used to incentivize miners to process transactions and include them in the next block.

2. Gas Units:

Gas is measured in units, and each operation or computation within a transaction consumes a specific amount of gas. Simple operations, like transferring tokens, require fewer gas units, while complex smart contract executions require more.

3. Gas Price:

The gas price is the amount of the native chain coin (PWR in this case) that a user is willing to pay per unit of gas. It is denoted in PWR/gas and determines the cost of the transaction. Higher gas prices increase the likelihood of a transaction being prioritized by miners.

4. Transaction Cost:

The total cost of a transaction is calculated by multiplying the gas units used by the gas price. It is typically displayed in the native coin (PWR).

5. Miner Rewards:

Miners on PoW blockchains, like MaxxChain, earn the gas fees as part of their block rewards for validating transactions and adding them to the blockchain.

6. Gas Limit:

Each block on the blockchain has a gas limit, which is the maximum amount of gas allowed for all transactions in that block. Transactions with higher gas fees have a better chance of being included in a block, while transactions with lower gas fees may be delayed or rejected if the block's gas limit is reached.

7. Gas Optimization:

To reduce transaction costs, developers can optimize smart contracts and minimize unnecessary computations. Users can also adjust their gas price to match the network's current demand, ensuring timely transaction processing without overpaying.

Simple Example of Gas Fees

Suppose Vue wants to send 10 $MAXX tokens to Bob's wallet address on MaxxChain. Here's what happens:

1. Transaction Initiation:

Vue initiates the transaction from his MaxxChain wallet by specifying Bob's wallet address as the recipient and the amount of 10 $MAXX tokens to be sent.

2. Gas Fee Calculation:

In the context of MaxxChain and other EVM-based blockchains, every transaction requires computation and verification, which consumes computational resources. These resources are measured in "gas" units. Each operation in a transaction consumes a specific amount of gas, and the total gas required for a transaction depends on its complexity.

3. Gas Price:

Gas price represents the cost of each unit of gas in terms of PWR coins. It is denoted in PWR/gas and is determined by the current demand and supply for block space. Users can set the gas price they are willing to pay for each unit of gas in their transactions.

4. Gas Limit:

Before confirming the transaction, Vue sets a "gas limit," which is the maximum amount of gas he is willing to pay for the transaction. The gas limit acts as a safety measure to avoid excessive gas consumption and prevent transactions from running indefinitely.

5. Transaction Fee Calculation:

The transaction fee (in PWR coins) is calculated by multiplying the gas price by the gas used in the transaction. Transaction fee = Gas price (PWR/gas)*Gas used.

6. Transaction Execution:

The transaction is broadcast to the MaxxChain network and added to a block for processing. Miners (nodes participating in a Proof of Work consensus) compete to include the transaction in a block and receive the transaction fees as a reward.

7. Miner Reward:

The miner who successfully mines the block that includes Vue's transaction receives the transaction fees as a reward for their work.

8. Confirmation:

Once the transaction is included in a block and confirmed by several subsequent blocks, the 10 $MAXX tokens are deducted from Vue's wallet balance and added to Bob's wallet balance.

Last updated