From 768b49fc79cfec8685ed9bee27a74cf3f7d39e95 Mon Sep 17 00:00:00 2001 From: OUDesignz Date: Sun, 6 Jul 2025 10:36:29 +0100 Subject: [PATCH] Create Gas_and_Fees_Obinna.adoc. Obinna Ugwu This is my assignment on Gas and fees --- `Gas_and_Fees_Obinna.adoc`. | 34 ++++++++++++++++++++++++++++++++++ 1 file changed, 34 insertions(+) create mode 100644 `Gas_and_Fees_Obinna.adoc`. diff --git a/`Gas_and_Fees_Obinna.adoc`. b/`Gas_and_Fees_Obinna.adoc`. new file mode 100644 index 0000000..14f4536 --- /dev/null +++ b/`Gas_and_Fees_Obinna.adoc`. @@ -0,0 +1,34 @@ +1. What is Gas? + +Gas is a unit that measures the amount of computational effort required to perform operations on the Ethereum network, such as sending ETH, interacting with smart contracts, or swapping tokens. +Purpose in Ethereum Transactions: +Prevents abuse: By requiring gas for every operation, Ethereum avoids spam and infinite loops. +Incentivizes miners/validators: Users pay gas fees, which go to validators for processing and confirming transactions. +Limits computation per block: Each block has a gas limit to manage how much computation can happen in one block, ensuring network stability. + +2. EIP-1559: Gas Fee Reform +Ethereum Improvement Proposal 1559 (EIP-1559), introduced in August 2021 (London Hard Fork), changed how gas fees work. +Key Components: + +Base Fee: +A mandatory fee set algorithmically based on network demand. It adjusts up or down depending on how full the previous block was. +This fee is burned (removed from circulation), reducing ETH supply. + +Priority Fee (Tip): +Optional extra fee users add to incentivize validators to include their transaction faster. + +Burning Mechanism: +The base fee is burned, making ETH deflationary over time as high usage leads to more ETH being destroyed. +This aligns incentives and potentially increases ETH value long term. +3. Slippage +Slippage refers to the difference between the expected price of a trade and the actual price at execution. +In Ethereum & Token Swaps: +Common in DEXs (like Uniswap, SushiSwap). +When you swap tokens, rapid price changes (from volatility or other transactions) can cause your trade to execute at a less favorable rate. + +Relation to Gas: + +Low gas fees → slower transaction confirmation → higher risk of slippage. +High gas fees → faster processing → lower slippage risk. +DEX users often set a "slippage tolerance" (e.g., 1%) to prevent excessive loss. If the price changes beyond this, the trade fails. +