Explained: What are Ethereum gas fees?

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The Ethereum network is switching its consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS) in an ongoing process since 2020 and is expected to conclude by 2022. According to the founder of the Ethereum network, Vitalik Butterin, the switch aims to overhaul the energy consumption process of mining, which validates transactions and adds them to the blockchain while also reducing the gas fees for transactions.While many of us are well aware of the energy consumption problem of mining, and the need to address it, there have not been many discussions around the effect the switch to PoS would have on gas fees.

In fact, there is still confusion around what a gas fee is and how it works. So, let us address some of these questions and understand what gas fee is in the Ethereum network and why it is vital to its functioning.Also Read | Explained: Proof-of-work vs Proof-of-stake mining and why Ethereum is transitioning to latterWhat is gas fee, and how does it work?Contrary to its name, gas fees do not have anything to do with liquid fuel consumption or the impact of mining on the environment.

Rather, it is the reward given to miners for putting transactions in the blockchain or executing them. You can think of it as the tip you give to your waiter at the end of the meal.As blockchains are decentralized in nature, the transactions are added and validated in the network blockchain by anonymous miners or validators.

This is the bedrock for any transactional blockchain technology. In the PoW system, miners solve complex mathematical puzzles to validate transactions for a reward of Ethereum token.

There are two ways miners can earn Ethereum tokens. The first is by mining Ethereum to get paid in newly minted Ethereum