Gwei is a term for a very small amount of the Ethereum cryptocurrency and is commonly used when discussing transaction fees on the Ethereum network. One Gwei is equal to 0.000000001 ETH. If you own any Ethereum token or are interested in any cryptocurrency, smart contract, or distributed application on the Ethereum blockchain, it’s important to understand how Gwei works so you know the cost of every transaction.
Keep reading to learn more about Gwei, how Gwei shows up in your cryptocurrency transactions, and your Gwei costs when buying, selling, and sending cryptocurrency.
Definition and Examples of Gwei
Gwei is a term in the cryptocurrency community for a very small amount of the Ethereum currency and is used to pay fees for transactions on the Ethereum network. The Ethereum token is called Ether and is denoted by ETH. One Gwei is the same as 0.000000001 ETH. If a transaction cost is 0.000000020 ETH, you would say that the cost was 20 Gwei.
Gwei is short for gigaWei. Wei is the smallest unit of the Ethereum network. One Gwei equals 1 billion Wei.
In Ethereum network slang, Gwei is also sometimes referred to as shannon, after American mathematician and computer scientist Claude E. Shannon. Shannon is credited with laying the foundation for information theory.
But Gwei is not the only measure of small amounts of Ether. Here’s how it stands in the hierarchy of Ether units:
|Kwei (babbage)||1,000 wei|
|Mwei (lovelace)||1,000,000 wei|
|Gwei (shannon)||1,000,000,000 wei|
|Microether (szabo)||1,000,000,000,000 wei|
|Miliether (finney)||1,000,000,000,000,000 wei|
How Gwei Works
Gwei is most commonly used when discussing Ethereum gas, a fee charged for transacting on the Ethereum network.
Depending on the transaction, you may be able to pay more Gwei for a faster transaction or less Gwei for a slower transaction.
Because one Gwei is the same as 0.000000001 ETH, the value of one Gwei in dollars varies based on the currency price of the Ether token.
For example, the dollar value of 50 Gwei today may not be the same as 50 Gwei tomorrow. You can calculate the value of Gwei at any time based on the current Ethereum price.
The gas fees paid for Ethereum transactions also vary. When the Ethereum network is congested, gas prices go up. When there’s less demand for transactions and the network isn’t busy, gas fees are lower. That variation is in addition to options you have to send your transaction faster or slower, driving costs up and down.
Do I Need Gwei?
If you transact on the Ethereum network in any way, you’ll have to pay gas fees, which requires Gwei. If you own any Ether today, you already have Gwei. If you own one full Ether coin, you could say that you’re a Gwei billionaire, as one ETH is the same as 1,000,000,000 Gwei.
If you use Ethereum, any ERC-20 token, or any other transaction type on the Ethereum network, you need Gwei to pay the fees.
Alternatives to Gwei
While there is no alternative to paying Gwei when transacting in Ethereum, other cryptocurrencies and networks have far lower costs. For example, Stellar, Dogecoin, Monero, Cardano, and Litecoin offer lower fees than Ethereum for most transactions.
If you plan to transact on the Ethereum network, pay close attention to the costs, and consider delaying your transaction if the network is busy and you can pay lower fees at a later time or date.
What It Means for Individual Investors
For individual investors, the cost of transacting on the Ethereum network can be significant. For example, as of July 27, 2021, the average gas price on the Ethereum network was 40.66 Gwei. A year ago in July 2020, it was 96.65 Gwei. That’s a huge variation, so timing your transactions for lower costs can yield significant savings.
It’s also worth noting that the Ethereum network is currently undergoing a major upgrade to Ethereum 2.0, which is intended to speed up transactions and lower costs.
- Gwei is a small fractional measurement of the Ethereum cryptocurrency.
- Ethereum transaction fees, called gas, are measured in Gwei.
- One full Ethereum token is the same as 1 billion Gwei.
- The timing of your transaction can influence transaction fees.
- Other cryptocurrencies may offer lower transaction costs.