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Quantitative Finance · Glossary

What is Gas, base fee, priority fee?

Also known as: gas · base fee · priority fee

Definition 14.6 Markets III: Commodities, Energy and Crypto · Chapter 14 — Blockchains for Traders

Gas is the unit in which Ethereum measures the computation and storage a transaction uses; each block has a gas limit. A transaction pays, per unit of gas, the block’s base fee, which is burned and set by protocol, plus a priority fee (a tip) that it chooses and that goes to the block’s proposer.

A demand shock under EIP-1559: from block 5 to block 34 demand for gas is four times higher. Blocks fill, the base fee rises 12.5% a block until demand falls back to the target (half the limit), and decays when the shock ends. Illustrative demand; exact protocol arithmetic. Data: the chapter’s tutorial.
Figure 14.1. A demand shock under EIP-1559: from block 5 to block 34 demand for gas is four times higher. Blocks fill, the base fee rises 12.5% a block until demand falls back to the target (half the limit), and decays when the shock ends. Illustrative demand; exact protocol arithmetic. Data: the chapter’s tutorial.
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