Gas is the unit that measures the computational effort required to execute operations on the Ethereum network. Every action — from sending ETH to executing a complex smart contract — has a gas cost. Gas prices are denominated in Gwei: one Gwei equals 0.000000001 ETH (one billionth of an ETH). When you send an ERC20 token, your wallet calculates the gas needed and allows you to set a maximum gas price you are willing to pay.
Gas is not a fee charged by Ethereum as an organisation. It is a market-based system where users bid for block space. Higher gas = faster confirmation. Lower gas = slower confirmation or potential pending status.
The EIP-1559 upgrade in August 2021 fundamentally changed how Ethereum fees work. Before EIP-1559, users had to guess the right gas price in a simple auction. Now there is a base fee set algorithmically by the protocol — this fee is automatically burned (destroyed), removing ETH from circulation. On top of the base fee, you can add a priority tip to incentivise validators to include your transaction sooner. This system makes fees more predictable while still allowing urgent transactions to get priority.
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