Ethereum network was one of the first to focus on
Ethereum network was one of the first to focus on building a blockchain platform rather than a crypto token like Bitcoin. Ethereum’s local token of use is Ether, however, it differs in many ways from the rest of the cryptocurrency.
Ether has several sub-divisions and Wei is the smallest unit among these subdivisions.
1 Ether = 1,000,000,000,000,000,000 Wei (1018)
The subdivisions for its token is to make it easier to calculate the computational fees for the miners. Unlike other cryptocurrencies which have a fixed fee for the mining operation known as mining rewards, on the Ethereum network, the amount of ether you pay to the miners for verifying your transaction depends upon the time in which you want your transaction to be confirmed.
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How Wei is Different From Ether?
Ether the local token of use on the Ethereum blockchain has a total of 3 subdivisions and each of these subdivision’s value is a fraction of the Ether. The subdivisions of Either are,
- the wei,
- the Szabo,
- the Finney,
Wei is the smallest unit and its value is 10^-18 of that Ether. The need for such a small division is to make it possible to calculate the miner’s fee.
On the Ethereum network, the miner’s fee is variable and depends on the speed of verification by the miners. The transaction fee (TX), is calculated in gas which is then converted to Ether. The Gas price can be set by the user themselves, and if they are in a hurry, a higher gas price can see their transaction getting verified faster than the others.
Miners generally pick the transaction with a higher gas price since its more profitable, and then the lower ones. When we say a higher transaction fee, it does not necessarily indicate a fee which can be afforded only by the rich. The fee is still peanuts when compared to traditional payment methods like MasterCard or Visa.
Suppose you want to transfer 3 ETH to an address, and you want it to be done immediately, so you can set the Gas price at 50 GWEI. Now your transaction will be preferred over those who have set the gas price lower than 50 GWEI. The transaction fee is calculated by multiplying the Gas limit and gas price. The GAS limit for transactions is set around 21000 Gas.
Now the transaction fee is converted to Ether, and let us suppose it comes as 0.00003 Ether. So, in order to pay that amount of ETH you would need the subdivisions to make the fee feasible. You can convert the ETH into wei or Finney or Szabo to make it easier to calculate the actual amount.
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Why Subdivisions of a Token is Important
The subdivisions of a currency make it more feasible and easier to use, imagine if a fiat like US dollar had no smaller units, how difficult life would have been, especially for those YouTubers who pay their challans or even buy a car using pennies just for the viewers.
With the smaller units like wei, the crypto world would have been a stone age barter system where you pay in sheep or grains in exchange for the items you need. Apart from that Ethereum network functions differently than many of its predecessor which use the mining process to validate transactions.
Most of the other cryptocurrency network has a predefined or constant block reward which gets halved after a certain period of time. On the contrary, the transaction fee for the miners is determined by the speed at which they validate those transactions.
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Final Thoughts
Wei in Ethereum is the smallest denomination of ether and helps the transaction fee calculation easier. Every activity on the Ethereum network requires a computational fee, be it smart contract creation, tokenization or launching your Dapp. Each activity has a certain constant a few variable factors associated with it
Wei, Finney, and Szabo make it easier to determine the transaction fee for these computational operations on the network and each sub-division holds a fraction of the value of that of Ether.
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