In Arch, we strive for the best user experience possible, with that in mind, we are constantly working to remove the need for users to pay gas-fees while making transactions in our web-app. However, it is important to know what actually is a gas fee and how they affect transactions on the blockchain.
But, what are gas fees then?
In simple terms, gas fees can be interpreted as the amount of cryptocurrency that a user needs to pay in order to successfully make a transaction on the blockchain. Imagine gas fees as a tax on the use of computing power to conduct transactions or execute contracts on the Etherum network. Essentially, it's a fee for using the blockchain's processing power. These fees help keep the blockchain running smoothly and pay the miners who carry these transactions.
Gas fees are an important aspect of blockchain transactions because they help to prevent spamming and ensure that transactions are processed in a timely manner. When a user submits a transaction, they attach a gas fee to it, which is then collected by the miners who process the transaction. Miners prioritize transactions with higher gas fees, as they earn more for processing them. Gas fees are typically measured in small fractions of cryptocurrency units, such as wei in Ethereum. The amount of gas needed for a transaction depends on its complexity, with more complex transactions requiring more gas.
The specific mechanism for gas fees varies between PoW and PoS networks. Both PoW and PoS have their own advantages and trade-offs, and they are utilized in different blockchain networks based on their specific requirements and goals. The choice between PoW and PoS depends on factors such as security, energy efficiency, decentralization, and scalability needs.
Proof of Work (PoW):
Mining: PoW is a consensus algorithm used in blockchain networks where participants, known as miners, compete to solve complex mathematical puzzles to validate transactions and add new blocks to the blockchain.
Computational Power: Miners use significant computational power and energy resources to solve these puzzles, requiring intensive computational work.
Difficulty Adjustment: The difficulty of the puzzles adjusts dynamically to maintain a consistent block generation time. The more miners participating, the higher the difficulty level becomes.
Security: PoW is considered secure due to its requirement of substantial computational resources. An attacker would need to control the majority of the network's mining power, making it expensive and impractical to carry out a successful attack.
Proof of Stake (PoS):
Staking: In PoS, participants, referred to as validators, are chosen to create new blocks and validate transactions based on the number of tokens they hold and "stake" in the network.
Token Ownership: Validators lock up a certain number of tokens as collateral to be eligible for block validation. The more tokens staked, the higher the chances of being chosen as a validator.
Selection Process: Validators are selected to create new blocks in a deterministic manner, typically based on factors like the number of tokens staked or a random selection weighted by token holdings.
Energy Efficiency: PoS is often considered more energy-efficient compared to PoW since it doesn't require extensive computational power. Validators participate in block validation based on their token ownership, eliminating the need for resource-intensive mining.
Security: PoS networks rely on the economic incentive structure. Validators who act maliciously or against the network's rules may have their staked tokens slashed as a penalty, ensuring their commitment to the network's security and stability.
Network Scalability: PoS has the potential to scale more efficiently than PoW networks since it doesn't face the same computational limitations. It reduces the energy consumption associated with mining and allows for higher transaction throughput.