What does it mean for ETH to be more like “gas” than an actual currency?
In: Technology
Alright, I don’t know if I can get all the way to EL5, but I’ll give it a shot. First, we gotta start with blockchain vs banking.
Banking: Imagine a toy bank that keeps track of toy boxes. You have a toy box with 10 toys and I have a toy box with 5 toys. If I give you a toy, the bank subtracts one from my box and adds one to your box. However, they don’t know WHICH toy was moved, just that 1 of them moved. They only keep track of how many toys went in and out of each toy box.
Blockchain: Now imagine no bank exists. We each have our own toy boxes. Instead of tracking how many toys we have, we decide to track the history of each toy. Everybody knows the truck belongs in your box. If Tommy to tries to put the truck in his toy box, all the kids on the playground will correct him. The truck belongs in your toy box! Every single toy has an audit trail of every toy box it’s belonged to, going all the way back to the toy maker. The contents of every toy box are public, but the owner of the box is anonymous. So while the kids know the truck belongs in that box, they don’t know who owns the box. If you’ve got the keys to the box, you can move the truck and then tell everybody it has moved. The boxes are wallets, the toys are crypto, and the audit trail is the crypto ledger.
That covers Bitcoin, but how is ETH different?
Toys on the ETH ledger have an additional feature called Smart Contracts. Think of these as agreements between kids they can’t back out of. You tell Tommy that if he eats a bug, you’ll give him the truck and all the kids on the playground heard it. When Tommy eats the bug, everybody immediately knows the truck now belongs in a different toy box. Somebody has to go move that truck! The ETH ledger has a machine built into it to execute these contracts. So as everybody confirms that Tommy ate the bug and the truck needs to be moved from one toy box to another, the machine goes over to the boxes and moves it without you or Tommy intervening. The machine, however, consumes “GAS” to do this. ETH is literally the gas that powers this machine.
Edit: After reading through this, I realized I didn’t finish the last bit. The machine is called the EVM (ETH Virtual Machine) and is really just code that’s executed by miners. So, physically, the miners are executing the contracts and they get rewarded the GAS fees for doing so.
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