Unlike dollars and cents, most cryptocurrencies are divisible down to eight decimal places or more. These novel denominational frameworks help ensure that cryptocurrencies like bitcoin (BTC) and ETHer (ETH) maintain an equal utility whether you’re transacting a billion dollar trade or buying groceries at your local supermarket.
And similar to dollars and cents, some of the most widely-used cryptocurrency denominations have their own names as well. Gwei is the unit of gas fees on ETHereum, and a satoshi is the smallest unit of BTC. In this article, we’ll dive into the Ethereum network and explain the wei meaning in crypto, along with its value.
Wei Meaning In Crypto
Wei refers to the smallest denomination of ETHer (ETH), the currency used on the Ethereum network. For instance, 1 ether (ETH) is equivalent to 1x10^18 wei (which may also be represented in exponential notation: 1e18 wei).
As the price of ETHer and other cryptocurrencies rises, the size of each blockchain transaction tends to become smaller. For example, if ETH is priced at $10, one would need 10 ETH to make a $100 transfer. But if ETH is priced at $150, only 0.67 ETH would be sufficient to transfer the same value in USD. Using ether denomination may be troublesome as the transaction size becomes smaller.
In this context, wei and other denominations of ETHer may be useful for describing small value transactions, especially in regards to very small amounts of ETH that are typically used for transaction fees or when setting the gas limit of a transaction.
The Values Of Wei
As presented on the ETHereum technical documents, there are several other denominations of ether, each representing a multiple of wei. Gwei and ether are among the most used denominations.
Unit | Wei Value | Wei | ETHer Value |
Wei | 1 wei | 1 | 10-18 ETH |
Kwei | 10³ wei | 1,000 | 10-15 ETH |
Mwei | 106 wei | 1,000,000 | 10-12 ETH |
Gwei | 109 wei | 1,000,000,000 | 10-9 ETH |
MicroETHer | 1012 wei | 1,000,000,000,000 | 10-6 ETH |
MilliETHer | 1015 wei | 1,000,000,000,000,000 | 10-3 ETH |
ETHer | 1018 wei | 1,000,000,000,000,000,000 | 1 ETH |
Similarly, Bitcoin uses the term satoshi to describe the smallest unit of its currency. 1 satoshi is equivalent to 0.00000001 BTC (or 10-8 BTC).
Although less popular, BNB has the term jager to describe the smallest unit of BNB, where 1 Jager = 0.00000001 BNB (or 10-8 BNB).
How Does Wei Work?
Gwei is most commonly used when discussing ETHereum gas, a fee charged for transacting on the Ethereum network. Depending on the transaction, you may be able to pay more Gwei for a faster transaction or less Gwei for a slower transaction.
Because one Gwei is the same as 0.000000001 ETH, the value of one Gwei in dollars varies based on the currency price of the Ether token. For example, the dollar value of 50 Gwei today may not be the same as 50 Gwei tomorrow. You can calculate the value of Gwei at any time based on the current Ethereum price.
Additionally, the gas fees paid for ETHereum transactions also vary. When the Ethereum network is congested, gas prices go up. When there’s less demand for transactions and the network isn’t busy, gas fees are lower. That variation is in addition to options you have to send your transaction faster or slower, driving costs up and down.
Do I Need Gwei?
If you transact on the ETHereum network in any way, you’ll have to pay gas fees, which requires Gwei. If you own any Ether today, you already have Gwei. If you own one full Ether coin, you could say that you’re a Gwei billionaire, as one ETH is the same as 1,000,000,000 Gwei.
If you use ETHereum, any ERC-20 token, or any other transaction type on the Ethereum network, you need Gwei to pay the fees.
What It Means For Individual Investors
For individual investors, the cost of transacting on the ETHereum network can be significant. For example, In December of 2021, the average gas price on the Ethereum network was 106 Gwei. In July 2021, it was just 40.66 Gwei. That’s a huge variation, so timing your transactions for lower costs can yield significant savings.
It’s also worth noting that a set of major upgrades to the ETHereum network in 2022 and 2023 are intended to speed up transactions and lower costs.
Closing Thoughts
For users looking to transact on the ETHereum network, it is fundamental to understand gas prices on the network, and that means wei meaning and how its values are derived. It may be confusing to try and memorize from the start given the number of decimals, but as you transact more frequently on the Ethereum network, it should come naturally to you as you find out the more frequent-occurring ones are gwei and ether.
However if you do need to refer, you can always revisit this article at any time!
