Does price of smart contract execution raise with price of ethereum

by Marko Blazekovic   Last Updated July 11, 2019 12:28 PM - source

I can't determine properly does higher price of ETH means smart contracts will also cost higher(in fiat not eth) and is is reciprocal, like if we have a SC deployed and eth price raises 10x, will execution of this SC also be 10x higher?

I know about opcodes and that each has some price in gas, I am not sure I understand is there some mechanics between that will mitigate this (maybe I dont understand clearly eth/gas relationship) or is it just 1:1?

Tags : ether gas-price

Answers 2

Gas system is created, because if the costs for smart contract movements were calculated straight in ethers the fee for contract creation today can cost 0.05$, but tomorrow it might be 50$, because ethers are traded on the exchange markets and the price cannot be stable any given time. With the gas system issues like your example are covered - if today we deploy contract costing us 0.1$ fee and on the next day eth price raise 10x the cost for contract deploy should be the same as yesterday. I hope this answers your question why the relationship between gas and ether is not 1:1.

Miroslav Nedelchev
Miroslav Nedelchev
July 11, 2019 11:55 AM

The cost of executing a smart contract is measured in Gas. The units of Gas consumed during an execution is paid for using ether by multiplying units consumed with GAS_PRICE. GAS_PRICE is set in the transaction.

Suppose an execution costed 1000 units of GAS and the account that submitted the transaction had set 1 Wei as the GAS_PRICE, then the total cost of Execution is 1000 Wei. Assuming GAS_PRICE is constant, the total cost in ether will be constant. This means that if the cost of ether in terms of a fiat currency is increasing then the cost of execution in terms of that currency is also increasing.

GAS_PRICE is in reality not a constant and is market determined(demand-supply). Since we are assuming that Ether Price is going up, I also assume that the demand for submitting transactions is also moving up. In that case GAS_PRICE can go down only as a result of large number of miners who are ready to mine at cheaper GAS_PRICE joining the network. This is not a possible scenario.

Since Ethereum is a non discriminatory network with the vision of universality, there is no argument of regulating gas price. So I guess in short, if Ethereum price with respect to a currency is going up, it will be costly in that currency to execute transactions in Ethereum.

You can read more about Gas here

Sanjay S B
Sanjay S B
July 11, 2019 12:03 PM

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