Ethereum is a decentralized platform that enables smart contracts and decentralized applications (dApps). To fully understand how it operates, it’s essential to grasp core concepts such as accounts, transactions, gas, and the block gas limit. This guide breaks down these foundational elements in a clear, structured way—ideal for both newcomers and developers looking to deepen their understanding.
Understanding Ethereum Accounts
Ethereum features two types of accounts: Externally Owned Accounts (EOAs) and Contract Accounts. Both can hold ether (ETH), but they differ significantly in functionality and control.
Externally Owned Accounts (EOAs)
An EOA is controlled by a private key and typically represents a user wallet. Key characteristics include:
- Holds an ETH balance
- Can initiate transactions (ether transfers or contract interactions)
- Controlled solely by private key ownership
- Does not contain associated code
Transactions from EOAs require digital signatures to prove authenticity and intent.
Contract Accounts
These are smart contracts deployed on the blockchain. They have unique properties:
- Possess an ETH balance
- Contain executable code
- Are activated by incoming transactions or internal messages (calls)
- Operate with Turing-complete logic within the Ethereum Virtual Machine (EVM)
- Can store permanent state and interact with other contracts
When a contract receives a transaction, its code executes across all network nodes via the EVM. This ensures consensus but comes at a computational cost—measured in gas.
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Transactions and Messages: What’s the Difference?
Ethereum Transactions
A transaction is a signed data packet sent from one account to another. It contains:
- Recipient address
- Digital signature proving sender authorization
- Value field: Amount of wei (1 ETH = 10¹⁸ wei) to transfer
- Optional data field: Used to pass input to smart contracts
- Gas limit: Maximum computational steps allowed for execution
- Gas price: How much the sender is willing to pay per unit of gas
Transactions originate only from EOAs and are broadcast to the network for inclusion in a block.
Internal Messages (a.k.a. “Internal Transactions”)
While not actual blockchain transactions, messages are virtual function calls between contracts. Triggered when a contract executes CALL or DELEGATECALL, messages include:
- Sender (usually a contract)
- Recipient
- Optional data payload
- Gas limit for execution
Though often called “internal transactions,” they aren’t stored directly on-chain. Instead, their effects are captured within transaction traces. Despite community overlap in terminology, technically, only EOA-initiated actions are true transactions.
What Is Gas? The Fuel of Ethereum
Gas is the unit measuring computational effort required to execute operations on Ethereum. Every action—from simple transfers to complex contract logic—consumes gas. This mechanism prevents spam and ensures fair resource allocation.
The Ethereum Virtual Machine (EVM) runs every transaction across all nodes, making computation expensive by design. Repeating operations across thousands of nodes demands efficiency, hence the gas-based fee model.
How Gas Works in Practice
Each EVM instruction has a predefined gas cost:
- Simple arithmetic: low gas usage
- Storage writes: high gas cost
- Contract creation: significant gas consumption
Users must specify two values when sending a transaction:
- Gas Limit: The maximum gas the transaction can use
- Gas Price: How much ETH (in wei) they’re willing to pay per gas unit
If execution stays within the gas limit, the transaction succeeds. Any unused gas is refunded. If it exceeds the limit, execution reverts—but the fee is still paid because resources were consumed during processing.
⚠️ No state changes persist if a transaction runs out of gas, but miners keep fees for work performed.
Calculating Transaction Fees
Transaction cost follows this formula:
Fee = Gas Used × Gas Price
For example:
- Sending ETH: ~21,000 gas
- Gas price: 20 Gwei (0.00000002 ETH)
- Total fee: 21,000 × 20 = 0.00042 ETH
Token transfers typically use 50,000–100,000 gas, increasing fees accordingly.
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Block Gas Limit: Network Capacity Control
The block gas limit defines how much total gas can be consumed by all transactions in a single block. It acts like a bandwidth cap, determining how many transactions fit per block (~15–20 seconds).
For instance:
- Block gas limit: ~30 million (as of recent upgrades)
- Average transfer: 21,000 gas
- Max transfers per block: ~1,400
Miners choose which transactions to include based on profitability—prioritizing higher gas prices.
Who Sets the Block Gas Limit?
Miners collectively influence the limit through consensus rules. Each new block can adjust the limit by ±0.1% relative to the previous block. Over time, this allows gradual expansion or contraction based on network demand and node capability.
Historically, defaults were set around 4.7 million, but post-upgrades like London and Shanghai, limits have increased significantly.
Adjusting the Gas Limit
Miners configure settings in clients like Geth or Parity:
Geth Example:
--targetgaslimit 4712388 --gasprice 4000000000Parity Example:
--gas-floor-target 4712388 --gas-cap 9000000 --gasprice 4000000000These settings help maintain network stability during traffic surges.
Handling Network Congestion and DoS-Like Conditions
High demand—such as during popular NFT mints or ICOs—can fill blocks completely, causing delays. This isn’t always malicious; it's often just organic congestion.
However, past incidents involved deliberate Denial-of-Service (DoS) attacks, where attackers spammed cheap-yet-computationally-heavy operations to slow the network.
In response:
- Miners temporarily lowered gas limits
- Protocol changes introduced opcode pricing updates
- Dynamic adjustment mechanisms were encouraged
Despite built-in auto-scaling features, some mining pools failed to revert to default policies after attacks, limiting responsiveness to current demand.
Tools like ETH Gas Station (now deprecated; succeeded by services like Etherscan’s Gas Tracker) once provided visibility into voting patterns and live gas metrics.
Frequently Asked Questions (FAQ)
What happens if I set too low a gas limit?
Your transaction may fail due to out-of-gas errors. While no ether is lost beyond fees, the operation reverts and must be resubmitted with a higher limit.
Can I send a transaction with zero gas price?
Technically yes—but miners will likely ignore it. Most clients enforce minimum thresholds (~1–10 Gwei). Without competitive pricing, confirmation could take hours or never occur.
Why do contract interactions cost more gas than simple transfers?
Smart contract execution involves reading/writing storage, performing calculations, and potentially triggering other contracts—all of which consume more resources than basic value transfers.
How do I check current gas prices?
Use block explorers like Etherscan or dedicated dashboards that display real-time recommendations for fast, standard, and low-priority transactions.
Does unused gas get refunded?
Yes. If your transaction uses less gas than specified, the remainder is automatically returned in ether.
Is the block gas limit fixed?
No. It’s adjustable by miners within protocol-defined bounds (±~0.1% per block), allowing flexible adaptation to network conditions.
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Final Thoughts
Understanding Ethereum’s account model, transaction mechanics, gas economics, and block capacity constraints empowers better decision-making—whether you're building dApps or simply using wallets. As Ethereum evolves with scaling solutions like rollups and sharding, grasping these fundamentals becomes even more crucial for navigating the ecosystem efficiently.
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