Ethereum Denominations Explained

Ethereum’s digital asset is Ether (ETH). It is a cryptocurrency whose fiat counterpart would be the Dollar, Euro or Yen. Ether can be spent on electronic payment systems, just like a form of digital medium of exchange. Its balance is then updated on a blockchain, where a digital wallet’s history is maintained that logs all transactions from the beginning to the present. Just like the Dollar, Ether can also be broken down into smaller denominations or fractions of the digital asset. The Dollar can be divided into cents, with denomination in penny (1 Cent), nickel (5 Cent), dime (10 Cent) and quarter (25 Cent). Ethereum also has its own denominations that are a fraction of Ether. Even Bitcoin (BTC) has smaller denominations called Satoshis.

The following table lists the various denominations of Ether, starting with its lowest unit called Wei. The table lists the values in Wei and Ether.

Denominations of Ether

The units are expressed with nicknames taken from pioneers in computing (Ada Lovelace, Charles Babbage, Claude Shannon, Nick Szabo, Hal Finney, Wei Dai) and Ethereum’s co-founder (Vitalik Buterin). The smallest denomination is Wei, which would be written as 0.000000000000000001 Ether for 1 Wei. That is 10 to the negative 18 in exponential form. The more commonly used denomination is Gwei, which is a billionth of a Wei or 10 to the negative 9 in Ether.

To get a better understanding of denominations, here are the values of 1 for each unit in Ether.

1 Wei = 0.000000000000000001

1 Kwei = 0.000000000000001

1 Mwei = 0.000000000001

1 Gwei = 0.000000001

1 Twei = 0.000001

1 Pwei = 0.001

When calculating gas, which is the unit of computation on the Ethereum blockchain, an entire Ether would be too much value. Therefore, like the way a Dollar can be divided into cents or a fraction of the currency, Ether can be denominated into smaller values. That way the cost of computation is kept low for transaction fees that occur during smart contract execution. The default maximum gas value is set to 21,000 gas units, which is in the denomination of Gwei. That would be worth 0.000021 Ether.

Denominations or fractions of a currency are a more fundamental way of dividing into more logical units of cost. Rather than a whole Ether to spend, a smaller denomination can be used as charges for a transaction. This lowers fees, making the system usable for payments and transfers.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s