What is Gwei and why is it used?

Nov 3, 2025 | 6 min read

What is Gwei?

Gwei is a denomination of the cryptocurrency Ethereum (ETH), the digital currency used on the Ethereum network. Ethereum is a blockchain platform (similar to Bitcoin) where users perform transactions to buy or sell goods and services without the involvement of a third party.

Just like traditional currencies such as the euro or the US dollar, ether is divided into smaller units. Wei is the smallest unit of ether, similar to cents in the euro. There are 1,000,000,000 (one billion) gwei in one ether, and 1,000,000,000,000,000,000 (one quintillion) wei in 1 ether.

Key Takeaways

Gwei is a denomination of ether (ETH) used to pay transaction fees (gas) on the Ethereum network.
1 gwei = 0.000000001 ETH (one billionth of an ether).
Gwei is the most commonly used unit within Ethereum because it makes expressing transaction fees much simpler.
Many other cryptocurrencies also use their own micro-denominations to make small amounts easier to understand.

How does GWEI work?

The Ethereum network has its own currency: ether (ETH). This currency is not only used to transfer value but also to pay for transactions and smart contracts on the network.

Every action on Ethereum (such as sending tokens or executing a smart contract) consumes computing power. That computing power is rewarded with a fee known as “gas.” Gas prices are expressed in Gwei because the amounts are usually too small to display in whole ethers.

For example: if the average gas price is 5 Gwei, you can say that a transaction costs 5 Gwei instead of saying that the gas price is “0.000000005 ETH,” which is harder to read.

Gwei was therefore designed to make transaction costs readable and practical.

Why is this relevant to you?

You understand your costs: you can immediately see whether a transaction is expensive or cheap today.
You can plan: when Gwei is high, you can wait or switch to a layer-2.
You avoid mistakes: correct fee settings prevent transactions from getting stuck or becoming too expensive.
You interpret the market: rising Gwei can indicate congestion (e.g., launches, volatility, memecoin hypes).

Ether denominations explained

Ether, like traditional currencies, consists of different units. The names of these units are derived from influential figures in the world of computer science and cryptography:

Denomination	Meaning / named after
Wei	Wei Dai, creator of B-Money and a pioneer of digital money concepts.
Kwei	Charles Babbage, designer of the first mechanical computer.
Mwei	Ada Lovelace, programmer and pioneer of the first algorithm.
Gwei	Claude Shannon, mathematician and “father of information theory.”
Twei	Nick Szabo, inventor of smart contracts.
Pwei	Hal Finney, early Bitcoin developer and first recipient of BTC from Satoshi Nakamoto.
Ether	Vitalik Buterin, founder of Ethereum.

Each higher unit contains 1,000 times more value than the previous one. Gwei sits right in the middle — not too large, not too small — making it the most commonly used unit for transaction fees.

Layer-2: cheaper transactions, still Gwei-driven

Layer-2 networks (also called L2s) are solutions built on top of Ethereum to improve scalability and reduce transaction fees. Examples include Arbitrum, Optimism, Base, and zkSync. Instead of processing each transaction individually on the Ethereum mainnet (Layer-1), these networks bundle hundreds or even thousands of transactions into a single package. That package is then published on Ethereum in a compressed form.

Because an L2 network can fit many more transactions per block, the gas cost per action is often much lower than on the mainnet. Users still pay in Gwei, but the amount of Gwei required per transaction is minimal. This is why Layer-2 networks are extremely popular: they are simply very cheap and fast.

However, costs do not disappear completely. Every batch of transactions combined by a Layer-2 must still be published on Ethereum Layer-1. That storage and validation add an L1 data component. This part of the cost ensures that while transactions on L2 are much cheaper, they are never entirely free. The final price is a combination of low internal L2 gas prices and a small contribution to L1 processing costs. The result for users is usually impressive: where a simple action on Ethereum can cost tens of euros, on a Layer-2 you often pay just a fraction of a cent. Transactions also process faster since L2s have higher throughput and shorter confirmation times.

Why is Gwei important for investors?

For investors and active Ethereum users, Gwei is more than just a technical detail. It’s an indicator of network activity, cost management, and even market sentiment.

Understanding the meaning of Gwei allows you to make smarter decisions and better plan your transactions.

Firstly, it helps with cost management. When Gwei prices rise during busy times (for example, popular NFT mints or market volatility), investors can set limits or simply wait until congestion decreases. By setting a maximum gas price, you avoid overpaying for simple actions.

Timing also plays a role. Historically, the Ethereum network is quieter at certain times, such as at night (UTC time) or on weekends. The Gwei price may then be significantly lower, resulting in cheaper transactions. While this is not guaranteed, it’s useful for planning large transfers or smart contract interactions. This is especially relevant on the Ethereum network, where fees can sometimes be quite high.

Strategic investors can also benefit from understanding Gwei. Those who regularly invest small amounts through a Dollar-Cost Averaging (DCA) strategy can use automated tools or fee alerts to execute transactions only when gas prices fall below a certain threshold.

Finally, understanding Gwei helps you choose the right chain. Not every activity needs to take place on the Ethereum mainnet. For NFT minting, gaming, and smaller DeFi actions, Layer-2 networks are often much more efficient. Knowing how Gwei works and where the differences lie helps you better decide which networks suit your trading or investment behavior.

In short: Gwei is not just a technical unit, but a practical tool to manage costs, optimize your strategy, and navigate the Ethereum ecosystem more consciously.

Final thoughts

Ethereum has its own currency, ether, which is divided into smaller units to execute transactions efficiently. Gwei is the standard unit used to express gas prices (i.e., transaction fees).

Using Gwei makes it easier to describe small amounts and helps users and developers better understand costs without dealing with extremely small decimal values. In short: 1 Gwei = 0.000000001 ETH, and gas prices on Ethereum are measured in Gwei.