If you have been to an auction sale, you will agree with the saying “The heaviest pocket bags the deal”. What is an auction sale or trade? It is a trade that involves various buyers bidding for a commodity at a price higher than the former until no one is willing to offer more. In an auction trade, a product is sold to a client willing to pay the highest price. You may be wondering about the link between an auction trade and cryptocurrency, an auction trade is the best description for crypto gas wars. With the increasing demand and supply occurring within the cryptocurrency network, it is considered a goldmine. However, the issue of gas wars can be an irk.

First, it is important to understand the gas fee and where it is often used. As we know gas is a fuel that powers a vehicle, the same way gas fees power up transactions in the cryptocurrency world. This fee is a transaction fee related to completing transactions on the blockchain. Most of the time, the rate of gas fees could be unstable due to network congestion. For example, when many vehicles are on the road at a particular time, it can lead to traffic congestion. In the same way, when lots of transactions are going on at the same time, the network becomes congested. This is so because a certain number of transactions can be carried out at a time on the Ethereum blockchain network, and once the lined-up transactions exceed these limits, the network becomes clogged.

Ultimately, as more people are coming on board, the network becomes more congested, and this is where gas wars come in. This occurrence is more likely to happen when the demand exceeds the supply chain in the blockchain system.

How Does Crypto Gas War Work?

In the case of a market frenzy or a hot token purchase, several users get on board to ensure their transactions get validated on time or first. This triggers gas war occurrence, as users opt for a faster means to validate their transactions by increasing the gas fee they are willing to pay. Once this starts, the other users, to secure the next block — the next order validation spot — will also increase the gas fee, and this continues for subsequent blocks until the trader with fewer fees is pushed out of the deal.

The way a fee works might still be a puzzle to crypto beginners, but I’ll break it down further. Imagine waiting in line at a restaurant for your order to get delivered, and then someone else comes in and gives the server a large tip, without saying the word, the server will gladly fulfill such orders first. You might consider this unfair, but that is how it works in most systems. In the same way, cryptocurrency transactions are validated by a set of people called miners. When the transactions on the blockchain network become too much, the miners will automatically prioritize the bids with the highest gas fee, hence the gas wars.

Crypto Gas Wars: Positive or Negative?

The knowledge of gas wars has revealed that it may have downsides since it can be a warzone. A deep scrutiny of the gas wars will reveal certain disadvantages that can be encountered in the cryptocurrency blockchain. For instance, if a user cannot keep up with the bidding, their transactions will not be fulfilled which can eventually lead to a transaction failure. Another problem is that it can lead to an eventual loss, when participating in a crypto gas war, more money is spent on the transaction than intended, and at the end of the day, the trader may eventually not be picked. There is also the risk of losing out on hot deals during the gas wars in cryptocurrency.

However, some people participate in gas wars to be at an advantage to some people called the front runners. They manage the Priority Gas Auctions (PGAs), to their benefit. These people are equipped with first-hand information and they know when to run and when to sit in crypto dealings. Their main objective for participating in gas wars is to access limited-slot investment opportunities. Other advantages that can be encountered in gas wars participation include participation in lucrative giveaways, and registering for incentivized testnets or beta programs.

Essentially, gas wars in cryptocurrency come with their downsides but it is an important way of maintaining the market buzz between traders and investors in the blockchain network.