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I'm trying to understand the financial model of Ethereum and despite all the reading on gas and how transaction cost is calculated still it is ont clear to me whether all gas needed to use EVM goes to miners or it is credited to the organization that then credits miners according to their activity? This is the most important part of my question but in the light of understanding the financial model I would appreciate any link that explains how Ethereum makes money to sustain it's operation.

Thanks!

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  • yes it all goes to miners... if you want to have a chat about it to clarify your mind I could help you around european times but not sure how to start a chat here... :-)
    – Roland Kofler
    Jul 9, 2016 at 20:40
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    @RolandKofler and OP: Chat can be started here chat.stackexchange.com/rooms/34620/whisper (then click on each other's picture if you want to create a separate room).
    – eth ♦
    Jul 10, 2016 at 2:01

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In short, yes.

First of all, there is a free market between transaction senders and miners, and it is miners who "sell" gas. When you start mining in a client you have the option of setting various flags of what gas-price range of transactions your client will accept or reject. Transactions which don't offer a high enough fee won't be mined.

Whoever successfully mines the block collects the gas-reward in terms of ether.

From the Homestead Docs:

The Ethereum protocol charges a fee per computational step that is executed in a contract or transaction to prevent deliberate attacks and abuse on the Ethereum network. Every transaction is required to include a gas limit and a fee that it is willing to pay per gas. Miners have the choice of including the transaction and collecting the fee or not. If the total amount of gas used by the computational steps spawned by the transaction, including the original message and any sub-messages that may be triggered, is less than or equal to the gas limit, then the transaction is processed. If the total gas exceeds the gas limit, then all changes are reverted, except that the transaction is still valid and the fee can still be collected by the miner. All excess gas not used by the transaction execution is reimbursed to the sender as Ether. You do not need to worry about overspending, since you are only charged for the gas you consume. This means that it is useful as well as safe to send transactions with a gas limit well above the estimates.

http://ethdocs.org/en/latest/contracts-and-transactions/account-types-gas-and-transactions.html#what-is-gas

Some interesting pages:

https://forum.ethereum.org/discussion/1477/what-does-the-halting-problem-have-to-do-with-ethereum

https://github.com/ethereum/go-ethereum/wiki/Gas-Price-Oracle

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  • Thanks for your prompt response! that is clear and leaves me with the question how are Ethereum operational costs funded if not from part of gas? Are donations the only revenue stream for the organization?
    – Konstantinos Liakeas
    Jul 9, 2016 at 18:59
  • Ethereum is itself not an organization, but a decentralized protocol. Just to clarify, do you mean the Ethereum Foundation or the miners?
    – Physes
    Jul 9, 2016 at 19:00
  • If you mean the Foundation, they are funded because they released a lot of Ether back in 2014, and the price has appreciated (from 0). So if you were lucky enough to hold 5 million Ether and the price goes from 0 to 10, you now have 50 million dollar-equivalent. If you mean miners, miners can only receive revenue from sucessfully processing blocks. There is no "organization"- just addresses on the blockchain.
    – Physes
    Jul 9, 2016 at 19:03
  • Thank you for the clarification question. My mistake. I'm trying to understand the financial model of the Ethereum foundation not the protocol. Therefore the question initially was if the organization gets part of the gas for operational expenses or relies purely on donations or what other kind of revenue does it rely upon to sustain its operation. Is the value of Ether initially issued the only revenue stream except donations?
    – Konstantinos Liakeas
    Jul 9, 2016 at 19:04
  • The foundation is just a legal formalism and has nothing to do with the operations of the protocol. I know that it holds a lot of Ether from the pre-sale and relies on other sources of revenue. But it has nothing to do with mining operations and doesn't impose any fees/charges. That's the whole point of decentralization- the foundation could disappear and the protocol would continue.
    – Physes
    Jul 9, 2016 at 19:06

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