NFTs are rising in popularity among digital investors and sellers by the day. Everyone is frantically collecting various rare NFTs to save as digital assets. However, if you're a collector or a seller, you're well aware of the substantial transaction expenses that must be paid. These are known as crypto Gas fees, and as decentralized financing (DeFi) becomes more popular, these fees are also rising rapidly.
This article is an introductory blog to the concept of Gas Fees that one needs to pay while buying or selling an NFT.
What is a Gas Fee?
Miners, who utilize sophisticated equipment and vast quantities of electricity, process and validate every transaction on the blockchain.
"Gas" refers to the amount of computing work necessary to do this. Miners must be paid gas expenses, which may sometimes be hundreds of dollars, to carry out the computations. Gas costs, in essence, act as a motivator for miners and aid in the reduction of spam on the network.
We will mostly discuss the ethereum gas fees here, as most popular NFTs are based on the ethereum blockchain, and it is home to a number of DeFi businesses and apps. The Ethereum blockchain becomes overloaded and clogged as a result of this. It can only handle 15 transactions per second, which is extremely sluggish, and it relies on the proof of work mechanism to confirm transactions that use a lot of resources.
The Ethereum network uses the Gwei as a unit of gas. You must set a "gas limit" for the Ethereum network, which is the maximum amount of gas you are prepared to spend for each transaction. In the meanwhile, the "gas price" is the amount you are willing to spend per unit of gas.
Simply put, gas charge = gas limit x gas price.
The gas tax is distinct from the ether's price and has no bearing on its worth. In actuality, the gas fee is a tiny fraction of the ether price. 0.000000001 ETH is equivalent to Gwei. To utilize the Ethereum Virtual Machine (EVM), you must compensate by asking miners to complete a transaction on your behalf in exchange for a few Gwei.
Transactions that require Gas Fees:
There are petrol expenses associated with each stage. You'll have to pay the gas costs even if you go on to add funds to your wallet or convert ETH to WETH.
Here are the transactions that would need the payment of gas costs.
Creating an NFT:
You must mint an NFT's token on the blockchain in order to produce it. Minting a token on the blockchain entails storing information about the NFT's smart contract and metadata in a blockchain block. You'll have to pay gas costs because it needs you to communicate with the blockchain.
Selling an NFT:
Most markets do not charge any costs when you advertise an NFT for sale, however, others do charge service fees straight away. Others levy this price when the NFT is sold, in addition to the gas fees required to complete the transaction.
This concept is also called “Lazy minting”.
Buying an NFT:
The problem of petrol costs affects everyone, not just the merchants. You must pay the gas fees whenever you make an order for an NFT or even cancel one. A gas fee must be paid after the sale is completed to transmit the cryptocurrency from your wallet to the seller's wallet.
Effect of ‘Gas’ on Artists:
Gas has had a significant effect on NFT art and artists. When gas rates are high, it is difficult for aspiring artists to produce, mint, and even purchase other works. Some artists try to include the expense of gasoline into their work.
This creates a catch-22 since the art's perceived "worth" is reduced when collectors are considering whether or not to spend 25-57 percent of the overall acquisition cost on petrol. Artists aiming to build a reputation for themselves have a hurdle in this regard.
In certain cases, petrol charges have surpassed the cost of creating a work of art, making it irresponsible for an artist to even put their work online. It's also worth noting that not all transactions consume the whole gas supply. This should be better stated, and we'll need to undertake further research to figure out what proportion of gas gets returned on average. However, you're effectively consenting to a maximum amount of gas fees that you'll pay to complete the deal.
Avoid high NFT gas fees:
While most blockchains do not allow you to completely avoid paying gas costs, the good news is that there are several ways to lower the amount you pay. The following are some ideas for avoiding excessive gas expenses when transacting on the Ethereum network.
Do not Rush!
Due to the fact that gas prices change mostly due to network activity, keeping an eye on traffic is a smart way to save money on petrol. Transaction volumes might spike on certain days and periods, resulting in higher transaction costs.
On Saturdays and Sundays, Ethereum gas costs are usually the lowest. On the other hand, it's at its peak on Tuesdays and Thursdays, when the network is busiest. It's advisable to wait till the network is calmer if your transaction isn't urgent.
You may also use a variety of programs to track changes in gas prices:
Another tool, NFT Gas Station, provides you a sense of the gas expenses on multiple marketplaces for specific acts. You may also examine the gas costs you'll have to pay for transaction times that are sluggish, average, or rapid on the blockchain.
Adopt Layer 2 solutions
Several Layer 2 alternatives and Ethereum sidechain systems have emerged in recent months to address Ethereum's constraints. Essentially, they are different Ethereum-based blockchains that are quicker, cheaper or both.
Layer 2 refers to technologies that allow an application to scale by processing transactions outside of the Ethereum Mainnet (layer 1) while preserving the same security and decentralization as the mainnet. Layer 2 solutions boost throughput (transaction speed) while also lowering gas costs.
Polygon is one such key protocol that has been attracting numerous projects, particularly among blockchain game makers. Polygon is a speedy and low-cost cryptocurrency that is fully interoperable with Ethereum. These come with the security of the Ethereum network, as well as minimal crypto gas expenses.
Also Read | Top 10 Tools traders use to mint NFTs
Buy Gas Tokens
When gas prices are low, you may buy or mint Gas tokens, then use them to make a transaction when prices are high. On exchanges like Uniswap, you may trade Ether for Gas tokens.
Although this might save you a lot of money, minting Gas tokens is a time-consuming operation. GasToken.io is a platform that allows you to create and trade gas tokens.
Combining similar transactions is another easy approach to conserve gas. This is due to the fact that the quantity of gas used fluctuates based on the transaction.
Consider the following scenario, as listed by nft evening, as listed by nftevening. Let's say you have numerous tokens at various addresses - A and B – and you want to transmit them all to address C. You will have to pay the gas charge twice if you send the tokens from each address individually. You will only have to pay half the gas price if you transfer tokens from A to B and then perform only one transaction from B to C.
Opt for other blockchains:
NFTs aren't just found on Ethereum; several newer, quicker blockchains have embraced them as well. Solana is a blockchain with its own non-fungible token (NFT) platform, Solanart.
You may purchase NFT there, which appreciates in value over time, and the gas costs are quite inexpensive. Binance and WazirX are two more exchanges that have dabbled in NFT and now host it using their native tokens for low or no gas fees.
To summarize, gas fees are indeed difficult, but they are an unavoidable evil if you want to participate in the world of NFTs. We studied the meaning of a gas fee, transactions that need gas costs, the impact of gas fees on NFT artists, and how to avoid large gas prices in this post.