NFT may be the latest craze sweeping around the globe, yet they are far from universally understood. It's not the fault of anyone because there is sure a lot to grasp from there. NFT gas fee is easily one of the most confusing aspects that everyone needs to comprehend before jumping on the non-fungible bandwagon thoroughly.
What is a Gas Fee?
Gas in NFT can be defined as the measurement unit to calculate the computational power amount required to streamline all transactions on the Ethereum blockchain. Like the petrol you put in your vehicle, this gas fuels all the activities on the blockchain.
Every bit transaction on the blockchain involves a series of complex computational operations, where each of them requires resources to streamline its process. Obviously, one needs to pay for these resources, which would be the responsibility of the end-users. And this is what has popularly termed a gas fee which is not stable due to various factors.
The cost of the gas has nothing to do with the value of Ether (Ethereum's native cryptocurrency). However, the price is actually a relatively tiny fraction of Ether. It employs the gwei unit, which is equivalent to 0.000000001 ETH.
Facts About NFT Throughout the Crazy 2021
What Does It Mean for the Artist?
Every artist understands that creating and selling NFTs are not affordable actions. It can sometimes be highly exorbitant due to gas fees. Then, what does it mean for every artist and creator of nft?
The majority of artists sell for only a few hundred dollars or even less. It's not even a rare occurrence to see creators are unable to sell any of their projects. They are prone to losing money rather than profit since they must pay gas fees to create and sell NFTs. Worst of all, the prices constantly fluctuate, so it's difficult to predict how much artists will pay.
High gas fees make artists have a hard time creating and selling NFTs in the most profitable way. If they want to make their artwork affordable, they have to cut the art's overall price to reimburse for the high cost of gas. However, this leads to a new issue where buyers may consider the art piece less valuable.
How is the Gas Fee Work?
All transactions occurring on the Ethereum blockchain require intensive computation procedures. As you might already understand, blockchain is a decentralized system that is controlled by miners rather than a central authority. Miners employ their own computing resources; thus, they should be incentivized in some way (in this case, using gas fees). It's for keeping the blockchain network functioning, meeting the growing demands of transaction validation, and recording user transactions.
Gas prices differ from one blockchain to another. Currently, the gas fee in the Ethereum consists of a base fee that is burned and a tip for the miners. Here's the formula to know the total transaction cost.
(Base Fee + Tip) x Gas Limit = Total Transaction Cost
For instance, with a 150-gwei base fee and a 20-gwei tip with a 21,000 gas limit, the total transaction fee is 3,570,000 gwei or 0.00357 ETH. This number would be equivalent to approximately $8.26.
Do I Need to Pay Gas Fees as an Artist?
Creators and artists have or don't have to pay an NFT gas fee depending on the marketplace they mint their work. The cost of minting non-fungible artwork has previously reached around $500 for each transaction. Of course, artists new in the field can avoid this exorbitant price by doing lazy minting.
Lazy minting is a feature available on NFT markets like OpenSea and Rarible. It enables creators to delay minting their NFTs to the ledger until someone purchases them. Artists can withhold payment until the moment of sale.
The buyer is the end-user who will pay the gas fee instead of the creator or seller. Also, the amount of gas fee to pay is deducted at the same time as the sale. On the other hand, creators may opt for regular minting, where they will pay gas fees in front every time there is a buyer.
NFT Marketplace, a Hotspot for Aspiring NFT Investors
Does Gas Fee Affect NFT Prices?
The gas fee is unrelated to the actual value of NFTs. The cost often exceeds the asset's worth in some situations, making it particularly difficult for emerging NFT creators. The price of NFT itself is determined by supply and demand, as well as the buyer's willingness to spend for the work.
This is the primary reason why artists, particularly the new ones, are prone to losing money when dealing with an NFT. They may never profit if the gas fees spike and their digital piece of artwork does not sell successfully. Even if artists reduce the initial price of their NFTs, prospective buyers may not perceive their work to be highly valuable.
How to Navigate Gas Fee?
When people start riding the NFT wave, they will immediately come to the realization that gas fees are inevitable. However, is it possible to reduce the prices? As mentioned above, gas fees can never be predicted; therefore, creators or sellers can never really cut the costs. Yet it doesn't necessarily mean users can never avoid the exorbitant NFT gas prices.
NFT transactions can be completed much faster when users are more than willing to pay the higher price of gas. However, the gas fees skyrocket when the blockchain network is busy with people who want to complete their transactions quickly.
In order to avoid the prohibitive gas fees, economic users typically will perform transactions during lower trading hours or over the weekend. Some marketplaces even provide a feature where users can establish their own gas fee limit. Transaction will only proceed if the gas prices are sufficiently low.
The key to obtaining a gas fee as lower as possible is to have patience in waiting for an indefinite amount of time until prices decline. Relying on a gas tracker accessible on the internet can also be an excellent option to keep track of the current gas fees.
Wrapping up, an NFT gas fee is unavoidable in the non-fungible world. It constantly fluctuates to the extent that it's impossible to predict. While it can be pretty costly, it doesn't mean users can save on gas prices. Artists can opt for the NFT marketplace that allows them to perform lazy minting, establish gas limits, or simply wait for off-hours. Those who equip themselves with the tricks of the NFT trade can minimize the gas fees and achieve profit.