The Basics of NFT Gas Fees: What They Are and How They’re Calculated
You check the NFT mint price, load up your wallet, and end up waiting hours to finally buy one, only to find out that the transaction cost is more than the NFT price. What a bummer!
Even though NFTs have come a long way in terms of overall utility and adoption, the entry barriers are still very high. As most NFT collections launch on the Ethereum blockchain, the gas fee is unpredictable, making NFTs out of reach for many collectors.
NFT gas fees also impact the creators. As creating and listing NFTs requires a gas fee, the cost of capital increases before generating any value in sales for the creator. So gas fee is crucial to understand when dealing with NFTs. In this article, we’ll explain basics of NFT gas fee and possible ways to reduce it.
What are NFT Gas Fees
NFT gas fee is like any other blockchain fee you pay to make a transaction. When you buy, sell, and list an NFT on a marketplace, you will pay a gas fee. It is charged for every interaction because you’re essentially trying to change the data on the distributed blockchain ledger.
In the case of NFTs, instead of changing the account balances of two addresses, you are transferring ownership from one to another. And when you do that in scale during an NFT mint, gas fees see a sharp spike.
On a blockchain like Ethereum, you are waging a bidding war to get your transaction processed first by paying a high fee. This is why people pay substantially higher gas fees than expected during an NFT mint. In such cases, the gas fee across the network on other applications also gets affected. One such scenario where this happened was during the Otherside public land sale that resulted in $180 million paid in gas fees.
How Gas Fee is Calculated
Gas fee on an NFT transaction mainly depends on three things: network activity, transaction size, and miner tip. If the network is congested and data size is more than usual, you will pay high gas fees.
If you want to speed up your transaction and don’t mind paying more fees, you can add a miner tip. This serves as an incentive for network validators to prioritize your transaction first. To represent gas fee on the Ethereum blockchain mathematically, we can use the following expression:
Gas fee = units of gas used * (base fee + priority fee)
In the above expression, the base fee refers to the minimum fee you must pay to include your transaction in the block. It is denominated in “gwei” which is equal to 0.0000000012 ETH. This fee varies based on the block size. If block size increases, the base fee increases. Gas units mean the maximum energy a validator uses on a particular transaction. The standard is 21,000 units.
Let’s take an example to understand how the fee is calculated. Say you want to buy an NFT worth 2 ETH, and the base fee of the network is 20 gwei. Plus, you wish to add a tip of 5 gwei.
So the fees would be equal to 525,000 gwei. If we want to convert gwei into ETH, we have to multiply the fee by 10–9, which gives us 0.000525 ETH. This is considering ideal network conditions as fees can fluctuate violently at any time of the week.
How NFT Gas Fees are Being Optimized
While the technical infrastructure is a work in progress, NFT projects are developing ways to optimize for lower gas. Azuki is a great example here. By introducing a new token standard with ERC721a, Azuki saved significant money for buyers buying multiple NFTs.
Projects are also leveraging whitelists to reduce gas fees. When the owners of NFTs are already determined and ample time is given to mint, it is unlikely network congestion will take place. As a result, buyers pay regular gas fees only.
As an NFT investor, you can reduce gas fees by monitoring the network activity on tools like Etherscan and ETH Gas Station. Watch agent platforms can also alert you when the gas price hits your desired level.
Wait a Bit Longer; Blockchain Evolution is Coming
It is only a matter of time till we see major blockchains like Ethereum achieve scalability and significantly reduce gas fees. Layer-2 solutions like Polygon are already aiding the process by giving people an alternative without compromising security.
At MetaHi, we have integrated with Polygon to make our 3D marketplace accessible to everyone. With low fees and seamless onboarding, we provide a safe and comfortable space for creators and collectors to connect over 3D NFT assets compatible with any metaverse.
About MetaHi
MetaHi is a 3D NFT marketplace where collectors can purchase metaverse agnostic assets designed by the world’s best 3D artists. MetaHi provides an easy-to-use platform for artists to launch their tokenized 3D assets and maximize their earnings with high royalties and the lowest-ever transaction fee. Metaverse users can access the MetaHi marketplace to request custom 3D assets and deploy them across many virtual worlds.
