What are NFT Gas Fees – Revealed: Gas Fees Explained

When purchasing an NFT you will notice that the cost of the NFT is not the only price you are asked to pay.

Often the additional fee, in addition to the NFT mint or sale price, can be up to 50% of the overall cost.

This fee is called a Gas Fee.

Gas fees are one of the biggest frustrations to those buying NFTs. It often means NFTs have to increase in value by 30%-50% or more just to breakeven.

Once gas fees are fully understood there are methods and tactics that can be used to heavily reduce the fees buyers pay, and buyers can save over $1,000 in gas fees when buying as few as 4 NFTs by following just a few simple hacks.

Gas Fees Explained – The True Cost of Minting

To understand gas fees its key to understand the mechanics of how the blockchain works.

Think of the blockchain as the largest secure bank vault ever constructed. Full of audit workers busy making sure all sales and purchases are legitimate, secure, and safe despite a constant barrage of attacks and infiltration.

An army of workers who not only make sure the assets within the vault are secure, but also help process each transaction and provide full validation and authentication for every purchase, creating an audit trail for every single item.

Now, as great as this sounds, an army of such magnitude can be expensive.

This method is called Proof of Work.

Miners are paid a fee based on a supply versus demand model to carry out the ‘work’ required for the transaction (minting of the NFT for example) to happen.

During quieter times there is more supply from miners than demand from buyers and therefore the gas fee reduces.

During peak time, or during an incredibly popular mint, there is more demand from buyers than supply from miners, and as a result the price heavily increases.

At these times gas fees can climb to $300 or more!

This is just a transaction fee for buying an NFT, that’s without the actual cost of the NFT itself. The average selling price of an NFT is 0.085 ETH , and based on today’s Ethereum price this is equal to around $250.

As you can see, during very busy and peak times the gas fee (which is also paid in Ethereum) can be higher than the NFT itself.

This is rare but often.

During our analysis across a three-month period, we calculated the average gas fee for a minted NFT is $116.31.

It doesn’t take long to see how quickly gas fees add up.

In just 10 average NFT mints, an average buyer would have paid $1,163.10 in gas fees alone!

How are Gas Fees Calculated

Gas fees were introduced in to the Ethereum network to provide everyone overloading the system with malicious, timely or incorrect code.

Each action in the network draws with it a gas fee, known as a GWEI fee. This is to protect the network.

1 unit of GWEI is equal to 0.000000001 ETH

As transaction requests are made, for example minting an NFT, these are sent to miners in a pool of pending work. Miners then can choose which transactions they will work on.

As ETH rises so do transaction fees as a result, but there are other reasons why gas fees may rise.

The transaction and gas model works on supply and demand. A user can set a speed at which their transaction is dealt with. The faster the speed, the higher the gas fee bid to the miner to get prioritized in the queue.

As miners can choose which transactions they work on, they will of course choose those that carry with it the higher bid prices first, as these are the most profitable.

Once all the highest bid gas fees are dealt with, the miners then turn their attention to the next highest gas fee bid transactions.

And so on.

Let’s put all of this into an example.

Let us imagine minting an NFT worth 0.085 ETH. The MetaMask wallet is connected, and it estimates it will cost 2,400 GWEI for the NFT to mint with a normal bid price for standard speed.

If the transaction costs 21,000 GAS in the Ethereum network we have to multiply the two together, and then multiply the total GWEI by the current ETH price (let’s say $3,100 an ETH).

The calculation would be:

2,400 GWEI x 21,000 GAS = 50,400,000 GWEI

50,400,000 GWEI x 0.000000001 ETH = 0.0504 ETH

0.0504 ETH = $156.24 in gas fees

So, on the basis the wallet estimates a 2,400 GWEI fee, at a fixed transaction of 21,000 to mint an NFT, it means we will use 50.4m GWEI in total.

If we then multiply this by the GWEI to ETH price of 0.00000001 it means our total charge for gas is 0.0504 ETH.

Based on today’s Ethereum price of $3,100 ETH, it means the total gas price is $156.24.

Slower Transaction Speed – Save on Gas Fee

The gas fee we looked at previously was on a suggested standard speed gas fee bid.

There is an option to set the transaction speed to slow, meaning it will be one of the last prioritized by the miners as it will be the least profitable.

If you are not in a rush – for example you made a whitelist with far more supply than buyers and you have time on your hands – set it to slow.

For example, a slow transaction may yield an estimated charge of 1,900 GWEI.

This would calculate to be:

1,900 GWEI x 21,000 GAS = 39,900,000 GWEI

39,900,000 GWEI x 0.000000001 ETH = 0.0399 ETH

0.0399 ETH = $123.69

This $123.69 gas fee would mean a saving of $32.55.

Faster Transaction Speed – More Gas Fee

On the other hand, the NFT may be public minting and demand is particularly high.

You may want to be able to mint regardless of gas fee as the project is huge.

The best way of achieving this is to set your transaction to the fastest speed, which will set it at the highest gas fee making it attractive for miners to choose your transaction ahead of the rest.

For example, a fast transaction may yield an estimated charge of 2,785 GWEI.

This would calculate to be:

2,785 GWEI x 21,000 GAS = 58,485,000 GWEI

58,485,000 GWEI x 0.000000001 ETH = 0.0585 ETH

0.0585 ETH = $181.30

This $181.30 is $57.61 more expensive than the slow transaction speed, and $25.06 more expensive than the standard transaction speed.

Why Gas Fees Increase Due to Demand

Gas fees increase due to demand because as more transactions are sent to the network using the faster, higher priced, gas fees these fees become the standard fee fast.

At this moment the previous faster transaction GWEI price becomes standard and a new higher GWEI price becomes the faster gas fee price, because of demand.

Each person then tries to outbid the one before to get an NFT minted ahead of everyone else.

The higher the demand, and the increased scarcity for not only gas but also the NFT collection, will cause buyers to panic bid and drive the gas fee higher and higher.

Once the demand decreases the gas fee price will once again fall to meet demand again.

What are the Most Expensive Gas Fees

The most expensive gas fees found are those on the Ethereum network.

Those familiar with buying and selling NFTs on OpenSea will be very familiar with the eye watering gas fee charges!

It is generally on the Ethereum (ETH) network and blockchain that the Proof of Work concept is used, and as a result requires the miners using energy to create the transaction.

It has been known for gas fees to climb to $500 or higher, but this is usually during peak premium times and heavy demand.

On average Ethereum gas fees cost $116 just to mint an NFT.

Ethereum 2.0 is planned for 2022 which will see transactions move from a Proof of Work to a Proof of Stake method.

This moves away from energy hungry miners, and on to users who stake their own Ethereum to validate transactions, and who will earn the ‘gas’ fee instead.

How this will affect the price of gas fees is unknown.

Some experts feel this shift will see a drop in gas fees due to the high energy costs removed, environmentally friendly transactions and a different set of users.

Other suspect to convince users to stake their Ethereum to help validate transactions, and secure the blockchain, it will take a sizeable return on their investment which may continue to see gas fees high for the medium term at least.

What are the Cheapest Gas Fees

The cheapest gas fees found at present is on the Solana network.

The most popular marketplace where Solana based NFTs are bought and sold is Solanart, which due to a recent investment is now known as a unicorn company, which means a valuation of more than $1 billion.

Solanart and the Solana network are growing in popularity and it’s easy to see why.

Gas fees on the Solana network are usually just a couple of dollars. This makes a huge different with NFT buyer for profit because no longer does an NFT have to increase in value by 30% or more just to breakeven to cover the costs of the gas fee.

Although Solanart is growing, and has a recent sizeable investment, it is still very much overshadowed by the might and popularity of the OpenSea marketplace using the Ethereum network.

All the most popular NFT collections, such as Crypto Punks and Bored Ape Yacht Club, are on OpenSea and trade in Ethereum.

It will only take one or two very high profile NFT releases on Solana for the network to really grow, for the Solana cryptocurrency to fly and a hasty move away from Ethereum.

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