Here’s What You Need to Know About Crypto Gas Fees and the Hidden Cost of NFTs

NFTs have taken the digital world by storm. Even as collectors shell out thousands of dollars to own these digital assets, the high transaction costs (a.k.a. crypto gas fees ) are a serious damper. 

With the massive rise in popularity of decentralized finance (DeFi) projects, gas fees have also gone up significantly. For first-time buyers and sellers, especially, this means losing their profit margin or even facing a loss. Some buyers, for instance, have lost more than $200 in gas fees while buying an NFT worth just $30 in Ether, reported Insider.

But, what are gas fees exactly? Moreover, what determines their price?

Crypto gas fees have gone up significantly in the last couple of months. Credits: Pixabay

What are gas fees?

Every transaction on the blockchain is processed and validated by miners, who use powerful systems and large amounts of electricity. The amount of computational effort required to do this is referred to as “gas”.

To carry out the computations, miners have to be paid gas fees, which can go up to hundreds of dollars. Essentially, gas fees serve as an incentive to miners and help reduce the spam on the network. 

On most NFT marketplaces, users have to pay gas fees for selling and buying NFTs, as well as for minting NFTs. The amount of the fee depends on the number and type of computations required to verify transactions—the more complex the computations, the higher the gas fee. 

With the Ethereum network, you must determine a “gas limit” which is the maximum gas you are willing to pay per transaction. Meanwhile, the “gas price” is the amount you are willing to pay for each unit of gas. Put simply, gas limit x gas price = gas fee. 

The actual gas price keeps fluctuating and depends on various factors such as the network traffic. The amount you set as the gas limit can determine how soon your transaction will be processed. Set it too low and miners will prioritize transactions that offer high gas fees over yours.

How to avoid high NFT gas fees

While you can’t entirely avoid gas fees on the majority of blockchains, the good news is that there are many ways to reduce the amount paid. Let’s take a look at some of them.

1) Plan ahead and time it right

As gas prices fluctuate primarily due to network activity, keeping a tab on the traffic is a great means to pay lower gas fees. Transactions can peak on specific days and times, thereby increasing the transaction fees. 

According to one report, Ethereum gas prices are typically lowest on Saturdays and Sundays. As opposed, it’s highest on Tuesdays and Thursdays – when the network is the busiest. If your transaction is not urgent, it’s best to wait till the network is quieter.

Plan ahead and analyze the blockchain’s network activity. Credits: Pixabay

You can also use various free analysis tools to understand the state of the blockchain at various times. One such example is GasNow, using which you can easily determine if the gas price is higher than average at any given time. Ethereum Price is another tool that will show the week-long network activity and NFT gas station is great for in depth analysis across marketplaces. 

Thus, depending on the urgency of your transaction, you can time it to reduce the fees. Check and recheck the current market price, analyse the network for congestion, calculate the gas fees, and plan ahead whenever possible. 

2) Adopt Layer 2 and sidechain solutions

In recent months, several Layer 2 solutions and Etheruem sidechain platforms have come up to overcome the limitations of Ethereum. Essentially, these are separate blockchains built on the Ethereum network that are faster, cheaper or both.

One such important protocol is Polygon, which has been steadily attracting many projects, especially among blockchain game developers. Fully compatible with Ethereum, Polygon offers fast and low-cost transactions. 

As the industry eagerly awaits the development of Ethereum 2.0, it can be a good idea to switch to other frameworks like Polygon, or even LOOM, and SKALE for now. Along with low crypto gas fees, these also come with the security of the Ethereum network. 

3) Combine transactions

Another simple way to save gas is by combining related transactions. This is because the amount of gas varies depending on the type of transaction. 

Let’s look at an example. Say you hold multiple tokens at different addresses – address A and address B – and want to send all the tokens to address C. If you transfer the tokens from each address separately, you will have to pay the gas price twice. However, if you were to transfer tokens from A to B, and then make only one transaction from B to C, you will only have to pay half the gas price.  

4) Switch to a blockchain with low or no NFT gas fees 

The Ethereum blockchain has established itself as the go-to network for tokens and DeFi projects. As a result, the activity on this blockchain is higher, resulting in higher gas fees compared to other blockchains. Thus, it can be a good idea to switch to another blockchain to lower your gas expenses.

The Binance Smart Chain is a good alternative to Ethereum. Credits: Binance Smart Chain

Before migrating, however, it is important to weigh the pros and cons. While other blockchains can offer lower transaction fees and higher scalability, leaving Ethereum can pose a hurdle when using third-party services that largely use Ethereum. Besides, Etheruem is reliable as it has been tested and validated for years.

Some good alternatives you can try are Tezos, EOS, and Binance Smart Chain. These are reliable and support smart contracts. As Tezos uses the Proof-of-Stake model, it not only offers gasless transactions but also a low carbon footprint. Hic et Nunc is a highly sought after marketplace on Tezos and is popular for its curated NFT collection. With Tezos and Binance, you can also use the same wallets you use on Ethereum. 

Meanwhile, the WAX blockchain has established itself as the leading decentralized network for entertainment and video games. It is home to the popular NFT marketplace Atomic Hub, which has top-selling creators such as Blockchain Heroes and Capcom’s Street Fighter.

5) Use gas tokens

Gas tokens let you tokenize gas. Simply put, you can mint gas tokens when gas prices are low and then use/redeem them when the prices are high. When you redeem a gas token, you will be refunded in ETH, which you can use to pay for your gas expenses.

Essentially, gas tokens make use of Ethereum’ storage refund system. Here, users are incentivized for deleting storage variables. GasToken.io, for instance, is a popular gas token project. 

GasToken works in a simple way: first, when gas prices are low, you mint a token by saving data in GasToken contract’s storage. Then, when the prices go up, you use up these tokens by sending them to the GasToken contract. Here, they will be destroyed, and you will get a refund for the fresh transaction.

However, it should be noted that gas tokens are not the most ideal solution for reducing gas fees. In fact, they clog Ethereum’s state size and currently, there are plans to stop the refund system entirely.  

The way forward for NFT gas fees

As more and more people embrace NFTs, high gas fees could become a major setback for blockchains like Ethereum. Buyers and sellers, will, of course, want a platform with low gas and high scalability. This has also given rise to new projects and new ways for users to reduce gas fees.

Ethereum’s high gas price has given rise to new projects. Credits: Unsplash

With the pace at which layer 2 solutions and Ethereum upgrades are coming up, high gas prices could soon be a thing of the past. Until then, make sure you explore all the ways to reduce the fees before you make your next transaction.


Source:nftevening.com

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