Oxalus Insights

NFT Gas Fees Explained & How To Calculate It?

Guides Oct 5 2022

When performing any transaction on the blockchain, whether NFT-related or not, the user always pays the gas fee. Although high NFT gas fees are a constant pain for NFT investors and creators, the absence of gas fees will block our blockchain activities.

So what is the NFT gas fee? Why do we have to pay for it? How do we calculate NFT gas fees and how do we minimize them? The following Oxalus article will answer all of your above questions and give you the most comprehensive and simple view of NFT gas fees. Check it out!

What Are NFT Gas Fees?

Originating from the Ethereum network, the gas fee is the reward for blockchain miners for expending their computational resources to validate blockchain transactions and protect the network.

Ensuring proper transaction execution while protecting the network from spamming, hostile loops, and redundant programming consumes computational power. Of course, no one would do it out of kindness. Gas fee, which accurately reflects the computational resources necessary to record a transaction, is used as a win-win incentive worthy of their expense.

How Much Does It Cost?

NFT Gas fees in different blockchain networks vary widely. Ethereum is known to be the most expensive blockchain because of its high gas fee. According to Cointelegraph, “For nearly two years, between Jan. 2021 and May 2022, the average gas fee required by the Ethereum network was roughly $40, with May 1, 2022 recording the highest average daily gas cost of $196.638.”

In contrast, gas fees at many other networks are much lower. On Avalanche, it was hovering at around just $0.0000064525 by the end of 2021.

Why are NFT gas fees on Ethereum particularly exorbitant? Following the law of supply and demand, the NFT gas fee reflects the correlation between demand for block space and the network’s capacity (or transaction throughput). As one of the early Layer 1 networks, Ethereum has relatively large transaction needs, but too low a capacity to satisfy users at an affordable price.

Currently, Ethereum’s transaction throughput is at around 15 transactions per second (TPS), in comparison to Solana’s 65,000 TPS, and Avalanche’s 4,500 TPS. When a bunch of people wants to transact simultaneously, but the system only has a limited capacity, high gas fees are inevitable.

Many mistakenly believe that The Merge would cause NFT gas fees on Ethereum to decrease. Rather, it created the foundation for a future where gas fees are no longer the UX bug of Ethereum. Vitalik clarified that this future won’t happen until his team fulfills the four-stage post-merge roadmap (The Surge, The Verge, The Purge, and The Splurge), which may eventually raise Ethereum’s transaction throughput to 100,000 TPS.

In more detail, the Ethereum Foundation claimed that The Merge’s transitioning from POW to POS consensus dropped 99.988% electricity consumption, but “does not significantly change any parameters that directly influence network capacity or throughput”. 

How Is Gas Used for Minting an NFT?

Minting NFTs is the process of turning a digital file into a digital asset or crypto collectible stored on the blockchain. As with any other transaction on the blockchain, minting an NFT requires miners to perform complicated algorithms. NFT Gas fees were thought up as a way to pay the miners for recording your minting transaction on the blockchain.

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What Determines Gas Prices NFT?

Under EIP-1559, Ethereum’s gas fee calculation guide published in August 2021, every transaction includes a base fee plus a “tip” value (priority fee). The base fee is the standard charge that applies to all users. The network calculates it based on real-time network traffic. The tip is an optional extra payment that users can pay to speed up their transactions.

The exact formula for Ethereum gas equals; Gas units (limit) x (Base fee + Tip). 

Based on the above formula, the NFT gas price is determined by three factors:

  • The size (or complexity) of a transaction

The implementation of the algorithms costs gas, the basic unit of the transaction on Ethereum. The more complex the transaction, the greater effort and energy it consumes, and the more gas it costs. For instance, whereas a basic transfer would only cost about 21,000 gas, a convoluted operation could easily cost one million.

  • The network traffic

As the base fee is calculated based on real-time network traffic, the NFT gas fees can spike at times of congestion.

  • High gas limit

Users who want a prioritized transaction can increase their gas limit, or “tip” higher gas fees to reward the miners. When multiple users do this, the tip will increase dramatically and add significantly to the final NFT gas fee of the transaction.

How Do Gas Fees Affect The Investor?

High NFT gas fees increase costs and reduce investors’ profits. Not all NFTs fetch six-figure prices and many of them are never sold while it still costs NFT gas fee for minting, resulting in a loss. If the gas is insufficient, the transaction will be canceled but you will still be charged. Therefore, high gas fees are a huge barrier to the brilliant development of the NFT industry in particular and the mass adoption of blockchain and crypto in general.

The introduction of layer 2 and layer 3 blockchain networks with high scalability is the most practical solution to the problem of high NFT gas fees. Because of them, many creators and investors have been able to get into the NFT market with the expectation of more profits.

Tips To Avoid Paying High Gas Fee

Here we provide you with some tips to work around the high NFT gas fee issue on Ethereum particularly.

  • Transact at off-peak hours

Between 12:00 AM to 4:00 AM (EST) on weekdays and between 2:00 AM to 3:00 AM (EST) on weekends are off-peak hours on the Ethereum network. Plan your transactions at these hours and try to avoid high-traffic events.

  • Try other networks

You can always mint and transact your NFTs on more affordable blockchain networks such as BSC, Solana, and Polygon. So why not?

  • Use the NFT gas fee budgeting tools

Since the price of gas is constantly fluctuating, you won’t know how much they are until you carry out your transactions. Nowadays, several tools allow you to have a better idea of your cost by simulating the transactions and anticipating the NFT gas fee in real time.

  • Lower your gas limit

You control your maximum NFT gas expenses by patiently waiting until the gas fee.

The Bottom Line

With The Merge and its after roadmap, we have hope for a future where users enjoy fast and affordable transactions while validators are well rewarded for their contribution to sustaining the Ethereum network. A low NFT gas fee future on Ethereum is something we are counting down to every day. The lower gas fee will remove the bottleneck that is making millions of users hesitate to join this network and pave the way for the mass adoption of NFT technology. In the meanwhile, apply the advice in this post to get around the hefty NFT gas fee.

Frequently Asked Questions

1. What is Ethereum’s gas fee?

The gas fee is the reward for blockchain miners for expending their computational resources to validate blockchain transactions and protect the Ethereum network.

2. Do you have to pay a gas fee for every NFT?

Yes, because performing every NFT transaction costs gas.

3. Why is my NFT gas fee so high?

Maybe you are transacting at peak hours, or you set your gas limit too high, or simply you are transacting on the Ethereum network.

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