You’ve probably seen the term ‘gas fees’ thrown around more than once if you’re involved in cryptocurrency or NFTs in any way, shape, or form. Because of this, the idea for this new article was born!
What are Gas Fees?
Gas is a measure of the computational power required to complete a transaction on the ethereum blockchain; this fee is paid with ethereum itself. When transactions are made on the ethereum blockchain, this requires computational effort to be made, which in turn requires what’s called gas. This gas is much like the gas you put in your car to drive from point a to point b. So to get the data on the ethereum blockchain from point a to point b, you need to put gas in your pretend car. Gas in this case isn’t measured in gallons or liters like in a traditional sense, instead it’s measured in gwei; of which 1 is equal to 10e-9 ETH.
Now you may be wondering how it costs money to send data from one point to another, as we do that already on a daily basis with pretty much anything we’re involved in online. Well, the gas fees on the ethereum blockchain are actually there for your security when you’re taking actions so that there are no cyber punks out there plugging up the network like when your mom picks up the phone while you were playing a game on your dial up internet in the 90’s and 00’s.
Why are Gas Fees so expensive?
The price of gas at any time is determined by the supply and demand of the market. Some people are well versed in economics and it goes to show that the theory of the Invisible Hand by Adam Smith applies to gas fees for crypto and NFTs to the tee. Gas allows for the scarce resource which in this case is computational power to be allocated efficiently and effectively to those who are willing to pay the most for gas. In this case, that will lead the highest bidder to have the priority and complete their transactions the fastest. As ethereum becomes more popular, gas fees will continue to rise as there is less and less computational power available. Great alternatives for investing in NFTs with a >.0000001 gas fee would be to do transactions on the Solana or SOL blockchain. As demand rises, price rises because of scarcity of computational power.
Will Gas Fees keep rising?
The good news is, people recognize that with the way the gas fees are currently trending that it won’t be feasible at all to do transactions (and already isn’t) for many out there. With Ethereum losing market share to the aforementioned Solana in the NFT space, it’s important that they bring in their new ETH 2.0 network.
So what does the ETH 2.0 network bring to the table?
- Significant gas fee decreases
- Turns ethereum into a Proof of Stake (POS) model as opposed to the current Proof of Work (POW) model
- High power consumption is capped and specialized hardware will carry the torch for transaction validation
The short of the long here is that, this will bring way lower gas fees to the table. The only issue is that ETH 2.0 has been being built for a long time now and is increasingly delayed to the point where people are starting to wonder if its existence is actually legitimate.
How Gas Fees and NFT buying and selling work
Whenever you buy, mint, or sell any NFTs, you will be subject to gas fees. It really sucks, but it’s just the cost of doing business on the ethereum blockchain.
In short, whenever you complete a transaction on the Ethereum chain, MetaMask pops up with a little window with the gas prices. If the gas price seems reasonable given the circumstances, I recommend not touching it. If you mess with it you can put yourself into an entire world of nonsense. But if it’s just too high, wait it out or bite the bullet. Many projects find a way to lower gas fees, usually via smart contracts, so keep an eye out for that.
MetaMask will typically show you three different speed options for completing your transaction and you’ll never need to use the ‘fast’ option. Slow and average are what we’re looking for minting our NFTs. They will from there give you an estimated time and in many cases, the transaction time will be different from the actual time. Don’t panic, it’s alright. With that said, maybe it’s time you learn the basics about NFT terminology, check this article out.