Non-fungible tokens (NFTs) are one of the most popular use cases of blockchain technology after cryptocurrencies. It is a unique way of establishing the ownership and authenticity of digital assets such as an art piece, a video or a song. Certain NFT collections have even achieved cult status and there are tokens that have been sold for hundreds of millions of dollars.
But before you are inspired to go mint and list your own NFT for sale as well, you need to know the costs involved in creating a token. NFTs are minted using blockchain technology and you have to pay a fee for every token you create. This gas fee can be particularly expensive during times of high network demand.
However, this does not mean that you have to pay hundreds of dollars in gas fees all the time. There are gas fee charts and calculators that help you keep track of the price movements so that you can optimize the amount you pay for minting NFTs. Here, we have also shared some tips that will help you in paying the lowest amount of gas fee.
What are Gas Fees?
Simply put, gas fees means the fees you pay for a transaction on a blockchain. Although originally specific to the Ethereum blockchain, “gas fees” is these days an all-encompassing term referring to blockchain transaction fees in general. This is largely because Ethereum is the largest and most popular network for all sorts of activities- from building DApps to minting NFTs.
For a better understanding of gas fees, you need to know how transactions are recorded and validated on a blockchain. As you know, blockchains are decentralized so, an extensive network of computers is used for processing transactions.
There are people who provide their personal computing power for this purpose. They are known as miners in case of proof-of-work(PoW) protocols and validators in case of proof-of-stake(PoS) protocols. These miners/validators have to be compensated as they purchase and run the equipment in a personal capacity. Gas fees incentivize miners/validators to properly process and record transactions on the blockchain.
Besides that, gas fees help in securing the blockchain network as well. This is because mandatory fees for every transaction discourage spamming of the network.
NFT Gas Fees Meaning
As we discussed above, fees have to be paid for every transaction on a blockchain. When NFTs are minted on-chain, it involves a significant amount of computational power and effort on the part of the miners/validators to record it on the blockchain.
To compensate them for their efforts, gas fees are charged every time you mint a token. These gas fees are unrelated to the actual value of the token and merely represent an amount that is paid as an incentive to the network nodes.
Therefore, sometimes the gas fee paid for minting the NFT may exceed the absolute value of the token especially if the artist is not well-known in the NFT community.
How are NFT Gas Fees Calculated?
Although different blockchains may use different criteria for calculating gas fees, we are going to focus on Ethereum since it is the most popular chain for minting NFTs.
Broadly, gas fee follows the principle of demand and supply. The higher the network demand the higher the fees and the lower the network demand the lower the fees. Here, demand refers to the number of transactions submitted for verification and supply refers to the total number of validating nodes on the network.
Generally, gas fees are updated in real time so that validators can optimize profits and users pay fees according to the transaction speed selected by them. Before Ethereum’s London upgrade, gas fees were simply a product of the gas price and gas limit.
Gas price is the amount a user is willing to pay for each gas unit while gas limit is the maximum amount of gas that can be used for a particular transaction. Gas price x Gas limit will, therefore, give us the maximum gas fees.
The London upgrade was implemented in 2021 and introduced EIP-1559 with the objective of making gas fees more predictable. Now, there are variable-sized blocks and a base fee which is calculated by comparing the size of the previous block with the target size.
The base fee is, however, burned after the transaction is completed. Therefore, a priority fee(tip) has been introduced to incentivize the nodes to record transactions. The tip is small under normal conditions but you may have to pay a higher tip if you want your NFT to be minted on a priority basis.
Keeping all these elements in mind, the final gas fee is calculated using the formula: Gas Limit x (Base Fee+Priority Fee).
Why are Gas Fees so High for NFTs?
Minting NFTs can be a costly affair partially due to the gas fees involved in the process. Often, artists may end up paying more for getting their token on-chain than what they earn from the sale of said token. But why are gas fees so high? Why is minting an NFT so expensive? Well, there is not one but several reasons for that.
Network Demand
Simply put, the more the demand for executing transactions on a blockchain network, the higher the fees for processing said transactions. Further, Ethereum can handle only a limited amount of transactions which further drives up gas prices.
Type of Transaction
Gas fees can vary according to the type of transaction being executed. Minting an NFT is generally more expensive than a simple ETH transfer. This is because the former is a more complex task and involves large amounts of data transfer. Since more computing power is needed to mint an NFT, the gas fees paid for the same are on the higher side.
Type of Consensus Mechanism
Generally, networks using proof-of-work(PoW) consensus mechanisms have higher gas fees as compared to proof-of-stake(PoS) networks. This is because mining is a more resource-intensive method of verifying transactions. Therefore, gas fees are on the higher end on networks using PoW for creating consensus and verifying transactions.
How to Mint NFTs without Gas Fees
Unfortunately, you cannot completely avoid gas fees while minting NFTs. The most you can do is delay paying the fees. But if you want your token to be on-chain, you have to pay gas fees. However, this does not mean that you have to pay hefty gas fees every time you mint a token. There are some tips and tricks that you can use to reduce gas fees.
Transact during Low Network Demand
Gas fees fluctuate according to the demand on the network. During times of high demand, gas fees can be very costly. It is best to avoid minting your NFT at this time and wait for the network to clear so that the fees come down. You can use Ethereum fluctuation charts to predict when gas fees will come down and accordingly, mint your NFTs.
Set a Gas Limit
Gas limit is basically the maximum amount of gas that can be used for a transaction. Keeping your gas limit low is one way to avoid paying high gas fees. However, remember that your translation may fail if you set the gas limit too low. You can, therefore, first study the weekly gas price averages to get an estimate for a reasonable gas limit.
Use a Tool for Tracking Gas Fees
If you’re planning to mint your NFT on Ethereum, you can use a tool like Etherscan gas tracker to keep an eye on gas fees. Such tracker tools will alert you when gas prices go down to the threshold specified by you. Apart from that, gas fee tracking tools can also provide you with gas heatmaps and the next gas block prediction.
Use a Layer-2 Solution
Layer-2 solutions like Polygon, Optimism and Plasma are designed to improve Ethereum’s scalability by shifting some of the transaction burden to the second layer. This helps in clearing the network and increasing the transaction processing speed on the mainnet which in turn, keeps the gas fees low.
Lazy Minting
Lazy minting is a way of deferring the payment of the minting fees including gas fees until the NFT is sold. Here, NFTs are created off-chain and are not officially recorded on the blockchain till the token is bought. This helps you save money on minting NFTs during times of high network demand when gas prices are rapidly rising.
Go for a Blockchain with Lower Fees
While Ethereum seems like the obvious choice, you don’t necessarily have to mint your NFTs on it. There are other blockchains with lower fees and fewer network congestion issues. Solana, for example, has been gaining popularity due to lower fees and faster transaction speed.
Final Words
Gas fee, though an important part, is not the only thing to be taken into consideration when minting an NFT. There are many factors that come into play during the whole process. You have to decide on the blockchain and the platform where you list your token, its price and the sale mechanism. Gas fee is just one part of a long process.
Further, you also have to keep market conditions in mind while deciding whether it is worth it to go through the effort of first creating and then listing a token or an NFT collection for sale. After the NFT craze of 2022, prices have been down low for quite some time. Therefore, you may not get crazy bids for your listed NFTs. This is something you should keep in mind before minting NFTs.