NFTs have become increasingly popular with each passing day. Understanding how they’re built and function is more important than ever.
OpenSea is one of the most popular NFT marketplaces, which had an increase in users and volume throughout 2021 and is continuing to do so during 2022.
The NFT space is still growing, as most people are not aware of what NFTs are, but the community is disproportionally active. Most NFTs today are created on the Ethereum blockchain, which is known for one very common and frustrating flaw, gas fees.
Ethereum gas fees are the transfer fees needed to complete a transaction on the Ethereum blockchain. Every transaction has a block with data in it. Blocks can only process a limited amount of data within them, so miners have to pick which transactions they process first.
Since Ethereum is a decentralized blockchain, it relies on many servers or computers around the world to provide the necessary level of computing power to complete transactions. The cost isnât always the same, because it depends on the supply and demand.
Miners are the people who provide the necessary computing power to the Ethereum blockchain. Also, they set the price for gas fees based on how much it costs to provide the service. The more data a contract or transaction has, the higher the gas fee it is going to be because it requires more computing power to execute.
Gas fees exist to increase the security of each transaction. While low gas fees would mean cheaper prices for the user, it would also mean less security, because it would be easier for external actors to manipulate the blockchain.
Gas fees are paid in Ethereum’s native currency, ether (ETH). Gas prices are denoted in gwei. Each gwei is equal to 0.000000001 ETH.
Ethereum gas prices depend on the demand. The more people are using apps built on top of Ethereum, the more computation power is needed from miners to execute the contracts.
That is because the more people use it, the more data there is to be handled. This can be a good sign for Ethereum because it means that there is a lot of interest from people, but it can also become expensive for regular users who want to complete transactions.
The standard limit for the Ethereum transaction gas fee is 21000 gwei. For more complicated transactions such as smart contracts, the fee is going to be higher.
If you want your transaction to be completed by the miners faster, you can increase the gas. The amount of gas that is not used will be returned to you by the Ethereum network.
If you set it too low, however, there is a risk of your transaction being declined and losing your ETH. Users can also set a maximum limit on the amount of gas fee they are willing to pay for, and can also tip the miners.
Both Ethereum and Bitcoin are built on the blockchain. Since blocks in the blockchain can only hold a specific amount of data, miners choose which block they are going to process based on their incentives and priority.
Bitcoin fees can also increase due to the congestion on its network. If there is a shortage of miners or increased activity, the fees will go up. This has happened in the past for both Ethereum and Bitcoin. There have been different solutions proposed.
Bitcoinâs Lightning Network is one example. Lighting Network is a Layer 2 protocol that aims to increase the number of transactions that Bitcoin can handle so that its’ fees will be lower.
Ethereum gas fees also depend on the volume the network is handling, but since the Ethereum blockchain is built as a platform for multiple use cases, the data that needs to be processed is diverse and large.
Etherum plans on overcoming this problem through ETH 2.0, a major upgrade in the way Ethereum works.
Since the world of crypto is very dynamic, it is natural that you need to stay updated all the time and look at different data. There are several ways you can check gas fees and compare different data that help you make the best decision on when to complete a transaction.
Some of the ways you can do this are by utilizing various websites and apps extensions such as:
- Etherscan – A block explorer that lets you monitor transactions on the blockchain.
- Blocknative – Google Chrome extension that estimates gas fees for ETH.
- ETH Gas Station – Website that monitors key gas fee data.
The Ethereum community, headed by the Ethereum Foundation, is actively looking for ways to improve the technology, including the gas fees aspect. The way through which this is expected to happen is by upgrading Ethereum to Ethereum 2.0.
ETH 2.0 means that among other changes, Ethereum will switch from a Proof Of Work model to Proof Of Stake. This means that the responsibility of validating a transaction will go from miners with a lot of computing power to people who have staked at least 32 ETH.
The network will randomly select people who have this amount staked to validate transactions. This will make Ethereum more energy-efficient, as it is predicted that it will use 99% less energy than it does today, but also cause a drop in gas fees, due to a higher number of participants in the validation process.
Ethereum 2.0 is a process that is split into multiple phases and is being implemented gradually, with previous accomplishments such as the âLondon Upgradeâ already in place.
Vitalik Buterin, the creator of Ethereum and head of the Ethereum Foundation, has stated that 2022 is the year when Ethereum switches to a Proof Of Stake model.
Although Ethereum gas prices can be frustrating, and cause a high barrier of entry for many getting started in the NFT space, the future looks hopeful.