NFTs solve the widespread and age-old problem that plagued the art industry for quite a while, and that is ensuring digital scarcity. The rise of NFTs paved the way for digital artists to drive the growth of the art industry.
However, while some NFT sellers might be sitting on millions of dollars, many artists have yet to find their pot of gold.
Photo by Executium
Although NFTs are a much-needed innovation for the art industry, the process can incur large hidden fees that first-time sellers might not be aware of, which can significantly cut into their profit margins or could incur losses.
Last month, top NFT platforms raked in nearly $600 million in digital assets, according to various data sources. Many artists are jumping on the bandwagon and trying their luck at selling NFTs amid the NFT hype. Oftentimes, little do they know that it’s not simple as it seems, and artists often need to pay more in “gas” than they assumed to start their adventure in selling NFT art.
Gas: A rising problem
The Ethereum blockchain is home to the majority of NFT artworks and is used by popular platforms such as SuperRare and OpenSea. Since Ethereum is powered by its native token, Ether (ETH), getting into NFTs will require users to use cryptocurrency for transactions, regardless of whether they’re selling or buying. Since the cryptocurrency market is extremely volatile, prices can be up by 20% one day and down by 15% by the next, so there’s a huge risk, especially if you don’t track the market.
Today, NFTs are highly affected by gas fees and inconsistent market value. The recent spike in network transaction fees seems to be taking its toll on the growth of NFT marketplaces. High gas fees have gradually turned into a major concern for the NFT industry as NFT creators are hesitant to mint new NFTs when gas prices are high.
Before we go into details, let’s talk about gas.
What is gas?
Gwei, a unit of gas, is used by miners on the Ethereum network to process transactions and is one of the main differences between Ethereum and other leading cryptocurrencies like Bitcoin. Essentially, the amount of gas you need depends on how large the contract you’re trying to execute is and how fast you want it to execute.
To be more precise, gas fees are typically paid in Ethereum’s native currency, Ether (ETH). Gas prices are denoted in Gwei, a denomination of Ether, where each Gwei is equal to 0.000000001 ETH.
So why does Gas exist?
Well, the Ethereum network has to run on gas so it can prevent users from spamming the network. Since the Ethereum network is based on the EVM, gas paid for by each computational execution disables malicious individuals from using unnecessary computational power to become de-facto coders on the Ethereum network and hijack the platform.
Gas: A Two-edged Sword
While gas maintains security on the platform, it can also affect users and the network. When gas prices are high, it becomes limiting for emerging artists to create, mint, or even buy other pieces of work. The rising gas prices have affected popular marketplaces like OpenSea and Rarible because they use Ethereum to turn your content into an NFT. OpenSea and Rarible are some of the more popular options in the market, and unfortunately, users have no choice but to shell out the network gas fees to put up a listing or purchase an NFT.
NFTs promise a world full of opportunities for arts and collectibles; however, as long as gas fees remain high on the Ethereum network, those opportunities will be more difficult to realize.
The scalability and network issues of Ethereum led to the introduction of numerous alternatives. Although gas prices have significantly decreased in recent months, users are still hesitant about the platform and its handling of the NFT hype. The introduction of NFTs has empowered thousands of artists to come out and attempt to make a living through sharing their art. However, the rising gas fees only made this less accessible for young and emerging artists.