What is an NFT?
NFTs are digital assets that come in many forms, from digital artworks to collectables like CryptoKitties, to killer in-game weapons for your favourite game. They are unique tokens that are issued on your choice of blockchain, a system of recording information that maintains a shared and public ledger of all transactions.
The underlying blockchain technology allows NFTs to act as digital receipts that supply proof of ownership for a virtual (or physical) item. Some of the most popular blockchains for NFT creators include Ethereum, Solana, Polygon, Gnosis, and more recently, NEAR. However, the landscape is in a constant state of flux as this emerging technology continues to develop.
Why Does Creating an NFT Come With a Price Tag?
In order for an artist to create and sell an NFT, they first need to ‘mint’ their NFT. The term ‘minting’ originally comes from a process used for creating regular cash, or ‘fiat currency’. Physical coins are minted using a specific concentration of precious metals, like gold or silver. Adding these metals to coins stores the asset’s value in a tangible way.
When an artist mints an NFT, they are converting a digital file into a digital asset by uniquely publishing their token onto the blockchain to make it available for purchase. This process requires a fair amount of computing power. Currently, most blockchains still use a lot of energy when they transfer and validate transactions. Gas fees cover the cost of these processes and can vary substantially depending on the platform you’re using.
Other fees include account fees and listing fees, which are set by the marketplace you’ve chosen to sell your work. Typically, marketplaces incorporate their fees into blockchain transactions when using their network. The most popular NFT marketplace, Opensea, takes 2.5% from each of your transactions as their listing fee.
Ethereum: The First Home of NFTs
The first blockchain to support NFTs was Ethereum, which was launched back in 2015. It’s an innovative blockchain that set itself apart from its pioneering competitor, Bitcoin, by being more than just a blockchain for cryptocurrency. Instead, Ethereum served as a blockchain-based software platform that would allow creators to use its open-source code for building DAOs, dApps, NFTs, and more.
When it comes to minting and gas fees, prices can fluctuate wildly on Ethereum, primarily due to network congestion. New competitors like Solana — which claims to be the world’s fastest blockchain — as well as NFT marketplace Polygon, have built their platforms on more recent blockchain innovations, providing an alternative for artists.
Ethereum’s current overhaul of its platform for Ethereum 2.0 is expected to bring many improvements, including faster speeds and stable gas fees. Although the platform is not without its shortcomings, Ethereum continues to be the most widely used platform for NFTs, and is a top choice for anyone looking to try their hand at entering the NFT market as a creator.
Their considerable market presence makes them a secure option for investors and its enormous ecosystem accounts for roughly 95% of NFT users, giving creators substantially more opportunity for exposure and profit.
The Cost of Gas
Gas fees cover the computational power needed to perform specific functions on a network, and are paid using the blockchain’s cryptocurrency. In the case of Ethereum gwei is used, which is a denomination of its cryptocurrency, ether (ETH). One 1 gwei is equivalent to 0.000000001 ETH.
While prices fluctuate, the standard transaction fee for minting NFTs on Ethereum is 21,000 gwei. There are, however, more complicated transactions that can rack up higher costs. Some of the factors that make a transaction more complicated are if you want the minting process to be completed more quickly, or if your files are on the larger side. It also fluctuates according to demand, which is why it’s a good idea to keep track of Ethereum gas prices using a gas fee tracker like Ycharts.
These days, the gas fees on Ethereum tend to range between USD 1 and USD 5, but there was a time when users could pay fees as high as USD 100. Artists looking to pay gas fee costs only after their NFT is sold now have the option of lazy minting. In these instances, the fees are deducted from the final sale.
The Solana blockchain offers some of the most affordable gas and minting fees, and is the second most popular blockchain for NFTs, after Ethereum.
On Solana, minting an NFT requires three blockchain transactions. Each transaction costs approximately 0.00045 SOL. At a price of 1 SOL at USD 95, one transaction fee would be equal to USD 0.04, bringing the total cost of minting up to 0.00135 SOL, or USD 0.12.
Polygon is another great option for minting NFTs because the blockchain uses the most popular NFT marketplace, OpenSea, to complete transactions.
On Polygon, you can easily mint and list your NFT without any upfront costs, since it uses lazy minting as its default option. With this option, however, the platform charges a 2.5% service fee, which is deducted from your earnings once your NFT is sold.
Even though you’ll be selling your NFT using the Polygon network, the selling price will be in ether (ETH). This is because Polygon is a Layer 2 blockchain solution that is built alongside Ethereum.
Layer 2 blockchains and their benefits
Layer 2 (L2) blockchain solutions are like patches or updates for existing Layer 1 (L1) blockchains. They function as a secondary framework, or protocol, built on top of an existing blockchain system. Their job is to solve the transaction speed and scaling issues that so many major cryptocurrency networks are currently facing.
Most L2 chains, like Polygon, are Ethereum-based, where developers have copied Ethereum’s code and tweaked it to run slightly differently. L2 chains are integral to the evolution of the NFT marketplace because they maintain the integrity of an existing blockchain. They accomplish this by facilitating interoperability between L1 and L2 chains — essentially allowing them to ‘talk’ to one another — while solving its speed and scaling issues.
L2 solutions also minimise the blockchain’s carbon footprint since it uses energy more efficiently. By limiting the computational power required to mint and transact NFTs, L2 chains enable a welcome reduction in gas fees.
Declining Gas Fees
On Ethereum, gas fees have steadily been rising due to the platform’s success, and the increase in users has caused huge spikes in network usage. Along with higher gas fees, this has resulted in network congestion and downtime. But it isn’t all doom and gloom. As of March 2022, Ethereum gas fees have been declining and have seen their lowest since August 2021.
Users can also take matters into their own hands to ensure lower gas fees on their transactions. Layer 2 solutions like Polygon are helping lower gas fees by easing congestion on the mainnet (main network) of blockchains, typically Ethereum. By using layer 2 solutions you can save on gas fees and contribute to lowering congestion.
Users can also track the price of gas and accurately calculate their fees using tools like Etherscan's Gas Tracker or Gas Now. Another great tactic for lowering fees involves planning your transactions ahead of time using predictive tools, like Ethereum Gas Charts, to ensure that you mint NFTs during off-peak hours.
Lazy Minting, Delayed Costs, and Free Minting
For most platforms, you’ll need to pay some sort of minting fee upfront to turn your digital file into an NFT on the blockchain. There are also alternatives where you can postpone minting costs. On Opensea, you now have the option of lazy minting, where creators can delay paying gas and minting fees until after an NFT is sold.
Momint has also structured its minting process so that none of its gas fees are passed onto the creator — or buyer. Instead, our gas fees are built into a standard percentage that Momint earns from each sale. For artists, this structure removes the risk of minting NFTs as they no longer have to worry about paying gas fees. This frees up creators to focus on what matters — minting bold and inventive works.
There are a few restrictions to bear in mind. Artists can only mint one free NFT a week, and if they want to mint NFTs more regularly, or upload a larger batch, they’ll need to pay a nominal gas fee. Early adopters also have the opportunity to drop 6 NFTs at once — for free — when they first sign up. This helps them gain exposure and become more active members of the NFT community!
Learn more about how Momint allows you to create NFTs without gas fees.
The Cost of Making an NFT
While minting and gas fees still pose some obstacles to NFT creation, the blockchain ecosystem is quickly evolving to develop new methods that streamline the process. From lazy minting to layer 2 blockchain solutions, to Ethereum’s platform-wide overhaul, each innovation brings us closer to affordable, and accessible, minting for all.