The past few years have seen NFTs explode onto the blockchain scene, progressing from a relatively unknown technology to one that’s been papered across the front pages of seemingly every crypto publication. Global trading volumes for NFTs have increased, with the market expected to hit $122.43 trillion by 2028.
This digital medium has a bright future thanks to the integration of NFTs into Play2Earn’s blockchain gaming projects, and metaverse creations. While progress has been impressive within the world of NFTs, their increased popularity also comes with a fairly hefty downside – rising gas fees when processing transactions.
NFTs minted on Ethereum make up the majority. Ethereum’s ERC-721 is an industry standard that allows for creation of new digital assets. Although Ethereum’s infrastructure provides a comprehensive ecosystem where users can create, distribute, and trade their acquired NFTs, the blockchain network itself has a notoriously low threshold for transactions per second, leading to high gas fees.
Although this was common knowledge when Ethereum was created, L2 networks will solve the problem. This development could increase the likelihood of NFTs growing sustainably and lasting their existence.
In this article, we’ll explore the current state of the NFT market, touching on Ethereum’s gas fees and the role they play in NFT expansion. We’ll then turn to L2 networks and discuss exactly how the introduction of these technologies is set to change the industry for the better.
Why does Ethereum have high gas fees?
Ethereum, a blockchain ecosystem has many benefits that make it the most widely used chain for developing. Over 3,000 of the currently active dApps are built on Ethereum. This is due to the extensive tools and developer community that the system provides.
Ethereum is not only known for its ability to create applications but also because of the wide range of tokens it offers. Each token has a unique function which makes blockchain development possible. With the rigorousness of the Ethereum ecosystem, it’s no wonder that it’s become so popular.
However, this popularity has also led to one of Ethereum’s weaknesses, its slow TPS speed, to start to impact the system. Ethereum cannot maintain its own popularity with only 15 transactions per seconds. When someone attempts to process a transaction, it joins a queue of other transactions, waiting until it’s at the front of the queue to then be processed onto the next block.
To skip these queues and ensure an instant transaction, users have to pay a gas fee – a one-off payment that pushes their transaction data right to the front of the queue. The queue for Ethereum is often very long due to its popularity. A transaction fee of $18 will push it through.
Although $18 seems like a steep price for processing transactions, it is still a far cry from the $196.64 high on May 1. The current stable higher figure is indicative of the instability of Ethereum. Users must also pay different gas fees, which is a reflection of the central weakness of Ethereum: its popularity.
How do gas fees impact the world of NFTs
A digital artist must go through minting the artwork in order to make an NFT. You take the digital file you have created and convert it to a digital asset. Your digital asset can be sold through smart contracts after it has been added to the blockchain.
To mint an NFT, you must first process a Ethereum transaction. Your transaction will need to be approved in order to make the asset. As with all transactions, users will need to pay the fee for pushing their transaction forward.
If a digital artist wishes to convert their digital art into NFTs they will need to pay a fee for each piece they wish to sell. If the artist doesn’t have an established following, or there are no buyers ready to purchase their artwork, the $18 gas fees could be prohibitive.
Quite simply, if a NFT vendor can’t sell their piece for more than $18, then they’ve lost money. The gas fee can significantly reduce their margin, even if the item sells for $30. This is why the NFTs have a higher barrier of entry than they should. Only artists who can make an initial investment will be able to list digital assets on the marketplaces.
What is the best way for artists to sell their NFTs?
Artists who want to sell art online should first sign up for an online non-custodial wallet. Ambire, a digital wallet which allows you to access your funds and make any crypto movements easily from anywhere in the world, is an example of a non-custodial online wallet. Ambire is a popular NFT platform because it recently announced that users can prepay gas fees in order to lower their cost. This scheme is known as Gas Tank.
Once an user has created their digital wallet, they will be able to use any NFT market to list, buy, or sell their artwork. As the world’s largest DeFi exchange, Binance NFT is typically the marketplace that artists go to when looking to distribute and exchange their art. The platform has a large customer base which allows new artists exposure. They also have exclusive partnerships and celebrity endorsements that allow them to engage the public.
Binance NFT recently launched an exclusive collection in collaboration with Franck Müller, a Swiss luxury watchesmaker. They distributed NFTs from their watches to the platform. Another recent headline has been Mike Tyson’s involvement in the Binance NFT space, releasing a Mystery Box NFT that users have been flocking to.
Binance NFT has a lot of community support and many artists can begin their career on the platform. Artists will be able to mint NFTs and sell them to others through this easy-to use site.
Some digital artists go beyond the generalist markets and sell their themed artwork in more niche locations. NFT artists who are passionate about popular sports might look into Maincard. This marketplace focuses exclusively on NFT, and digital assets related to major matches.
Digital artists can reach a targeted audience by using specific media like these. As the world of NFTs continues to grow, we’re likely going to see many more of these specialist digital platforms emerge to support niche exploration.
L2 Networks are set to shake up the world of NFTs.
Over recent months, Ethereum, as well as other major blockchain ecosystems, have been releasing news around various updates that they’re making, or are planning, for their networks. One of the main center points that encompasses Ethereum’s new 2.0 system is the inclusion of Layer 2 systems. Layer 2s provide a comprehensive extension to L1 and integrate into the central ecosystem.
L2 ecosystems are not like side-chains. They use the same blockchain that their partners. This ensures high security and a simple bridging path between them. Boba Network integrates directly with Ethereum, and strives to expand the amount of transactions per second. Ethereum can reduce its gas charges by giving it the speed and tools to scale up its operations.
This action allows NFT makers to accelerate their transactions by integrating L2 systems that are focused on scaling into L1 systems. This allows both buyers and sellers of NFTs to instantly access lower prices.
Once L2 is integrated into an NFT, Ethereum users will be charged a small gas fee. This allows them to increase their margins on all sales. Users will also need to pay a fee to register a transaction in which they buy NFTs on a market.
The increased scale that L2s provide to Ethereum will increase accessibility for those who buy NFTs. The gas fees will be smaller and they won’t have to pay huge fees for each NFT they purchase.
NFTs are a more affordable market because of the benefits for both seller and buyer. While many like to focus on the most expensive NFT sales, with Christie’s auction house bringing in over $150 million worth of NFT sales in 2021, the reality is that most NFTs go for around $30.
Both buyers and sellers will benefit from technological advances that suddenly increase margins by only a few pennies in gas costs.
Final Thoughts
NFTs are on a steady upward trend over the last few years. However, L2 networks will facilitate further growth. With L2 networks providing a strong foundation for the leading blockchains, such as Ethereum, the scaling problem in blockchain will effectively be resolved, increasing TPS, and decreasing gas costs.
NFT creators who need to process transactions before selling their digital assets can lower their entry fees, making it easier for more people to join NFTs. That’s not to mention the easier buying circumstances, with buyers having to pay less when wanting to transfer an asset into their digital wallet.
With the arrival and vast integration of L2 networks into the world of NFTs, we’re likely to see a resurgence in their popularity, with NFTs set to shake up the world of blockchain over the next few years.