The NFT industry has a gas problem

The NFT industry has blown up as one of the first recognizable crypto trends in the wider culture. Even people who don’t have any clue about how blockchain works or what exactly smart contracts are have heard about NFTs and how they’re the future of digital ownership. But there’s a huge problem in the industry that only people who actually own or sell NFTs talk about — gas fees.

As of this writing, the average gas fee of an NFT sale on OpenSea is $8.61. That’s coming down from some of the higher prices we saw in 2021. But despite the dip, this is an ongoing, huge problem for the NFT industry. People can hardly talk about NFTs without complaining about gas fees. Most say NFT markets and even Ethereum itself are not sustainable with such high fees. After all, half the reason we want P2P blockchain transactions is to cut out legacy middlemen who charge too many fees, right? So how can the industry bring the prices back down and trading volume back up?

How the NFT industry can solve its gas problem

Everyone demands to know why NFT gas fees are so high but more importantly, they want the problem to be solved. If it goes away, does the end-user really care why it happened in the first place? There are several possible solutions and the NFT industry is hoping they can all contribute to a lower-gas-fees future.

1: Updating to Eth 2.0

Because Ethereum is the largest smart contract blockchain and the home of most of the NFT market, this is where a lot of the transactions happen. Unfortunately, that’s also where the high gas fees are. When people ask why NFT gas fees are so high, they’re asking about Ethereum. It’s a scalability problem in which transaction volume, ETH price, and network speed all play a role. But a planned update called Ethereum 2.0 is meant to speed up the capacity and efficiency of the network which should, in turn, lower gas fees. Unfortunately, however, the update has been slow to arrive, and it’s still not here.

2: Multichain

Another growing but not-fully-realized solution to the gas fees problem is simply not using Ethereum. Some of the alternative layer 1 blockchains like Soloana are beginning to create NFT marketplaces that allow for much lower gas fees. When an NFT sale on Solana costs less than one cent, it makes sense people would begin migrating there. Whether Ethereum can keep its place as the top smart contract platform may ultimately hinge on gas fees. 

3: Layer-2 solutions

There’s a third possibility for solving the NFT industry’s gas problem — and it’s not Beano. Layer 2 solutions like Polygon can settle transactions off-chain and only place them back on-chain in batches so that gas fees can, in essence, be completely removed. If there can be a gas-free future for the NFT industry, many people would be very happy.

Why is it taking so long?

It’s not very hard to understand why people dislike high gas fees; no one wants to do transactions that could potentially cost more than their NFT is worth. And we’ve already answered why NFT gas fees are so high in the first place. But why is a solution taking so long to arrive? 

Despite the fact that all the fixes mentioned above are already being built out and, in some cases, being used, it’s taking time to solidify a complete fix. One of the reasons it’s such a difficult problem to solve is the blockchain trilemma. The trilemma is a dilemma in which achieving three important characteristics — decentralization, scalability, and security — is incredibly difficult.

If a blockchain is sufficiently decentralized, like Bitcoin, it will not be very scalable. If it’s scalable, it may not be very secure. In the Venn diagram of scalability, security, and decentralization, no one has really been able to find the slice of the circle where all three overlap. If the NFT industry wants to solve the problem of high gas fees, it may want to solve the blockchain trilemma ASAP. Plus, other sectors like DeFi will also be thankful.

What the situation looks like currently

Last year, near the end of Q1 2022, Ethereum gas fees were dropping, to everyone’s joy. But the unfortunate surprise is that gas fees were not coming down because of some great solution. They came down because NFT trade volume decreased. Taking a sharp spike down, cryptobriefing.com says, “OpenSea handled $67.5 million worth of transactions on Mar. 13, 2022, a 70% decline from peak February levels.”

With world events that are almost as volatile as the crypto market, inflation in the US, and the Fed promising interest rate hikes, it seems people’s attention has turned, hopefully briefly, from the NFT market. Like all things in the crypto world, there are ups and downs. The NFT industry has already become so woven into brand strategies, celebrity and influencer culture, art, and even the metaverse, that it’s definitely not going away any time soon. But if the problem of why NFT gas fees are so high gets corrected by reduced volume, that’s not a real solution.

Conclusion

The NFT industry has a big problem with high gas fees, and though it’s getting solved, it doesn’t seem to be happening fast enough.

It’s not just a thorn in the side of NFTs, either. DeFi and other crypto sectors are also suffering from getting gouged on transaction fees. Scalability across the cryptosphere is one of the most pressing issues. The faster it gets solved, the more parabolic adoption can go. It’s not very fun to introduce newbies into the crypto space only to have them immediately deflated by the promise of trustless, disintermediated transactions… which also have insanely high gas fees.

Here’s to hoping the NFT industry can right the ship soon.