Even though entrepreneurs, billionaires, and NFT enthusiasts keep influencing the general public and internet users to invest and trade NFTs, there are several things that they need to know. First, trading non-fungible tokens are not free in many marketplaces. You will likely part with $50 or more when dealing with blockchains such as Ethereum, which you must-have in your crypto wallet before making a sale. It is used to cover the amount of energy used in selling or minting NFTs.
To help you learn more about this topic, this article will look at all the information you should know about NFT trading fees on OpenSea and what you can do to limit some of them, such as gas fees. Remember, we are interested in your well-being and would like you to make the most out of your trades and investments. Let’s delve more into this topic.
This is one of the common fees that people are expected to pay on the Ethereum Blockchain. It is applicable in OpenSea, which relies on this blockchain for its smart contracts and NFT registration. (it is based on the ETH Blockchain). It is normally defined as the transaction fees on the Ethereum blockchain, which you will incur when transferring crypto to a different wallet or when purchasing an NFT, a process popularly known as minting. These fees are also paid to maintain the ETH blockchain.
When making your first transaction, you must have enough ETH on your wallet, which is normally a big turn-off for several NFT traders or enthusiasts, especially beginners. You will end up disappointed if your main aim is to make money off NFTs and spend nothing in return. These fees are non-refundable since the platform does not receive them.
Calculating Gas Fees
This discussion will be important when discussing some upcoming topics as it will help you understand why the price of gas fees keeps soaring and how you can avoid spending excessively on gas.
Every Ethereum transaction costs way less than 1 ETH and is measured in Wei. Gas fees are represented by gwei, one of the most popular wei values. You can spend 1000 gwei on a particular ETH transaction, which is similar to 0.000001 ETH. This value is referred to as the base fee. It is part of the total gas fees payable.
The total gas fees on a given transaction will be obtained using the Gas Unit(limits) * (Base Fee+ Tip), terms we have to explain. The gas unit is the total amount of gas one is willing to pay for in a transaction. Ensure that you carefully adjust this value as it may result in loss of the gas fees and a reversal of the transaction.
On the other hand, the base fee is the minimum quantity of gas to record ETH transactions. This is normally largely influenced by the demand for transaction inclusion. Note that the base fee will easily change depending on the congestion of the blockchain.
Lastly, tips are the priority fees paid to fasten a transaction. It acts as an incentive, directing those mining Ethereum to give you priority when recording transactions on the blockchain. Remember that the higher the tip, the faster the transaction. This is normal since everyone wants to make the most out of any NFT transaction.
What is the Genesis of Gas Fees?
We have to help you understand where these costs come from. Well, even though plans are underway to revolutionize the Ethereum Blockchain, it still uses the proof of work mining model where decentralized computers process and record transactions. However, these transactions find their way to the blockchain after every fifteen seconds, earning miners payment through ETH.
Where exactly do gas fees come in? Miners are paid to process the transaction, which does not guarantee their success due to the wide fluctuation.
Types of Gas Fees
Note that the user may have to incur three different types of gas fees in the OpenSea marketplace. The ETH Blockchain has recurring fees and one-time fees. Some actions are also gas-free, meaning users won’t have to spend a dime. We will explain that later. Let’s discuss these types of fees:
1. One-Time Gas Fees
As the name suggests, the one-time gas fee is only paid once. A good example is the account registration fees you pay when new to the OpenSea platform. It applies to anyone who has not made a transaction or sold something on the blockchain. It is only charged once, which should be a relief for new OpenSea members or users.
This normally acts as the account initialization free before listing any digital asset on the Ethereum-based platform. It allows you to transfer money to transact between your crypto wallet and the OpenSea platform. This account initialization fee further enables the blockchain to access the necessary transfer items whenever a sale occurs.
You won’t get an expected value since it greatly relies on the network congestion at a particular time. Note that it is also higher than the average NFT transaction as it empowers your wallet and the OpenSea platform to transact and the latter to access the relevant items in case of a sale.
The second one-time fee is the token or contract approval fee on the Ethereum Blockchain. This is normally paid when the items listed were not originally minted in OpenSea, but using a custom NFT collection contract, such as the Bored App Yacht Club, one of the most successful 10K NFT projects in the NFT space. This fee authorizes the necessary transactions between your wallet and the smart contract. It also allows you to use given crypto on OpenSea for the first time, acting as a token approval. Note that it is quite popular when listing a token for sale or trying to purchase one for the first time and also applies to currencies such as a DAI and USDC.
In conclusion, you will have to part with a one-time gas fee when registering your account and approve the cryptocurrency tokens to be used on the OpenSea platform.
2. Recurring Gas Fees
This is self-explainable just from the wording. Recurring gas fees are different from the former since they are applied repeatedly. You will mostly incur them when transacting on this blockchain, which should tell you that buying and selling NFTs is not as free as you thought. What does this mean?
You will have to pay gas fees whenever you accept an offer on OpenSea, transfer the NFT to a buyer, or gift it to someone else. The recurring gas fees also apply whenever you acquire an NFT, cancel a listing or a bid withdraw ETH to and from the network. Note that they are not constant and greatly rely on the number of operations on the blockchain when making the deal or approving the given process. If fewer people are transacting on the Ethereum Blockchain, the recurring gas fees will be less expensive. However, you will spend a fortune when many people are transacting on the same blockchain.
Recurrent gas fees are also paid when freezing an NFT’s metadata, bridging ETH, or withdrawing it to and from the Polygon Blockchain, and during cancellations.
3. Gas Free Actions
We also have to mention gas-free actions on OpenSea to keep you ahead of the game. You will not incur any costs when minting a new NFT, popularly referred to as lazy minting; listing a fixed price NFT; coming up with a collection; reducing the floor price of a listed NFT, and listing one on auction.
Why are Gas Fees Expensive?
You cannot adequately understand gas fess if you can’t tell why they are expensive. There are two main factors responsible for this phenomenon.
First, gas fees are expensive because of the cost of ETH. Ethereum is one of the most expensive blockchains in existence. These fees are denominated in gwei, an alternative ETH quantity representation. If you are wondering why, note that DeFi and the entire NFT market are booming, leading to high demand for the blockchain’s products by the increasing number of users.
Secondly, we pay more gas fees on Ethereum due to base fees. This is closely related to the total fee formula of Ethereum, which is highly dynamic. Keep in mind that base fees refer to the smallest quantity of gas needed to record a transaction on the ETH Blockchain. Due to the increasing number of Ethereum users, base fees have recently increased.
Note that the Ethereum Blockchain boasts of one of the highest numbers of decentralized applications, whose transactions must be included in it. These applications can record up to a quarter of a million transactions daily. The higher base fees are also caused by the increased adoption of ETH, which has made the former highly volatile.
Apart from the gas fees, OpenSea also demands a commission whenever you sell a non-fungible token. This is understandable since the platform is a bridge between you and the buyer, allowing you to sell the token without worrying about marketing or appealing to the audience.
Note that this platform has a simple mode and will only be entitled to 2.5% of your OpenSea transaction. Therefore, if you sell and NFT for an equivalent of $100, the platform will only take $2.5, allowing you to enjoy the 97.5%. However, you can easily recover the fee as the platform allows you to earn revenues of up to 10% on the subsequent sales. You will get an alert every time your NFT gets a new buyer.
How to Avoid High Gas Fees on Ethereum
You have to reduce the gas fees charged on ETH if you intend to make a fortune selling your NFTs on OpenSea. Well, this will require that you do things differently and, in this case, avoid instances that may attract super-high gas fees. Here are some great solutions to avoiding exploitative gas or transaction fees.
1. Avoid Failed Transactions
Note that the ETH Blockchain responsible for OpenSea will attract gas fees whether your transaction goes through or not. These payments are purely incurred to record the transactions on the blockchain and do not guarantee that they will be successful. You can easily reduce high gas fees or unnecessary payments by limiting failed transactions by dropping and replacing or setting the gas limit of your transaction to be too low.
You only need to drop and replace the transaction with a new one for the former. However, setting an extremely low gas limit is quite detailed and may not be possible nowadays since the platform automatically captures transactions gas limit settings on the blockchain. This means that you are likely to end up with a failed transaction if you defy and change the gas limit settings.
What then should you do? Ensure that you check useful websites such as ETH before authorizing a transaction or using other gas-free options.
2. Be Patient and Sell the NFT Later
Nobody loves spending high gas fees when trading, listing, or canceling an NFT bid. It also sucks to pay a significant amount to freeze your NFTs metadata. What then can you do? Note that the gas fees paid during NFT transactions are often higher when the blockchain is highly congested. What does this mean? You will incur more gas fees on OpenSea if several NFT transactions are happening simultaneously.
Therefore, you can make the transactions later when the blockchain is less congested to attract lower prices. This is especially important for beginners who may not have adequate information to avoid exorbitant fees. It is usually the easiest way of avoiding high gas fees, provided that you can time yourself well.
3. Incorporate Relevant Tools and Software
There are several tools and software that can tell you if the gas prices are high or low before you make a transaction. A good example is ethereumprice.org/gas, which lets you view the gas prices you incur at particular times. Therefore, you will tell the best time to transact on the blockchain and even avoid congestion, known for high transaction fees.
You can also use ETH gas station, a renowned website that tells you the required gas fess before confirming a transaction. Nobody should spend extremely high transaction fees on non-fungible tokens when they can pick the right time for a transaction.
3. Set a Maximum Fee Limit
Do you know that you can set a maximum gas fee limit on your transaction to avoid paying extra? Well, a maximum limit will tell the blockchain the highest amount you are willing to spend on a given transaction as gas fees. Even though the blockchain can exceed the set amount, it will immediately refund the extra value that was not part of your gas fees.
Remember, this step will help you curb your spending on gas and, at the same time, give you much-needed peace of mind when dealing with NFTs. However, you risk losing your fee and reverting the transaction if you set a value below the required amount because the ETH miner will be entitled to the required fees after processing your transaction regardless of whether it was successful or not. Therefore, be careful.
3. Use a Different Blockchain
Even though this should come as a last resort, it can still help you reduce the gas fees spent on an NFT. Note that Ethereum is not the only blockchain for creating and listing non-fungible tokens, and therefore, you should not feel pressured. Most people are turning to Polygon, lauded for its gas-free operation. Here, you can create and trade these tokens without incurring any fee.
5. Using Layer 2 Scaling Solutions
You will discover that there are layer 2 Scaling solutions as you interact more with non-fungible tokens. You will spend less on an NFT if you identify the right scaling tool, which is basically Ethereum network extensions. They speed up transactions and increase the number of transactions processed in one second. You can extensively research Loopring and Arbitrum if you don’t know where to start.
How do these solutions reduce gas fees? They are not based on the blockchain, meaning that they independently deal with transactions and away from the ETH Blockchain. They have a similar working mechanism where the transactions are finally verified and recorded on the ETH Blockchain.
These solutions greatly reduce the number of gas units one needs to complete a given transaction. Therefore, the minting and mining processes will require fewer amounts of gas since these solutions only work with the blockchain during validation. Lastly, they reduce the congestion responsible for higher gas fees on the Ethereum blockchain, lowering the base fee for different users.
This article has covered most of what you need to know about OpenSea’s fees. Remember, you will either incur them recurrently or once. Ensure that you know how to reduce the said fees to maximize your profit limits. Also, please take note of our future articles, which will help you profit heavily from NFTs.