Bitcoin NFTs or Non-Fungible Tokens have taken the world by storm in recent years. From digital art to tokenizing real-world assets, the potential uses for NFTs are vast. However, with the explosion of interest in NFTs, the fees associated with using the Ethereum blockchain have skyrocketed. This rising cost is becoming a cause for action as it threatens to limit the accessibility of NFTs to all but the wealthiest individuals.
NFTs are tokens that represent unique digital assets, such as art, music, or even tweets. These tokens are stored on a blockchain, giving them a level of security and permanence that traditional digital files don’t possess. Ethereum is the most popular blockchain for NFTs due to its ease of use and wide adoption.
However, using the Ethereum blockchain comes at a cost. Each transaction on the network requires a fee paid in Ether, Ethereum’s native cryptocurrency. These fees, known as gas fees, cover the cost of processing the transaction on the network and rewarding miners who verify it. As the demand for NFTs has grown, so too have the gas fees associated with using the Ethereum blockchain.
In February 2021, the average gas fee for an Ethereum transaction was around $20. By May, that fee had skyrocketed to over $70. At its peak in mid-May, the gas fee hit an all-time high of over $300. These fees are putting a strain on creators and buyers alike and are proving to be a significant barrier to entry for many individuals.
Creators who want to release NFTs are increasingly finding the costs prohibitive. For artists and musicians just starting out, the fees associated with releasing NFTs can be a significant financial burden. Even established creators may be unable to justify the costs, especially if they want to release multiple NFTs. This is particularly true for artists who create shorter-form content, such as GIFs or memes, where the potential return on investment is lower.
Buyers also face rising costs. Purchasing an NFT requires paying the gas fee to complete the transaction. With fees sometimes reaching hundreds of dollars, it’s becoming less feasible for buyers to invest in NFTs with smaller price tags. This is particularly true for those who want to make frequent purchases or build up a diverse NFT portfolio.
The rising fees associated with NFTs aren’t just a problem for creators and buyers; they’re also a problem for the Ethereum network as a whole. If the cost of using Ethereum continues to rise, it will eventually push less wealthy users off the network, leading to centralization. This is because only those who can afford to pay the high fees will be able to use Ethereum, limiting the ability of the network to function as a true decentralized platform.
To address this problem, several potential solutions have been proposed. The most straightforward solution would be for Ethereum to increase its capacity, allowing more transactions to occur simultaneously on the network. This would require a significant investment in infrastructure, including upgrading computer processing power and storage capacity.
Another potential solution is to migrate the Ethereum network to a more efficient blockchain. Several alternative blockchains, such as Solana and Binance Smart Chain, offer faster transaction speeds and lower fees than Ethereum. Migrating to one of these networks could help alleviate some of the cost pressures associated with using NFTs.
Finally, the Ethereum community could seek to improve the gas fee market itself. By making changes to the way in which gas fees are set, the community could reduce the overall cost of using Ethereum without requiring significant changes to the network infrastructure. This could include using algorithms to determine the optimal fee for each transaction or removing the separate gas limit and gas price components of Ethereum’s gas fee system.
Regardless of the solution chosen, it’s clear that action needs to be taken to address the rising fees associated with NFTs. The continued growth of the NFT market depends on ensuring that creators and buyers of all backgrounds can participate without incurring unjustifiable costs. By reducing gas fees, the Ethereum community can ensure that NFTs remain an accessible and viable asset class for all.
Bitcoin has been facing a surge in new activity on its original blockchain, leading to a spike in transaction fees, which have reached $30.19 for a simple bitcoin transaction on May 8, after hovering around $2 since July 2021. While some have blamed BRC-20 tokens and other assets based on the “ordinals” issuance method for driving up prices, it is important to note that Bitcoin’s main issue is scaling. If even a few million people wanted to use Bitcoin to send money peer-to-peer regularly, the network would face the same scaling issues, making the recent explosion of interest in BRC-20 tokens ultimately a blow to the very “maximalist” vision held by those opposed to non-monetary uses of bitcoin.
The mempool, where transactions wait to be validated, provides a good metric for understanding this congestion. According to Jochen Hoenicke, a researcher at security firm Certora, Bitcoin’s mempool has never been this full. The last major peak saw 200,000 transactions waiting in line, while yesterday, that number peaked at 450,000. This uptick in small transactions confirms that the demand spike has been driven by speculators issuing and minting tokens using the experimental BRC-20 standard. While there is hype around these tokens currently, it is important to acknowledge that they are largely memecoins and will only lead to a short-lived bidding war.
However, this frenzy is a warning that should trigger preparation for a sustained barrage. If even a small fraction of the world were using Bitcoin for monetary transactions, the chain would still face scaling issues. Therefore, Bitcoiners should focus their energy on preparing for the imminent problem of sustained higher fees driven by everyday users, rather than focusing on a temporary fee spike driven by degens.
There is also a hypothetical irony, as the actual viability of both ordinals and fungible tokens on Bitcoin is still unclear. However, it is not impossible to envision some form of ordinal technology enabling entirely new approaches to scaling Bitcoin, perhaps including “layer 2” technology closer to what Ethereum can accomplish.
In conclusion, Bitcoin’s high fees amidst a surge in new activity on its original blockchain can be attributed to the network’s inability to scale, and blaming ordinals does not change that fact. Bitcoiners should focus their energy on solutions to the imminent problem of sustained higher fees driven by everyday users, rather than putting all their effort into a temporary fee spike driven by speculators. The recent explosion of interest in BRC-20 tokens ultimately serves as a warning that should trigger a frenzy of preparation for a sustained barrage, and may even enable entirely new approaches to scaling Bitcoin in the future.