NFT Gas Fees Explained
Every Ethereum operation requires computational effort. Somewhere out there is a machine that needs to process your purchase, transfer, mint, etc. And there’s a person in charge of it who needs to be compensated for their work. That is done using gwei, otherwise known as ‘gas’, which is basically a very small fraction of ETH, used solely to indicate the cost of performing an action on the Ethereum blockchain.
Not every action however costs the same amount of gwei. Although transactions are on average cheaper than minting, there are times when they become much more expensive. That happens whenever the ETH network is heavily congested, often during reveals or mints of popular collections. At that moment there are more requests than the miners who calculate them are able to process. This result in the Base Gas rising. Base Fee is the minimum amount of gwei you have to pay for your transaction to even be taken into consideration.
Paying the Base Gas alone doesn’t guarantee that your transaction will go through. On top of it, you’ll often have to pay a Priority Fee, which is basically a tip for the miner handling the operation. While usually it’s only a customary 1.5gwei, there are times when it needs to be raised significantly in order to increase the chance of a successful transaction. For example, there can be multiple wallets going for the same token at the same time. Since only one of them can complete the purchase, a miner chooses the one that pays him the highest Priority Fee.
Base Gas and Priority Fee combined make up the Gas Price. And while Base Gas is dynamic and there is no way for the user to control it, there are still ways to control the Gas Price you end up paying. You’re able to set the maximum Priority Fee you’re willing to pay (Max Priority Fee), as well as the maximum fee overall (Max Fee). Both of these can be preset ahead of time to match your needs. Then it’s only a matter of figuring out how different preset values interact with each other depending on the circumstances.
Below you’ll find visual representations of various scenarios that could occur depending on how gas is preset, along with some real-life examples. Block numbers used, as well as their base fees are hypothetical and used only to illustrate how Gas Price would behave under various market conditions and gas presets.
Max Priority Fee: 50 / Max Fee: 200
These imaginary scenarios serve to demonstrate the static nature of Max Priority Fee and Max Fee presets, as well as their impact on the Total Fee, depending on the Base Fee.
- First two blocks show the optimal scenario: Max Fee is high enough to accommodate both Base Fee and Max Priority Fee. Total Fee in this case equals combined Base Fee and Max Priority Fee.
- Third block shows what happens when combined Base Gas and Max Priority Fee exceed the Max Fee preset. In this scenario, Gas Price would be capped at 200gwei.
- Fourth block shows what happens when Base Gas alone exceeds the Max Fee. In that case your transaction would be rejected.
Max Priority Fee: 200/ Max Fee: 200
Some people prefer to set their Max Priority Fee and Max Fee to the same value, for example fast Etherscan estimate + 5gwei. While it might seem convenient, in most cases it is imprecise, since you never pay the Priority Fee you actually preset (compare max priority fee and priority fee paid in the chart above). Max Priority Fee being the same as Max Fee means that the Priority Fee you actually pay will never be as high as the preset would suggest. Instead it will be lowered by whatever the current Base Gas is. That means you have less control over the final outcome of your transaction, especially during Gas Wars.
Gas Wars
Gas Wars are periods of extreme congestion on the blockchain. There are too many requests for a transaction confirmation in a small window of time and, with miners not being able to process all of them, Priority Fees rise as people try to get ahead. There are a couple of ways of gauging what the requirements are at the moment. You can check the Ethereum Gas Tracker, although this only gives you a rough estimate of the average gas fees. Or you can look at the current pending transactions, featured on NFTNerds.ai (see image below). Under normal circumstances paying the highest gas on that list should guarantee success, though there’s always a risk of Flashbots going for the same token. Flashbots provide a direct line of communication between a buyer and miner and thus don’t show up on the pending transactions list.
Observing pending transactions provides a significantly better learning experience, because sniping is always about an individual token, and not about average gas fees. You have to beat everyone else trying to buy the specific NFT you’re after. Pending transactions show you precisely what settings your ‘opponents’ used.
Gas Price in dollars
It’s quite difficult to quickly calculate how much you’ll pay for gas. We came up with this simple method that gives a fairly accurate estimate under most market conditions:
- Step 1: Add current Base Gas and your Priority Fee and divide the sum by 2. That’s your lower estimate for gas price in $.
- Step 2: Take the number from Step 1 and add 50% to it. That’s your higher estimate of Gas Price in $.
To use a simple example, let’s say current estimated Base Gas equals 35gwei and your Priority Fee ended up at 5gwei.
Your estimates will be:
- Step 1: (35 + 5) / 2 = $20
- Step 2: $20 + 50% = $30
Meaning your gas fee will likely be somewhere between $20 and $30.
Below you’ll find three real-life transactions that happened under specific condition and the differences in presets used and Total Gas paid.
#905, Strong Ape Club
A regular purchase, outside of a period of heavy competition, will usually require a priority fee of 1.5gwei. Similarly the base fee at that moment will also be significantly lower, rarely exceeding double digits. Those are standard numbers outside of ‘Gas Wars’ or ‘Sniping Wars’.
#2261, The ApeDads
An underpriced token with a rarity rank of 1 will always be a target of many bids, especially during a reveal. That means purchasing it will often require a high enough max priority, and by extension a high enough max fee to accommodate it. In this case the base was still relatively low — in double digits — but the max priority was set to 556gwei.
#6747, Kindergarten BabyApe
In this particular case a high rarity/low price token was again sniped during a reveal. Here however both max fee and max priority fee were set to the same amount. This person likely used a sniping tool that doesn’t differentiate Max Priority Fee and Max Fee settings. Notice that Gas Price was equal to the value of both Max Priority Fee and Max Fee — 479.38gwei — even though Base Gas was at 99.8gwei.
