- Ethereum’s scaling issues have taken the prices of NFTs to millions of dollars in the past.
- Cardano and Solana are seen as alternatives to Ethereum for this very reason.
- Gas fees on Ethereum-based non-fungible tokens (NFT) for 0.1 ETH apiece were bought for 30 times the price.
One of the core problems with the Ethereum platform has been scalability. As more and more decentralized apps use the platform, and transactions increase exponentially, so do the gas fees.
Simply put, if there are too many users on the blockchain, it gets more expensive to buy and sell things. This was demonstrated to great effect, albeit unintentionally, by TIME Magazine’s recent NFT sale.
TIME’s NFTs were sold out within minutes — but that’s not good news
The publication announced a new collection called “TIMEPieces”, which allowed users unlimited access to the company’s website till the 100th Anniversary of the publication in 2023. That, along with exclusive invites to future events by the publication made for a pretty enticing proposition for some. What wasn’t accounted for were Ethereum’s scalability issues.
TIME minted 4676 tokens that were tied to digital art, with each priced at 0.1 ETH. All the tokens were sold out within minutes. Ordinarily, that would be good news. However, it also means that about 4,000 odd transactions happened within a very small amount of time, clogging the Ethereum network. As a result, the gas fee for each transaction kept increasing, since the network saw more demand for authenticating these transactions.
Users paid upto 30 times the price for TIME Magazine’s NFTs
explained by Coindesk, the Ethereum platform has something called a “priority fee”, which basically allows you to pay miners extra in order to get your transaction up first. The more the fee, the more likely the transaction is to be completed before others. With so many people on the network, the ones who can afford to pay these fees would be able to win the most number of transactions.
Given TIME’s pricing, 10 NFTs should cost a person 1 ETH, which at its pricing at the time would be between $2500 to $2800, under normal circumstances. However, one of the buyers paid as much as $70,000 for 10 of TIME’s NFTs — nearly 30 times that amount. Why? Because Ether has a scaling problem.
isn’t even the first time that Ethereum’s gas fee issue has affected the price of NFTs. Earlier this month, an auction at Sotheby’s, which was expected to fetch between $12-18 million was finally sold for almost double, at $24.39 million.
The high gas fees is one of the main reasons why Ethereum’s competitors, namely Cardano and Solana, have gained popularity. On September 1, Solana
gained an all time high pricing of almost $125, leading to a four-fold increase in the last month.
To be fair, Cardano and Solana’s proof of work systems allow the gas fees to remain low, which is something that Ethereum will also introduce with version 2.0 of its platform next year. The question remains though — will developers wait?