Non-fungible tokens, also known as NFTs, are a type of token that is used in the cryptocurrency industry to track ownership and validity.
There’s a lot of promise in them because you can make a digital asset, store it on the blockchain, and then get money every time someone else buys the asset. In the fourth quarter of 2021, the trade volume and market value of NFTs went up a lot.
Coin-collectibles like CryptoKitties, Everdragons, CryptoPunks, and dozens of other crypto-collectibles offer a new way to invest.
With a little effort and innovation, you can create your own NFT and distribute it to people all around the world.
However, it’s critical to keep in mind that working on the blockchain is not free. The consensus among several nodes is required to add a transaction to a public blockchain.
Transactions start the process of minting tokens, transferring tokens, and calling functions on blockchain-based code, which is why they are important.
When users initiate transactions on the blockchain, they pay a number of tokens, which serve as transaction fees, similar to how they do in the traditional banking system (gas fees in the case of Ethereum).
Miners receive a percentage of the gas costs as compensation for adding a specific transaction to the blockchain. The magnitude of the gas taxes is not constant, as it varies according to network demand. The more congested the network, the more patrons must pay in gas fees.
In terms of minting your own NFT, transaction fees are the most obvious cost.
So you’re interested in developing your own cryptocurrency collectibles? Great! Let us begin. However, before you start, you’ll need to figure out how much it will cost to mint your own NFT collectibles.
What is minting?
“Mint” is a term that refers to the act of creating something for the first time. Minting is the process of validating data, producing a new block, and adding it to the blockchain. For instance, someone may manufacture an NFT or a new coin.
There are two methods for minting an NFT: a no-code, and an intense technique in which the code for minting and deploying the NFT is written explicitly.
If you wish to sell your art online, there are several NFT platforms to select from. Among the most well-known are OpenSea, Rarible, SuperRare, and Foundation. Customers can mint and sell collectibles on these markets with a few mouse clicks. There is no need for coding.
The other, more prevalent, way for large projects is to employ a token standard (ERC-721 or ERC-1155), store the collectibles on decentralized storage, and install the smart contract code on-chain. This approach enables artists and developers to incorporate specific features that marketplaces may lack.
They can either construct their own website or marketplace where others can purchase art, or they can share the address of their smart contract with a marketplace to have their work featured.
What are the costs associated with minting?
The cost of minting an NFT is highly volatile and fluctuates constantly. This is because of the blockchain’s ad hoc nature and congestion.
When deploying the NFT collection code, the minting charge is a substantial cost.
On Ethereum, developers and artists can spend anywhere between 50 USD and 400 USD to register an artwork on the blockchain.
The network was constructed in such a way that patrons pay for only the area they utilize. The greater the pressure of the gas, the more data is involved.
One popular technique for avoiding high expenses is to utilize a gas tracker and deploy it at less crowded times on the network. Reduced demand results in a lower-paid gas price.
However, nothing about the Ethereum network is certain.
Despite the fact that the bulk of NFTs is based on Ethereum, other artists prefer fast and scalable but low-cost blockchains for their collectibles, such as Polygon, Solana, BSC, and Avalanche.
It’s critical to remember that minting fees are just the tip of the iceberg when it comes to NFT projects. Consider the structure of the mint and marketplace fees.
How are NFT fees structured?
1. Minting fees
A minting fee is a charge that is made to pay for the energy that is used to process an NFT transaction.
As mentioned previously, the higher the gas tax, the greater the demand and popularity. People often use Ether to mine NFTs and buy and sell cryptocurrency on a well-known blockchain called Ethereum.
However, dealing with Ethereum is too expensive.
This is mostly due to network capacity constraints. The Ethereum architecture burns some gas fees. Most are shared with other miners who start the consensus procedure that adds a transaction to the chain.
The graph below illustrates how Ethereum gas fees have changed over the last five years.
2. Listing Fee
The number of blockchain-based apps is expanding at an exponential rate.
NFT Marketplaces are also a good way to get your work in front of a lot of people quickly and easily.
Not everything, though, is free.
The majority of marketplaces charge an artist a listing fee in exchange for using their platform and technology to reach a market.
A “listing fee” is a small fee that platforms charge merchants to put their products on their site.
Before the use of NFTs on big eCommerce sites like eBay and Amazon, this was already clear to anyone who looked at the sites.
This cost varies. Certain marketplaces do not charge artists’ listing fees, but instead, charge commissions. The key sources of revenue for NFT markets are listing and commission fees.
We shall explore commission fees in further detail in the following few lines.
On average, listing costs range between 0 and 100 USD, depending on the platform and its rules.
3. Commission Fees
In basic finance, auctioneers, salespeople, and others are compensated with a commission for their services. A fixed commission fee is levied on sellers.
OpenSea and Rarible are two examples of NFT markets that act as salespeople. Artists act as sellers.
Certain marketplaces offer free listings but charge a tiny commission on sales.
For example, Open Sea and Rarible account for 2.5% of all transactions.
Consider the following simple math: If you sell artwork for 400 USD, Open Sea will take 10 USD (gas fees are not included).
This structure is exclusive to an NFT marketplace such as Foundation.
Foundation maintains 15% of the final sale price, which is also exclusive of gas.
People who sell things at Solanart, one of the biggest markets in Solana, have to pay a 3% fee.
Because these markets are so different, it’s very important to know what they’re all about and pick the best one for your project and cash flow.
Binance NFT, a multi-chain platform (BSC and ETH), is a vast and secure marketplace that allows for fiat cash withdrawals. On the plus side, Binance NFT has a trading fee of 1%.
Mintable is a well-known NFT marketplace that’s easy to use and has a wide range of NFT solutions. It also has free Mintable University courses for anyone who wants to learn more. Mintable, like OpenSea, levies a 2.5% transaction fee.
Magic Eden is one of the most prominent marketplaces on the Solana blockchain. They do not charge for listings but do charge a 2% transaction fee. Magic Eden is a platform that enables the rapid creation, sale, and purchase of NFTs.
4. Miscellaneous Gas Fees
Every action on the blockchain is recorded as a transaction. Delisting an artwork from the public market stops it from taking offers, and this process also uses up gas.
Gas is also required when sending an NFT from one account to another.
If you’re using a slow and expensive blockchain like Ethereum, delisting or transferring a single piece of art will cost you a significant amount of money.
Let me discuss an aspect of the Open Sea Marketplace that is unique: Wrapped ETH (WETH).
Wrapped ETH (WETH) is a cryptocurrency that enables users to submit pre-authorized bids that are automatically fulfilled at a later date without the bidder needing to do anything.
OpenSea makes use of the cryptocurrency WETH, which may be used to buy and sell products at auctions. ETH and WETH are the same value and can be exchanged right away on your OpenSea profile.
When selling a portion of your project’s revenue in exchange for fiat cash, you must convert WETH to ETH, which requires an absurd amount of gas.
Gas is ubiquitous, posing a threat to new and budget-conscious clients.
Layer 1 blockchains, such as Solana, and Layer 2 scaling solutions, such as Polygon, on the other hand, reduce transaction costs by 99%.
On Polygon, you may send a token from one account to another for as little as ten cents.
Which blockchain should you use? (Top 4 blockchains for minting NFTs)
Choosing which blockchain to employ for your collectibles might be a difficult decision in any NFT project. Even though there are ways to fix this, the first blockchain for digital art, Ethereum, is very slow and expensive to work with. This gives artists a lot of choices when they choose a chain.
We’ll discuss what the major blockchains have to offer in terms of digital art in the following paragraphs.
Anyone can use the Ethereum platform to make apps that aren’t going to change or die. They can also make apps that interact with users.
In 2013, “Colored Coins” was one of the first projects to try to make a token unique.
This allowed people to make their own Bitcoin assets, but the idea didn’t become popular until CryptoKitties came out in 2017.
Minting NFTs on Ethereum
NFTs became more popular when the ERC-721 token standard came out. This standard allows a token to have extra features that aren’t found in cash.
In the last few years, the market for NFTs has grown rapidly, with weekly transactions in the millions and billions of dollars. Most NFTs are sold on the Ethereum blockchain.
At the beginning of 2021, Ethereum hosted 95% of all NFTs, but this percentage is steadily declining due to the absurd amount of gas consumers spend on a single transaction. In some cases, the cost of gas will exceed the cost of the artwork.
The ERC-721 and ERC-1155 token standards, which were created by Ethereum, are what make digital art possible. Most NFTs are traded on Ethereum.
Even though Ethereum is a high-cost blockchain, with the right strategy and audience, your art can still sell.
OpenSea, Rarible, Axie Infinity, Foundation, Mintable, and KnownOrigin are a few of the most popular ETH-compatible marketplaces, but there are many more.
Solana is a public blockchain platform comparable to Ethereum that supports smart contracts. This is because Solana has faster transaction times and lower gas fees than Ethereum.
Minting NFTs on Solana
Solana’s transaction fees are expected to be 0.00025 USD, or 60,000 times less than Ethereum’s.
Solana has a transaction processing rate of 710,000 per second, which is quicker than the Ethereum blockchain. That is why it has earned the moniker “Ethereum Killer.”
Solana’s success in the blockchain space is due to its ability to process a lot of transactions quickly.
The Magic Eden, Solanart, Solsea, Metaplex, and Digital Eyes stores are some of the most popular Solana-friendly marketplaces.
Imagine Ethereum, but significantly less expensive and faster. That is precisely what the Polygon blockchain is!
Polygon is a decentralized Ethereum scaling platform for developers. It lets them build scalable applications with low transaction fees so that their apps can grow quickly.
At the time of this article, Polygon has been utilized to scale the performance of over 7000 decentralized applications.
Polygon has exploded in popularity over the last few years.
Polygon’s Proof of Stake consensus algorithm is Ethereum (Layer 1) compatible and is classified as a Layer 2 chain.
Layer 2 chains speed up new transactions, lessen the strain on Layer 1, and often charge significantly lower fees.
Minting NFTs on Polygon
MATIC is the native cryptocurrency of Polygon. Even though the Polygon NFT project doesn’t make as much money as Ethereum, its speed and low costs are making it popular in the market.
Marketplaces that are compatible with Polygon include OpenSea, Refinable, NFTrade, and PlayDapp.
4. Binance Smart Chain
Binance Chain is a distributed ledger technology platform developed by Binance and its community. Binance is the world’s largest cryptocurrency exchange.
The Binance Smart Chain utilizes the Proof of Staked Authority (PoSA) consensus mechanism. As a result, shorter block times and lower costs are envisaged.
Minting NFTs on Binance
Binance NFT is a well-known NFT marketplace that offers both BSC and ETH blockchain support. NFTs are simply purchased, sold, and traded between artists and clients.
Plenty of things should be considered when determining the type of blockchain to use for an NFT project, including the project’s target audience, roadmap, concept, budget, and long-term goals. Making the wrong choice here can have unthinkable consequences for your enterprise.
What are NFT Royalties?
When done properly, NFTs can be a lucrative enterprise. We’ve seen incredible campaigns generate millions of dollars.
The primary source of revenue is principal sales. As with publishers, creators can tack on a tiny amount to the collectible they receive as a secondary sale profit.
Royalties is a regular source of revenue. The royalty percentage can be specified and signed explicitly in the smart contract code or on marketplaces.
If the former owner imposed a 7% royalty on the artwork, they would get 7% of each purchase/sale transaction that included the artwork.
What’s fantastic about blockchain and NFTs is that artworks have data about their previous owners and pricing.
Blockchain technology is expensive, and developing a long-term ecosystem can be pricey. However, a well-executed project on the appropriate blockchain can be as cost-effective and profitable.
The cost of minting and listing on a platform can easily exceed 1000 USD.
A more cost-effective and time-saving option, on the other hand, is to use a feasible blockchain. However, a con is that there is a lack of familiarity and acceptance.
When working with less-known blockchains, companies should include information on the chain’s history and technical details on their websites.
For example, if Polygon is your favorite blockchain, you might write about how to set up Polygon (MATIC) on social media.
Without losing sleep over “transaction fees,” you may build a profitable portfolio using Solana, Polygon, or even BSC. Thread with caution, since the market is roaring!
To learn more about NFTs and other web3 content, check out Hashnode’s web3 blog.