1 min read

Misallocated funds

This week, a new sports NFT collection was launched on Ethereum. There were 15,555 NFTs available for 0.155 ETH (plus gas) each.

There was a lot of hype for this collection and they sold out very quickly, netting over $8 million worth of ETH for the creators. That's fantastic for the people who created the collection, but it doesn't tell the whole story.

Because of how quickly the NFTs sold out, there was a massive (temporary) increase in demand for the Ethereum network. When demand for network resources goes up, so does the cost. The result is that the buyers ended up spending over $26 million on gas fees in the race to be the first to buy the NFTs. That's over 3x the amount the creators actually got. (source)

The market was willing to spend $34.5 million for this collection, but gas fees redirected 75% of that value away from the creators.

Obviously, you have to pay the people running the computers that keep the network alive, but that's not the main point of gas fees. Gas is meant to limit network spam so legitimate users can actually benefit from the network. You can pay miners by just creating new tokens. Economically, this spreads the "fee" across token holders instead of directly charging the people who want to use the network.

If blockchain is meant to be for everyone, and networks want to attract and retain creators, gas fees need to be eliminated.


P.S. Yes, Koinos is the only general purpose blockchain I know of that's successfully eliminated gas fees while still solving the problem of spam, but that doesn't mean the Koinos mana system is the only way. I expect that more alternatives to gas will arise once people get over the limiting belief that "free = scam".