When I was six or seven years old, I wanted a Nintendo NES game console more than anything in the world. My parents told me that I’d have to save the money myself if I wanted one. My brother and I scraped together every penny and dollar we could find, mowing lawns, getting “hired” by our parents to do household chores, and saving our allowances. Finally, we had saved the required $99 to bring Mario home with us.
We took our overflowing wallets, counted out every $1 and $5 bill, and made sure we had exactly enough. No more waiting: Nintendo Day had arrived! My mom drove us to the local Toys R Us, where we picked one off the shelf, took it to the front of the store, and watched as they rang up the device to… $110?! What kind of bait-and-switch was this?! Luckily, my Mom was prepared and covered the difference, and we went home to play Duck Hunt, taking out our frustrations on digital fowl.
That is the story of how I discovered sales tax. As a little kid, it was new information that the price on the sticker isn’t what it’ll cost you to take it home. I never got over the disappointment and anxiety of discovering I didn’t have enough money to complete the purchase.
The pit that formed in the bottom of my stomach discovering that things can cost a lot more than expected? It made a triumphant return to my life recently in the form of Ethereum gas fees. Darn gas fees.
What is a Gas Fee?
The power of the blockchain lies in its open-source, community-built, and maintained infrastructure that relies on “miners” or “validators” to ensure that every transaction conducted on the blockchain is correct, secure, and logged in a block correctly. This requires intensive computing work, and the dedicated individuals who do it (or rather, allocate computing resources to do it) are financially rewarded for their effort to keep the gears turning.
As the demand for cryptocurrency has grown, the cost to mine and validate it has risen commensurately — especially on the Ethereum network, which explosive growth and thriving NFT ecosystem has created a backlog of demand and gas fees to match. Every time you write to the blockchain, there is a gas fee to validate the transaction. This is how NFTs are minted — by writing a proof of purchase to the blockchain. The result? While the NFT minting price might be only a few dollars, its associated gas fees can range anywhere from $30 to $300.
The last Ethereum NFT I minted, for example, cost .08 ETH to mint, roughly $250 right now, and came with a $65 gas fee. But that wasn’t the first price I was offered — gas fees vary minute to minute, based on network congestion. To make this purchase, I sat and reloaded, rejecting each gas tax I was offered: $130… $100… $95… $65. Finally, I clicked “Accept.”
This high transaction fee is a steep barrier to entry for newcomers to the NFT system and results in an ever-increasing drive on prices to make any transaction involving a gas fee worthwhile. And this issue isn’t limited to NFTs: All transactions written to the Ethereum blockchain have to pay gas fees, regardless of the underlying value of the transaction. Gas fees prevent innovation of Web3 technology, restricting it to speculative investments and money-making schemes when the blockchain has so much more to offer. There has to be a better way.
Reverse Gas Fees
The Internet Computer has built a better way, using “reverse gas fees.” The system is simple: Instead of passing on the cost of writing to the blockchain to end-users, it builds the cost into the overall financial model of hosting on the ICP platform. The cost of writing to the blockchain is covered by the app developer, who preloads their application (hosted, in ICP parlance, in a “canister”) with Cycles, the currency of computing on the ICP platform.
What does this mean for the end-user? No gas fees, ever ever ever. Even if the cost of the reverse gas fee goes up, it isn’t passed onto the end-user but instead becomes an operating cost for the developer.
This inversion of a typical gas fee model is emblematic of how the Internet Computer is architected: offering a more thoughtful approach to the growing pains of Web2, early Web3, and blockchain implementations, one that has scalability built-in as a core feature from the very first line of code.
The reverse-gas model enables other innovations, too. For example, when you buy an Ethereum-based NFT, what you’re getting is a proof of purchase logged on the Ethereum blockchain — the NFT isn’t stored on the chain, only a reference URL pointing to where the actual JPG resides, which nine out of ten times is hosted on Amazon’s AWS service. Hosting on Ethereum would be unfeasibly expensive.
In contrast, ICP’s reverse-gas system allows all NFTs to be securely stored on the blockchain, so your assets are backed by the same security and speed afforded to your transactions. In fact, everything in your ICP-hosted Dapp is stored on-chain.
This opens up blockchain tech to new and novel uses, powering social networks, community-driven applications, and more. When you remove the toll booth to get on the Web3 Information Superhighway, speed limits and restrictions disappear. Instead of a digital Jersey Turnpike, you’re on the Autobahn.
A Gas-Free Future
For Web3 Dapps to truly break out into the mainstream, gas fees must be eliminated. They are cost-prohibitive, unpredictable, and a major stumbling block for new and price-sensitive users. Ethereum is working on getting there, but it’s a slow and painful transition.
The Internet Computer is already there, minting NFTs, recording transactions, hosting Dapps, and creating a better, less expensive internet with no surprises when you get to the register with your purchase. The kid version of me would be thrilled to shop for some video-game-themed NFTs on the ICP platform. In fact, I might browse for a few of them right now. Adult me is pretty into it, too.
- Disclaimer: The views and opinions expressed on this website are solely those of the original author and other contributors. These views and opinions do not necessarily represent those of the Dfinity Community staff and/or any/all contributors to this site.
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