Gas wars are a complex concept and you should understand them before entering into one.
Gas wars are when people bid more than 100 gwei (a unit of ethereum) on an NFT transaction. NFTs are non-fungible tokens or crypto collectibles that have unique attributes, such as a specific appearance or statistical properties -- like the ability to change color or shape when exposed to light.
What is an NFT gas war?
NFT gas wars are when a group of people bid up the price of ethereum transactions. You may have heard about this problem in the news, but you might not know exactly what it is or why it's important to NFT collectors and artists.
The situation has become so bad that some people have said it will be hard for them to continue their work as artists and creators. Let's talk about why this is happening, who's involved, and how you can avoid getting caught up in one yourself.
It's become a problem for NFT collectors and artists, whose trading of digital assets has dramatically increased the demand for ethereum, leading to congestion and higher transaction costs.
NFTs are digital assets that you can collect, trade and sell on the blockchain. They're a hot item right now, as they've become all the rage among crypto enthusiasts.
One of the reasons for their popularity is that they're fun to collect and trade. You might have heard about CryptoKitties, which are digital cats that can be bought and sold using ether (the cryptocurrency associated with Ethereum). If you want to purchase one, you'll need to send some ethereum (ETH) tokens from your wallet so that it can complete an exchange transaction on behalf of your account.
Ethereum "gas" is what allows transactions such as these to happen smoothly -- it's essentially paying for gas so cars can drive down highways without getting stuck in traffic jams or crashing into each other while trying to pass through toll booths at high speeds. But now there's too much congestion on Ethereum's highway!
Players have been complaining that so-called NFT gas wars are interfering with their ability to buy, sell and trade their virtual collectibles.
NFT gas wars are a problem for NFT collectors and artists. They can interfere with your ability to buy, sell and trade your virtual collectibles.
They're also a problem for crypto users because the gas fees can be greater than the cost of the transaction itself. According to CryptoKitties, it costs about $0.20 in Ethereum (ETH) or roughly $0 trillion USD in Etherum Gas to purchase an ERC-721 token on their platform. So if you’re spending less than that amount, you can expect some pretty bad news when it comes time to make a purchase: Your entire balance will be used as fuel before anything happens!
Some experts are suggesting that in order to avoid these disruptions, people should not bid more than 100 gwei (a unit of ethereum) for an NFT transaction.
People who are not familiar with the cryptocurrency world might be wondering what a gwei is. It's just a unit of ethereum, which is used to measure gas prices. Basically, if you want to buy an NFT or do any other transaction on the blockchain, you have to pay for it with ethereum. And ethereum has its own internal currency called ether (ETH). So when you send $100 from your bank account into Coinbase, then transfer that money into your Coinbase wallet where it sits as ETH until you want to use it for something else like buying an NFT or sending money back home via peer-to-peer trading platform LocalBitcoins, then convert back into ETH once more upon arrival at its destination—that kind of thing—then we're talking about 200 gwei per dollar worth of transaction fees!
So why should people care about how much they're paying in gas? Well...
Most recently, one crypto Twitter user claimed he racked up $30,000 in fees while sending just $3 million worth of ethereum this week.
- Most recently, one crypto Twitter user claimed he racked up $30,000 in fees while sending just $3 million worth of ethereum this week.
- The Journal's report indicates that the user was using a dapp to manage his funds and send them to another dapp on the ethereum network. He then tried to send some back to himself—and paid a premium for doing so, which was apparently due to congestion issues with the mainnet and sidechains. At one point during these events, some users reportedly waited hours for their transaction fees to be confirmed by miners.
People have been getting burned by the skyrocketing cost of ethereum transactions.
The result of this system has been a dramatic increase in the cost of ethereum transactions. This isn’t good news for most users, but it’s especially problematic for NFT collectors and artists, who trade their assets at a higher rate than other users. The more money they have to spend on transaction fees, the less they can afford to buy new digital goods—and there are plenty of them out there that you can buy today with an ethereum transaction.
The gas wars have become so prevalent that some people are calling them “The Crypto Crisis” as they hurtle toward a solution that could take months or years
Gas wars are complex and you should understand them before entering into one.
- You should know what you are getting into. A gas war is an intense and stressful experience that can cost you a lot of money, time, and potentially your NFTs.
- Be prepared to lose money. Even if you win the auction, winning doesn't necessarily mean that your gas war has been profitable. In fact, while this article will be focused on winning auctions, it is also important to understand that losing an auction in a gas war could be just as good for you (or better!) than winning one outright. The only way to truly learn how profitable each auction is is by participating in them yourself -- so don't get too caught up trying to predict the outcome in advance!
- Be prepared for regret. Gas wars are such an adrenaline rush because they take place at lightning speed with high stakes involved -- but like any type of gambling game where there's no guarantee about how things will turn out after all is said and done (and especially when there's thousands upon thousands being risked), mistakes made during these quick moments can haunt us later on down the road if we're not careful enough about what happens next...
As with any form of trading, it’s important to understand the market before jumping in. If you are new to NFTs or want to learn more about gas wars, check out our beginner's guide here.