What is the purpose of gas fees?

Ethereum calls gas “the fuel that allows [the network] to operate, in the same way that a car needs gasoline to run.”

Gas fees compensate the entities, called node operators or network validators, who validate transactions on the blockchain. The Ethereum blockchain supported by Novartify has different gas fees. These fees differ depending on each transactions.

Users often want to know who receives the money from these gas fees, and the answer to that depends on the method each blockchain uses to verify transactions. So let's step back for a moment to discuss the two primary methods of validation: Proof-of-Stake and Proof-of-Work.

Proof-of-Stake and Proof-of-Work

Blockchains that use the Proof-of-Stake method verify transactions using validators. Validators are users who stake large amounts of that blockchain's cryptocurrency. These validators check each transaction and monitor all activity on the blockchain to ensure it's correct. This method has validators vote on the outcome.

Blockchains that use the Proof-of-Work method verify transactions using miners. Miners are tasked with solving complex math equations that verify each transaction. Both of these methods are complex, time-consuming, and ultimately ensure the security of the blockchain, which is why the gas fees are awarded to the operators.

What is The Merge and how does it impact gas fees?

Ethereum has historically used the Proof-of-Work method but recently changed to the Proof-of-Stake method in an event known as “The Merge.” According to the Ethereum Foundation, this will reduce its energy consumption by ~99.95%. The Foundation has stated that “the Merge was a change of consensus mechanism, not an expansion of network capacity, and was never intended to lower gas fees.”

What impacts gas fees and how are they calculated?

Gas fees increase when more people use applications that run on top of a blockchain's network. Gas fees increase as these users compete for space within the block. Think of it like Uber's surge pricing model that increases the cost of booking a ride during the busiest commuting times.

Fees are incurred when data is stored or changed, tokens are transferred, funds are withdrawed, NFTs are minted, sold, or purchased, and so on. Each of these actions involves different changes to the blockchain and therefore requires a different gas fee.

Novartify doesn't control gas fees, set gas fees, or receive any of the gas fees incurred by users on the platform. Instead, they all go to network validators or miners.

Types of fees

At Novartify, users encounter two types of fees: one-time fees and recurring fees. The one-time fees are associated with specific actions that grant particular permissions and are paid only when users perform these actions for the first time. On the other hand, recurring fees arise when users engage in activities such as minting NFTs (which is free thanks to the lazy minting feature), purchasing NFTs, canceling NFT transactions, or withdrawing ETH.

For withdrawals, the recurring fees depend on the destination. Different fees apply when users withdraw to an Ethereum wallet address, credit card, or bank account. It's important to note that overall gas fees are essential for each transaction to be recorded on the Ethereum network, ensuring the smooth processing of activities within the Novartify ecosystem.