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The enormous success of the NFT usage over the last quarters is remarkable. Therefore, we are not surprised to see an ongoing innovation trend in the NFT market niche in this context. However, creating NFTs can be struggling on several occasions, especially for new traders and artists.
Today we will look into the lazy minting practice, an innovative idea that has recently become popular in the blockchain industry. Before doing that, however, it is essential to spend a few words on the general minting process.
Anyone familiar with the cryptocurrency mining operation will not have any issues understanding how minting works. In the blockchain context, minting means validating information, creating a new block, and recording the data in the chain.
We can think of mint as a part of the whole mining process in the cryptocurrency system. For example, when a new block is inserted into Bitcoin’s chain, the system mints several new BTC. Applying this process to the context of our article, the creation of an NFT consists of a minting operation.
Without further technicalities, we can summarize the whole minting process as follows:
- Intelligent contract design: to mint NFTs, you need to have a smart contract designed to do so. Luckily, you don’t need to be a blockchain developer to complete the operation: NFT marketplaces have smart contracts.
- Transaction fees: if you know enough about the blockchain, you will expect to pay a gas fee to write new information in the system. In the original minting process, this is indeed what happens.
- Sell your NFTs: you can sell your NFTs on the marketplace of your choice at the end of the minting process. Keep in mind that the number of marketplaces is increasing, and each of them comes with different minting offers.
The short piece of information we mentioned above is sufficient to give you an overview of the minting procedure. The following section will introduce the lazy minting strategy and explain the main reasons behind its success.
The success of lazy minting
Have you ever completed a transaction on the Ethereum network? If the answer is yes, you will be familiar with the high gas fees of the system. To put it simply, transaction costs are so high on Ethereum because the network suffers from a congestion issue.
While the world waits for the launch of ETH 2.0, expecting a significant cost reduction, minting on Ethereum remains expensive. Considering that, after over a year, Ethereum claimed that its upgrade is halfway complete, the market is looking for solutions.
In this context, the NFT market niche came up with the idea of lazy minting. Let us summarize the concept in, once again, three steps:
- Smart contract design: like traditional minting, lazy minting needs a specific type of smart contract. Several NFT marketplaces are starting to adopt this methodology.
- Transaction fees: after signing the NFTs with your private key, you won’t pay any gas fee if you mint using this strategy.
- Sell your NFTs: anyone buying your NFTs will have to pay the cost for minting together with the selling price.
How can anyone add information to a chain such as Ethereum without paying any gas fee? As you may guess, the answer is pretty straightforward: the initial NFT minting operation is a mere illusion. When you launch the lazy minting operation, the marketplace only creates a representation of your NFT for sale purposes.
This illusional mechanism is why marketplaces find lazy minting convenient. It may appear that someone is generously letting you mint NFTs for free, but it is not like that.
A solution to high gas fees
To better understand the success behind lazy minting, we can think of new digital artists trying to sell their work. However, with no previous connections in the sector and limited funds for marketing campaigns, selling NFTs may be challenging.
Artists may decide to launch NFT collections with hundreds of artworks. Considering that minting on Ethereum may cost $100, it is easy to see how minting is risky. All the artists struggling to sell their NFTs will eventually suffer a financial loss.
The mechanism may discourage them and abandon the NFT marketplace. Encouraging lazy minting effectively removes the financial loss possibility. However, we need to discuss this solution’s indirect cost in the following section.
A matter of demand and supply
When NFT marketplaces sell the “free minting” idea on their websites, we should consider how lazy minting works. Generally speaking, minting NFTs can be accessible for anyone using this option. However, the NFT buyer will eventually need to pay the gas fee, no matter how high.
Using this mechanism may lead potential buyers to cancel their purchase once they learn about the minting fees. Being a new process, most buyers may expect to pay only the price they see on the marketplace.
Consequently, those selling NFTs at a low price (say, $10) should remember that the final purchase may be expensive. While anyone may have the impression of being able to mint NFTs for free, there’s an indirect cost in this case. Forcing buyers to pay high gas fees may reduce NFT sales.
While traditional minting added an entry barrier for sellers, the mechanism has started to work oppositely. If limiting supply and encouraging demand pushes prices up, we may find ourselves in a paradox. Lazy minting may lead to an excess supply on the market, with fewer buyers, hence pushing prices down.
Final thoughts on lazy minting
This article analyzed the main details of traditional and lazy minting operations in the NFT world. It is transparent how lazy minting acts as an exciting solution to the notorious gas fee issue of Ethereum.
However, it is equally straightforward to understand how lazy minting only offers a temporary solution to the problem.
To avoid distortions in the demand-supply balance on the NFT market, the world waits for a substantial gas fee reduction. Lazy minting may survive in the long term, even with lower gas fees. However, it may be risky to rely on it to sustain the new NFT market exclusively.