Lately, NFTs have become a real reason of concern not only for environmentalists, but also for people who are just discovering the harmful impact of the non-fungible tokens on our home planet.
On one side, we have people who are thrilled about the profit potential of these new digital works of art. However, others have begun to tell the story of an ecological disaster. But whether NFTs are considered a financial savior or the monster who is slowly killing our planet, there is no doubt that many believe that NFTs represent the future when it comes to digital art.
For those who are just discovering this new form of digital art, we will examine exactly what NFTs are and how we can decide whether their impact on the environment is justified or not.
What is an NFT?
A non-fungible token, or NFT, is a unique digital asset that has been registered in a blockchain in order to record the authenticity and ownership of the construct. NFTs were created so that artists can ensure that their digital art cannot be counterfeited. This ability to establish authenticity and ownership is essential to digital artwork, because replicas are so easy to produce and very difficult to discover.
Basically, NFT is a digital artifact that represents real objects like pieces of art, music, games and videos. The non-fungible tokens are bought and sold strictly online, mostly with cryptocurrency. The main advantage of NFTs is the guarantee that the digital asset that you’re buying is authentic and cannot be duplicated.
How does it work? When invented, a unique entry is created in the blockchain register in order to identify the created asset. When it is sold, the transfer of the asset is also recorded on the blockchain, which means that ownership of the asset is always known and available to the public.
This also allows the digital artist to achieve a percentage of the sale price not only at the first sale, but also at each subsequent sale of the NFT. Finally, when a digital work is created in this way, it can still be copied and distributed as .jpg/.png/.gif, but the associated NFT will always remain unique.
Because NFTs are registered as blockchain assets, they are created in the same way as cryptocurrencies. Most NFTs are created on the Ethereum blockchain. Unfortunately, blockchain technology creates a considerable amount of greenhouse-gas emissions and this is why NFTs have a major impact on the environment.
What is the carbon footprint of an NFT?
A carbon footprint is an estimate of the total amount of carbon emitted during the process of creating and consuming a product. Depending on the product, this process can be dramatically different.
In the case of NFTs, there are a number of steps in the sale process that do not have a known carbon footprint. There are also few research studies on this topic. For example, Digiconomist, a website that examines the unintended consequences of digital trends, has developed an Ethereum energy consumption index. The index estimates the carbon footprint of a single Ethereum transaction at 76.27 kg of CO2. It is equivalent to the carbon footprint of 169,041 VISA transactions or 12,712 hours of watching Youtube.
A number of specialists on environmental issues claim that the Ethereum network consumes more electricity than countries like Colombia or Austria. A single Ethereum transaction consumes 160.57 kWh, which is equivalent to the power consumption of an average U.S. household for 5 days. This information is based on a report published by the International Energy Agency.
The very existence of NFTs requires a large amount of energy, which has a considerable carbon footprint. Inevitably, this situation leads to pollution, to the exploitation of natural resources and to other environmental issues.
So what can be done in order to keep our planet clean, while also enjoying the benefits of the latest technology?
People are becoming aware of this problem and they are asking for a sustainable approach to tackle energy efficiency. It is very important that tech industries create innovative methods in order to reduce the amount of carbon emitted. This way, we can have a chance to reverse climate change and to avoid a climate crisis.
How to minimize the NFTs impact on the environment
The Ethereum blockchain used to create NFTs is currently using a mechanism called Proof-of-Work (PoW) to verify legitimate transactions and to store digital data. This PoW mechanism leads to the incredibly high energy use of the Ethereum network.
However, there are alternative mechanisms that can be used, which are consuming much less energy. One of these mechanisms is called Proof-of-Stake (PoS). In fact, several blockchains that also support NFTs (Polygon and Tezos for example) already use the PoS mechanism and have a much lower power consumption compared to Ethereum. For example, Tezos has an estimated annual energy consumption of 0.00006 Twh, compared to 33.57 Twh for Ethereum.
The public pressure has determined Ethereum to take into account the change of its mechanism. Although there is no set date for the complete move to PoS, the Ethereum website claims the change is expected to take place in 2022. This will significantly reduce the carbon footprint of NFTs.
On the other hand, PoW blockchains could be considered acceptable if they operated on a renewable energy source, such as wind or solar. In fact, a study conducted by Cambridge University in 2020 found that 39% of the energy used by PoW blockchains is already renewable energy. The researchers also concluded that this number could increase in the near future.
What can we do to protect the environment?
Regardless of the blockchain we are discussing, total electricity consumption is not the only factor that leads to the NFTs impact on the environment. As cryptocurrencies become more popular and move into the mainstream, the number of miners and players will surely increase.
This means that NFT carbon footprint estimates are already higher than previously thought and could remain quite high even on a PoS blockchain.
Secondly, digital artists who are using Ethereum are often the most vocal in seeking change. If NFT markets do not meet their requirements, the artists could easily stop creating NFTs or move to an alternative market where non-fungible tokens are created on “cleaner” blockchains.
Some artists are already rewarding people who can find new ways to reduce the NFTs impact on the environment. This is the perfect example of our community approaching the problem on its own, rather than ignoring it and hoping that someone else will solve it in the end.