Can NFTs be environmentally friendly? One cryptocurrency can consume as much energy as a studio uses in two years. Can we get the best of both worlds? Are green tokens possible? NFTs have been around since 2014, but chances are you only started hearing about them last year. The popularity of NFTs has skyrocketed, and 2021 was a good year. You may have heard of:
- Beeple: artists selling their digital work, like Beeple’s First 5000 Days for $69 million at Christie’s
- GameFi: Axie Infinity, the original breakout blockchain game to earn money, and other NFT games
- Bored Apes: The popularity of the Bored Ape Yacht Club (BAYC), especially among celebrities such as Stephen Curry, Shaquille O’Neal and Eminem.< /li>
- Metaverse: the value of digital real estate and companies are buying land in virtual worlds such as Sandbox, Decentraland and Engine
It is clear that NFTs have dominated the headlines throughout the year and continue to do so in 2022. But a major problem remains in the minds of the public: the climate debate. As the Web 3.0 infrastructure expands, investors and crypto enthusiasts are facing questions regarding the environmental issues of NFTs. What are the environmental implications of buying and selling NFTs? Why does it matter? Why exactly do NFTs have such a high carbon footprint? Are there more sustainable alternatives? What does the future of NFT look like? This article addresses each issue. Let’s start.
What are the environmental consequences of NFT?
As soon as an artist announces on Twitter that he will start doing NFT, his comments section is filled with messages of hate. These messages criticize the artist for damaging the planet for profit. But what does the science say? How does NFT contribute to global warming? It’s not easy to calculate the carbon footprint of NFT minting because of the steps in the process. Nevertheless, several studies on the subject have made estimates in this regard.
According to Digiconomist, the carbon footprint of one Ethereum transaction is 33.4 kg CO2. On the other hand, according to Memo Akten, the average NFT transaction has a carbon footprint of 48 kg CO2. If we compare crypto art with traditional art printing, it is clear that the difference is significant. To put things in perspective, one Ethereum transaction is equal to 74,000 Visa transactions. According to Digiconomist, the Ethereum network consumes 99.6 terawatt hours of electricity per year. That’s more than the Philippines or Belgium require.
Why do people sell and buy NFTs?
There is a lot of discussion on this subject, starting with the good old question, “What’s the point of my personal actions when 71% of the world’s carbon emissions come from 100 companies?” It’s a good argument, but the fact is that the public has a lot more choices when buying. For example, biodegradable or reusable straws have become widely used in restaurants and cafes due to public demand. If the demand for “green” solutions is high enough, companies have no choice but to adapt.
Another question is, “If burning fossil fuels for electricity, heat, and transportation leads to most greenhouse gas emissions and that suits people, why shouldn’t NFT?” If you follow what’s happening in the news, you’ll notice that people are calling for change in all areas. Sure, it’s important to fight for organizational change, but it’s just as important to practice individual sustainability, whether it’s eliminating beef from your diet, cycling to work, or making extra money from your writing in print.
Finally, you may be thinking, “I need money from NFT. I can’t afford to worry about sustainability.” It’s really quite simple. It all depends on what your priorities are. For example, you may prefer a quick car ride to a 15-minute walk to your destination. But when the price of a ride goes up, doubles or even triples, a 15-minute walk suddenly doesn’t seem so bad.
What makes the NFT do such damage to the environment?
In order for us to understand if we can have such a thing as environmentally friendly alternatives, we need to know where the carbon emissions from NFTs come from. NFTs are bought and sold on marketplaces – e.g. OpenSea, Foundation and SuperRare – which use the cryptocurrency Ethereum. Ethereum and other major cryptocurrencies, including bitcoin, are built on a system called proof-of-work.
To verify transactions and mint new crypto-tokens, the system forces people to solve complex puzzles using energy-intensive machines. This process is called mining. Essentially, it adds a new “block” of verified transactions to a decentralized ledger called the blockchain. The miner then receives a new token as a reward. As a result of this mining, Etherium, Bitcoin, and other blockchains that use a consensus proof-of-work algorithm end up consuming huge amounts of electricity.
As more and more people have shown interest in NFT over the past year or so, the purchase and sale of NFT is also increasing, and the environmental impact is increasing. To maximize their profits, miners are choosing cheaper electricity, such as. fossil fuels, which can further pollute the environment. Not to mention, what happens to these specialized computers after they become unprofitable in a few years? They get thrown away, and it piles up in e-waste.
Are environmentally friendly NFTs possible?
Does this mean that NFTs are doomed to be harmful to the environment? The answer is no. Experts, including Susanne Köhler, a researcher and researcher of sustainable blockchain technology at Aalborg University in Denmark, argue that NFTs can be made greener in the future.
We understand that consensus mechanisms, such as proof-of-work, require a lot of energy. But there are other alternatives, such as share proofing. This is a more environmentally friendly method of validating transactions in a distributed database and ensuring their security. With proof-of-fraction, validators legitimize transactions without having to solve the computational puzzle; rather, it is based on the number of coins the validator puts up. They offer their coins as collateral to verify blocks and secure transactions. When a transaction is made, the system will randomly select validators based on their bid and reward them with a network transaction fee. This method requires much less processing power and, as a result, has a much smaller carbon footprint.
Ethereum has long been planning to switch to the Proof-of-Stake model. When do they want to do it? It will be a game-changer in 2022, especially for crypto-enthusiasts who are concerned about the environmental costs of using Ethereum in a proof-of-work state. According to Tim Bako, coordinator of the Ethereum protocol developers, moving Ethereum to Proof-of-Stake will reduce its environmental impact by 99%. “It would essentially mean that Ethereum’s power consumption would literally drop to almost zero overnight or overnight,” says Michelle Rauchs, a researcher at the Cambridge Center for Alternative Finance.
In the second case, NFT can be more sustainable, the number of transactions needed in the blockchain can be reduced. “This can be done by relying on ‘layer 2,’ which means that not every transaction needs to be in the blockchain,” Koehler says. “For example, an auction could be conducted entirely off the network at layer 2 and then sent to the blockchain as packets. It’s a solution that can be implemented in a shorter timeframe.”
The next solution may come from the profits generated. If the profits from NFT are passed on as carbon credits or contributed to the ecological footprint, it will help reduce the carbon footprint.
Finally, the most obvious solution to the problem of carbon dioxide emissions from NMTs is clean energy. If more mining machines ran on clean energy, emissions would be greatly reduced. However, this is not a perfect solution. Climate experts and blockchain opponents argue that renewable energy is still scarce and valuable, so it could be used for more pressing purposes such as heating and lighting.
What will happen to the future of the NFT now?
The calls for sustainable NFT solutions cannot be ignored. Robbie Ferguson, CEO of Immutable X, a company that facilitates NFT transactions and considers itself 100% carbon neutral, believes the movement toward sustainable alternatives is inevitable for business and society. When investors, brands, businesses and creators keep demanding that their work be carbon neutral, blockchain platforms like Ethereum have no choice but to find ways to make the necessary changes in response.