As a young, disruptive niche, blockchain and cryptocurrency trends are constantly dynamic, with different changes and improvements now and then. A recent innovation gaining unending popularity from investors is the non-fungible token. Non-fungible tokens, also known as NFTs, are digital assets that symbolize owning digital art.
While NFTs are relatively new in the crypto and art community, they hold a lot of value. Beeple, a digital artist, sold one of his digital artworks as an NFT for over $69million. That makes the artwork rank amongst the top three most expensive digital works of art on the globe.
While the hype about NFTs continues to gain traction, we must understand the impact of NFTs on the environment. NFTs are digital assets that rely on blockchain technology to exist. In most cases, NFTs exist on Ethereum smart networks. Now, if the environmental impact of mining a single Ethereum is high, how much more is it for NFTs?
This guide will discuss the environmental impacts on NFTs, why it’s important, and possible solutions. Keep reading to learn if the craze about NFTs is good for the environment.
What is Environmental Impact?
Any change to the normal activities and features of the environment has an environmental impact. Environmental impact can either be positive or negative, depending on the type of change.
For instance, climate change in the form of global warming is an environmental impact with only negative effects. On the other hand, climate changes like constant rain also have an environmental impact. But this time, it has positive effects on agriculture and farming.
In the case of bitcoin and Ethereum blockchain technology, electricity consumption is the main focus. The process of mining bitcoin and Ethereum blockchain is an energy-intensive process with negative impacts on the environment.
Since NFTs are a by-product of the Ethereum network, they offer negative environmental impact.
Why Should We Consider Environmental Impact?
NFTs are an excellent introduction to the crypto and art world. Regardless of the value of digital art,, we need to study its carbon footprint. Carbon footprint refers to the extent of carbon emissions during the creation, sustaining, and consumption of any item. Carbon footprints range from the carbon offsetting during food production to the release of carbon dioxide during bitcoin mining.
The use of renewable energy and energy-efficient processes always affects the value of the carbon footprint. If the carbon emissions during any product’s processing are high, that product can cause a potential climate crisis.
Already, the electricity consumption that follows bitcoin mining is a controversial subject. Bitcoin depends on a proof of work algorithm, which requires energy-intensive processes. According to research, bitcoin mining requires more energy than the entire Netherlands uses.
The second most popular cryptocurrency, Ethereum, has similar energy usage. According to Digiconomist, you’ll need to consume more than 30 kilograms of carbon dioxide to complete a single transaction using Ethereum. You can complete over 70,000 Visa transactions with the energy used to mine Ethereum.
NFTs depend on the Ethereum blockchain for its creation. Mostly, an NFT is a by-product of ERC-1155 or ERC-721. As a result, the NFT marketplace requires high energy use.
According to a report, more than 70% of carbon emissions in the globe come from one hundred companies. While this may be true, it doesn’t mean we should downplay the energy effect of the NFT market.
What is the Environmental Impact of NFTs?
As at the time of writing this, there’s no exact measure that defines the carbon footprint and the environmental impact of NFTs. What we have available are estimates from experts.
According to digital artist Memo Akten, a single NFT transaction may emit 4-8 kilograms of carbon dioxide in the environment. Right now, we don’t have enough scientific proof to back up this claim.
But, if you take a closer look at the activities involved in minting and transacting NFTs, it’s hard to disagree with the estimate from Memo Akten. For each step in the minting and acquiring process of an NFT, there are carbon emissions. Different crypto wallets are working 24/7, minting and selling NFTs, so you can expect to use up to that energy.
Efforts to find a more concrete measure of the environmental impact of NFTs have caused mixed reactions. Recently a group of people set up a website — cryptoart.wtf — to track the energy consumption of NFTs. Unfortunately, the project was unsuccessful with the website causing a rift among cryptocurrency enthusiasts.
According to the creators of CryptoArt.wtf, the website was not fulfilling its purpose. Instead of tracking the energy consumption of NFTs, people used the website to harass and abuse NFT users. The reactions led to the setback of the website’s mandate, and the site closed completely in March 2021.
Environmental Impact of NFTs: The Solution
With the amount of energy consumed by cryptocurrency, NFTs, and other digital assets, it’s vital to look for a solution. NFTs have the potential to revolutionalize media ownership forever, but this revolution shouldn’t be at the expense of our environment.
Let’s take a close look at some of the probable solutions to reduce the environmental impact of NFT collectibles:
- Blockchain technology should rely more on other renewable and safer energy sources.
- Blockchain should move from proof of work to proof of stake (pos) algorithm. The proof of work algorithm requires high energy to exist. However, a proof of stake algorithm offers less energy expenditure. According to a report, ethereum is slowly migrating into the pos algorithm, as opposed to pow. Fortunately, most NFT marketplaces depend on ethereum to exist.
NFTs are growing by the minute, not only in popularity but in value. However, with most cryptocurrencies existing thanks to the energy-intensive proof of work algorithm, they harm the environment. Currently, the NFT marketplace isn’t entirely safe for the environment.
The current realities of NFTs concerning the environment don’t mean we should abolish innovation. Instead, the best option will be a switch from the proof of work algorithm to the proof of stake algorithm to ensure the sustainability of NFTs. By doing so, we’ll be reducing carbon emissions drastically, thereby making NFTs an energy-efficient option.