Most NFTs (non-fungible tokens) belong to the Ethereum blockchain. Ethereum is a crypto currency, just like bitcoin or dogecoin, and its blockchain does support these NFTs, storing extra information that permits different functions from ETH coin. Other blockchains implement their own versions of NFTs. How do NFTs hurt the planet? When we comprehend cryptocurrencies and how they work, a new crypto-cousin, the NFT now emerges with considerable environmental impact.
NFTs are these amazing digital tokens that through multiple computer transactions, give someone ownership of a piece of art, like a video, song, or image. Traditional cryptocurrencies, such as Bitcoin, are pretty much identical and can be traded with each other. They are pieces of digital art. You can just as easily convert a $20 note for two tens, but cannot trade a Dali for a Picasso. The market in trading NFTs is rapidly expanding due to COVID-19 which has increased online time for people, making native digital products like NFTs, more attractive, as our digital living has increased much more. Recently a collage of futuristic-looking illustrations went under the hammer $69.3 million, the third-highest price earned by a living artist. With serious money at play, the non-virtual art world is waking up. Artists having track records for works are creating NFTs while art auction houses like Christie’s host sales. Increasingly, NFTs have become a new component of today’s art world.
Environmental Impact of NFTs
NFTs share harmful traits with cryptocurrency cousins by using much energy. Bitcoin ‘mining’ generates 38 million tons of carbon dioxide per year, exceeding Slovakia’s carbon footprint in 2018, while Bitcoin emissions raised Earth’s temperature by two degrees. Bitcoin is a proof-of-work (PoW) blockchain, using consensus mechanisms to secure the blockchain and verify transactions with miners competing against each other to mine a block with specialized computers generating trillions of guesses per second to try and win a brute-force approach requiring much electricity. Bitcoin’s daily carbon footprint equals watching 57,000 hours of YouTube videos while daily electricity consumption equals electricity used by an American household in 25 days.
The environmental impact of NFTs is similar, as energy-intensive computer transactions authenticate and sell the art. NFTs require blockchain transactions to create NFTs, to bid, and pay for the NFT after the winning bid, or to transfer ownership. You assess their share of electricity consumption to measure their environmental footprint. Increased trading in NFTs increases associated impacts. Energy used for transactions is a real problem, as miners are incentivized to use cheaper electricity sources to maximize profits. Production and recycling of hardware is a small share but specialized computers for mining will be unprofitable within years, creating huge e-wastes.
Can NFTs Ever Be Sustainable?
NFTs have massive environmental impact, but could become sustainable later by reducing blockchain impact. Most NFTs operate on Ethereum, essentially a blockchain mechanism which moves away from proof-of-work to proof-of-stake to secure the blockchain besides verifying transactions making NFTs more sustainable over time. Using a non-PoW blockchain could also address this or by reducing the number of transactions needed on blockchains. Building on ‘layer 2,’ensures reduced transactions on blockchain. An auction entirely held off-chain on layer 2, can be submitted to the blockchain in batches. This is a short-term solution for implementing but as most energy production is from fossil fuels, cryptocurrencies and NFTs will contribute to more global warming.