Are NFTs Killing our Planet? The Darkside of NFT Explained

NFTs have exploded in popularity since the beginning of 2020. With the astounding rise in sales by 1,700% between December 2020 and February 2021, the newest tech sensations have led many artists to earn millions over the auction of a single picture.

However, there is a dark side to these digital assets. NFTs may be the future of digital art – but they are putting our planet’s future in grave danger.

So, what are NFTs? Are they bad for the environment? What makes them so dangerous for the planet? And, is there a future for green NFTs?

What are NFTs?

NFTs are being heralded as the next big thing in the high-growth crypto investing world. These tokens, which are seen as the digital equivalent of collectibles, have already attracted millions of dollars in investments in a range of NFTs and NFT-related enterprises. 

But, what exactly is NFT?

The idea of cryptocurrency is that each unit of the currency is interchangeable. They are all identical and worth the same amount; therefore, they are known as a fungible tokens. NFTs, on the other hand, are Non-Fungible Tokens.

An NFT is an information stored on a ledger maintained by a distributed network. However, each NFT is different from one another; therefore, not interchangeable.

NFTs (non-fungible tokens) are gaining traction in the digital world, and they may take the shape of artwork, music, metaverse real estate, and even selfies. They provide new ways for artists to profit from their work, as well as a means for purchasers to support creators while also gaining the bragging rights of having exclusive content. However, they have faced criticism for their environmental impact.

But, what makes NFTs bad for the environment?

Are NFTs Bad News For The Environment?

Yes, NFTs have a devastating impact on the planet. And one of the primary perpetrators behind NFT’s environmental impact is mining. Mining is a procedure that uses enormous processing power and energy to solve complicated mathematical problems to ‘mint’ an NFT on the blockchain and hand over the ownership to the buyer.

Ethereum, an open-source blockchain, is the most popular marketplace for NFTs. To construct these digital assets, Ethereum employs a purposeful inefficient ‘Proof of work‘ (PoW) approach.

Powerful computers can try an infinite number of new block creations each second. And the first miner to find the solution is rewarded with their unique assets, which are then added to the blockchain.

However, the puzzle becomes even more complex as more money fuels the NFT industry and more computers join the race to solve the problems. To stay competitive, miners constantly need to upgrade to higher computing power, large warehouses, and more powerful cooling systems. Thus boosting the carbon footprint.

Take, for example, ‘Space Cat,‘ a GIF NFT of a cat traveling to the moon in a rocket. According to Crypto Art, the Space Cat’s carbon footprint is the same as an EU resident’s electrical usage for two months.

Finding the Worst Offender of Carbon Footprint

Given a sequence of steps involved and little to no research in determining the emission during each stage; finding out the actual carbon footprint of each NFT is challenging.

However, we know that Ethereum is one of the most carbon-intensive NFT platforms. Thus any digital asset purchased through it would have a significant carbon footprint.

Unfortunately, most NFTs today are stored in the Ethereum blockchain that operates on a proof-of-work (PoW) model. Digital Artist Akten examined the carbon emission of 18,000 NFTs and discovered that an average digital asset uses energy equivalent to a month’s worth of power consumed by an EU resident.

The PoW system of Ethereum consumes over 31 terawatt-hours (TWh) of power every year, an approximate equivalent to the annual energy usage of Nigeria.

“Since NFTs are getting mainstream, more people are transacting on Ethereum. As long as proof-of-work still exists in that chain, the environmental impact is still high,”

Angeline Viray, a trader and investor in NFTs and cryptocurrencies

Is Proof of Stake (PoS) Model the Way to Green NFTs?

Thre are two widely used blockchain consensus for cryptocurrency and NFT that ensures the legitimacy of the transaction on the network:

• Proof of Work (PoW)
• Proof of Stake (PoS)

While most networks today operate on a power-intensive PoW model where miners are rewarded for solving a combination of ‘digital locks,’ PoS might be the future of green NFT and the crypto industry.

PoS is when a validator (a person in charge of validating a transaction on a blockchain) holds a portion of their crypto holdings as collateral (stake). The system periodically awards one of the validators with the ability to produce the next ‘block’ in the blockchain.

However, there are still a lot of hurdles for PoS to become the primary consensus tool of the blockchain networks.

For one thing, shifting to the PoS model while maintaining functionality is quite challenging for blockchain. Furthermore, because specific systems favor validators willing to gamble the largest amount of stake on the line, the process may drift towards centralization (opposite to the core of blockchain tech, i.e., decentralization). Moreover, the consensus is yet to prove its security as PoW already has.

Ethereum, on the other hand, claims to have made progress toward a proof-of-stake paradigm. According to Tim Beiko, the coordinator for Ethereum’s protocol developers, the ultimate transition will minimize Ethereum’s environmental effect by 99 percent.

NFT Industry Towards a Cleaner Future

The energy consumed in generating and operating NFT platforms is enough to power large countries like Argentina and Nigeria. But should this really be prioritized when so many people worldwide still lack access to dependable power while many are already suffering from the consequences of climate change?

However, the bright side is that the crypto and NFT industries are now marching toward a more environment-friendly future. Furthermore, there does seem to be a push in the crypto industry for more sustainability. Therefore, from the current trajectory, we can expect to see an increase in renewable energy and a steep reduction in emissions in the near future.