With headlines like Beeple sold an NFT for 69$ million circling around the internet, it is easy to understand how NFTs have gained the interest of so many and become one of the defining buzzwords of 2021. Just in the last year, NFTs have become a 40-billion-dollar market with 28.6 million wallets trading these digital assets. And, although these figures depict NFTs in a positive light with a promising future, they also call for a long overdue discussion on its more controversial characteristics: its sustainability and impact on the environment.
Non-Fungible Tokens (NFT) are digital assets on a blockchain that utilize unique identification codes and metadata that distinguish them from one other. Because NFT leverages blockchain technology, digital assets that are usually easily replicable can be recorded onto a blockchain that acts as a digital ledger that individuals can refer to for proof of ownership. Jacob Kastrenakes from The Verge simplifies the concept behind the technology in his article explaining that, “NFTs, or non-fungible tokens, are unique files that live on a blockchain and are able to verify ownership of a work of digital art. Buyers typically get limited rights to display the digital artwork they represent, but in many ways, they’re just buying bragging rights and an asset they may be able to resell later.” It is the ability to track a digital asset and prove one’s ownership of such asset that has so many creators, artists, collectors, and even big brands like Coca Cola and Gucci joining in on the movement for new ways of generating profit.
From an ecological standpoint, however, the entire process of creating and maintaining NFTs is a mass-scale burden. Because most NFTs are minted on the Ether cryptocurrency and utilize Ethereum for transactions, the carbon footprint that is associated with the Ethereum cryptocurrency is exacerbated by the high-frequency trading that governs the high-volatility NFT market. Memo Akten, an artist and programmer, estimates that “an average transaction specifically for NFTs has a carbon footprint of about 48kg CO2,” which is 20 times that of physically mailing an art print or equivalent to more than a month’s worth of electricity for a person living in the EU (Qiu, Jiahui). Considering that these carbon emissions are incurred every time someone mints or buys an NFT, quickly reveals how damning NFTs can be to the environment.
Despite the large carbon footprint of NFTs, there are a few possible solutions that may create a more sustainable and ecofriendly system for these new asset types. One of the main problems with Ethereum in the NFT market is that this cryptocurrency utilizes a Proof-of-Work system that is very energy inefficient. Proof-of-work acts as Ethereum’s security system, as it oversees and verifies transactions through complex puzzles that users, or “miners”, solve in exchange for tokens. However, because of the energy consumption of the “miners” that maintain this system, many newer coins are adopting a Proof-of-Stake system that “validates block transactions based on the number of coins the validator stakes,” which reduces the number of puzzles and computing power necessary to maintain the system (Leonard, Kimberlee). Thus, the NFT market could reduce its carbon footprint by transitioning from Ethereum to cryptocurrencies employing Proof-of-Stake solutions. Furthermore, a higher adoption rate of green energy resources for existing mining facilities that are currently maintaining the Ethereum blockchain could greatly reduce the total carbon footprint of NFTs. Finally, new technologies and features like the ability to batch transactions and process them in bulk, which is being developed by Bitcoin Lightning Network, show hope for possible developments in the efficiency of transactions.
Some marketplaces for NFTs have already integrated more energy-efficient blockchains. OpenSea has begun supporting Polygon and Klaytn while Rarible is using Flow and Tezos. These alternatives for Ethereum show great promise for sustainability. For example, Tezos is estimated to consume 0.00006Twh annually compared to the 33.57Twh that are required to maintain Ethereum (Qiu, Jiahui). Other newer projects like one of from Dapper Labs are also using Tezos to provide artists with an eco-friendly way to transform their music into NFTs. Beside marketplaces and projects adopting Proof-of-Stake cryptocurrencies, new NFT sustainability initiatives are also being created. TreeDeFi is a project that “mints NFTs that represent real-life trees that sequester carbon” (Matthews, Leigh). Thus, despite the inefficiencies and complications that come with the current NFT market, many are still confident that developments are coming soon and that NFTs are here to stay.
Calma, Justine. “The Climate Controversy Swirling around Nfts.” The Verge, The Verge, 15 Mar. 2021, https://www.theverge.com/2021/3/15/22328203/nft-cryptoart-ethereum-blockchain-climate-change.
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Kastrenakes, Jacob. “Beeple Sold an NFT for $69 Million.” The Verge, The Verge, 11 Mar. 2021, https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million.
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Matthews, Leigh. “How Some Nfts Are Becoming More Sustainable.” LeafScore, 7 Jan. 2022, https://www.leafscore.com/blog/how-some-nfts-are-becoming-more-sustainable/.
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