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The NFT Environmental Costs and Impact Blog

Apr 27, 2022

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However, there's a nefarious cost associated with these innovations. The environmental impact of NFTs such as, for instance, may be sky-high.

Then what is it that does it mean to make NFTs detrimental to the environment? what are the consequences of NFTs as well as changes in the climate? Below, we dig into this buzzword to discover the answer.

 Why Are NFTs Bad for the environment?

It takes an huge amounts of energy to run the transaction technology that underpins NFTs. Here's how the system works--and some of the most recent estimations of how much power is consumed.

The NFT Ecosystem

Ethereum is the most popular blockchain used today for NFT transactions. The platform is compatible with both crypto (its own coin is Ether or ETH, which is currently the most popular crypto used to facilitate NFT sales) as well as smart contracts which are self-executing computer programs that oversee legally important instances (including NFT purchases).

This is an aspect of a "proof-of-work" security mechanism, which is energy-inefficient by conception. It is believed that the energy-intensive process for crypto mining encourages scarcity and discourages bad actors from taking part in the system.

The NFTs and the Environment

Although there are some plans being implemented to cut back on carbon emissions from cryptocurrencies like Ether at the moment, for the time it is still consuming a staggering amount of energy--a significant percentage of which is powered by fossil fuels. Actually, an internet-based resource found that Ethereum uses more electricity than a number of countries.

NFT Pollution

Through a thorough analysis of more than 18,000 NFT transactions, one artist, Akten found that an average NFT is carbon footprint equivalent to 1 month's worth of energy usage for the average UK resident (it's important to note that this research has not been corroborated by scientific institutions). Another artist of note, Beeple, estimated that the expense of carbon offsets that help divert the carbon emissions from one of his works that are digital works is approximately $5,000.

NFTs as well as NFTs and Climate Change

Then, what's the connection between the NFT and climate change? Like any other question regarding environmental effects, the position of the individual user, artist and consumers is being debating. There are those who believe that the NFT ecosystem could exist regardless of individual contributions--sort of like how the plane can take off no matter how many passengers are in the plane. Some critics, however, draw attention to the pressure that each individual's actions, when viewed collectively, can put upon companies and economies to ultimately propel systemic change.

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 NFT Pros and Cons

To answer the question "Why are NFTs bad?" isn't cut and dry. There are lots of advantages and disadvantages of NFTs -- more than can be adequately addressed in a single piece. Here are just a few of the most well-known ones:

Pro: Re-democratizing the art-buying and Selling Process

Pro: A Continued source of revenue for creators

Con: Are NFTs harmful for the Earth?

The drawback of the "pros and negatives of NFTs" debate which we've discussed previously, is that the underlying technology requires a huge quantity of power. There's also some debate about just how much the responsibility NFTs hold in the wider emission of cryptocurrency; they probably account for only a minor portion of the overall Ethereum transactions.

 What Are Blockchains doing to improve

The blockchain industry is in flux. Both emerging and established ones are rethinking how distributed ledger technology and their native cryptos rely upon fossil fuels. Here are some of the ways innovators are working to reduce the environmental impacts of NFTs.

Proof of Stake. Evidence of work

A way to lower the environmental costs of NFT is to reconsider the "proof-of-work" technology on the foundation of which it's built. A different option, "proof of stake," allows participants to sequester a portion of their cryptocurrency on a third-party platform in exchange for the opportunity to verify new transactions and change the blockchain. The process ensures that they are the right to "stake" to ensure the accuracy of the ledger. Also, theoretically this eliminates the requirement for high-energy machines for mining cryptocurrency.

The NBA's Top Shot, a marketplace that allows fans to purchase NFTs for NBA highlights, utilizes this method. The next version of Ethereum, ETH2, which is believed to be to be released around 2022 and is expected to be based with proof of stake. Others blockchains, such as Tezos the open-source blockchain that utilizes the native cryptocurrency , tez is already built on the consensus system.

Green Energy Sources that Cut down on NFT's Climate Change Risks

There are numerous examples that show "clean crypto" in action. In Canada, for instance one firm is working on converting petroleum waste into green energy that powers crypto mining. In Texas there are several companies building renewable-run mines for cryptocurrencies. This has the potential to reduce the environmental impact of NFT art as they will make the entire system more sustainable from the beginning.

 What else needs to Be Do?

While the above solutions are promising, they're only speculation. Since cryptocurrencies, blockchains, and NFTs are still relatively new technologies. To pare down the environmental cost associated with NFT, more research, collaboration and continued innovation is necessary.

Additional Studies and Data Analysis

To enhance the energy-intensive NFT environment, additional research that quantifies the impact of current systems--and predicts how new ones might improve upon it -- must be carried out. Resources such as those from the Bitcoin Energy Consumption Index could be an important part of this process.

Organizations studying the relationship between NFTs and Climate Change

Other initiatives such as that of Crypto Climate Accord as well as the Blockchain to Climate Foundation call for collaborative, private-sector buy-in for cryptocurrency to help make its transactions environmentally friendly. Collaboration efforts such as this would likely play a pivotal role in creating a sustainable future for NFTs and the other cryptocurrency-related products.

Inspiring Innovations for NFTs, and the environment

Many businesses are trying to solve the NFT sustainability challenge. From businesses that have developed proof-of-stake technology to those developing new methods for carbon offsets for NFTs to those building Blockchain-based carbon-neutral platforms, there's a sea change in the near future. Some studies suggest that NFTs' negative impact on the environment could be reduced significantly in as little as a year or two.

 Weighing the NFT Environmental Cost

When thinking about the NFT effect on environment, it's worth factoring in all the available information--including the foundational technologies that make NFTs bad for the environment to begin with.

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