You’ve probably heard (or even participated in) conversations about cryptography and its environmental impact. Climate activists have been talking about the evils of cryptocurrencies for years, and crypto brothers have also counterattacked in their own discussions.
With the spread of NFTs, conversations have been amplified more than ever. Search for NFTs and climates and you’ll find countless articles on this topic.
Most frame NFTs are considered unwanted evil due to their impact on the climate, but research has shown that there are solutions currently being worked on to mitigate the impact.
However, before we can delve into the conversation completely, we first need to understand how and why NFTs are considered bad for the climate.
First, let me explain a little about NFT.
If you still don’t fully understand what an NFT is, here’s a quick explanation.
NFT stands for irreplaceable token. Fungibility is the characteristic of a product or product that can be exchanged for another individual product or product of the same type. Therefore, even fiat money and cryptocurrencies can be replaced. However, NFTs are not.
Ownership of NFTs is recorded in the blockchain, a system that records transactions made in cryptocurrencies. The blockchain is maintained across multiple computers linked in a peer-to-peer network.
If that sounds awkward to you (which was the case for me at first), the point is that the blockchain works in a way that makes changing or hacking information difficult or impossible. It aims to be a transparent yet secure system for records management and distribution.
Now that we know what NFTs are, this is why the environmental considerations of NFTs have been hotly debated over the last few years.
1. Creating, selling and transferring NFTs all require energy
First, let’s understand the life cycle of NFT. In order for NFTs to exist, they need to be cast like fiat coins. In cryptography, minting refers to the process of generating new coins by authenticating data, creating new blocks, and recording information on the blockchain. This process, of course, requires energy.
Not only that. Each NFT transaction, including bidding, selling, and transferring NFTs, requires power. If you decide to “remove” the NFT (also known as sending it to a null inaccessible address to burn the NFT), this also consumes energy.
Different transactions have different levels of complexity. This means that some transactions consume more energy than other transactions.
At this point, you may be wondering exactly how much energy each NFT transaction requires.
Many cite Memo Akten’s article on Medium, which was recently updated in December 2021. This is a fairly long article that blurs the eyes of the average person, so here are some important numbers to refer to.
Akten studied SuperRare, one of many NFT marketplaces, to do the calculations. According to his analysis, the average footprint per NFT-related transaction is 82KWh or 46KgCO2.
Akten also added some additional information from the work of artist Kyle McDonalds. This includes these statistics related to NFTs.
- From 100 Kg CO2 to mint (apparently equivalent to an hour or two hour flight).
- Selling over 200Kg CO2 in a few bids (equivalent to a 3-hour flight).
- 500 + KgCO2 for more bids and more sales (compared to flights over 5 hours).
Second, according to the Cambridge Alternative Finance Center (CCAF), Bitcoin consumes about 110 TWh annually. This probably corresponds to Malaysia’s annual energy consumption.
Another platform, Digiconomist, is also often quoted. According to this platform, the electrical energy used by the Ethereum blockchain is 92.69 TWh, which is comparable to the annual power consumption of neighboring Philippines.
The site also reports that Ethereum has an annual carbon footprint of 51.7 Mt CO2, comparable to the Swedish carbon footprint.
However, there is much debate surrounding these numbers, as they are ultimately just estimates.
2. Ethereum and Bitcoin Proof of Work models consume a lot of power
You will notice that we specifically mentioned Ethereum and Bitcoin. Because these are two of the biggest names in blockchain technology.
Both Ethereum and Bitcoin currently use the Proof of Work protocol. This essentially refers to a distributed consensus mechanism that validates transactions.
Proof of work is done by miners competing to create new blocks full of processed transactions. The winner will share the new block with the rest of the network and win the newly created ETH. Computers that can solve math puzzles the fastest will win the competition. This creates an encrypted link between the current block and the previous block. Solving this puzzle is the job of “Proof of Work”.
Proof of work is known to consume large amounts of energy, mostly by design, because energy protects the network.
However, even Ethereum itself states that the current energy consumption using the Proof of Work model is too high to be sustainable. Therefore, we plan to move to the Proof of Stake Protocol instead. This eliminates the “puzzle solving” required for proof of work models.
In Proof of Stake, cryptocurrency owners can bet coins and give them the right to check new blocks of transactions and add them to the blockchain. In this system:
The miner is replaced by a verifier who performs the same function, but instead of spending the assets in advance in the form of computational work, he bets ETH as collateral against fraud. If the validator is lazy (offline if it is supposed to fulfill the validator’s obligations), the bet ETH can slowly leak out, but due to fraudulent behavior, the bet asset will “slash”. Will be.
Blockchains that currently use Proof of Stake include Solana, Tezos, and Algorand. There is also Zetrix running NFTPangolin locally.
3. The energy source used may be unsustainable
Consuming large amounts of energy is one thing, but not when the energy used is non-renewable and therefore unsustainable.
According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin miners in particular find that their main sources of energy are hydropower, coal and natural gas. However, some have used renewable energies such as oil, nuclear power, wind, solar and geothermal.
According to Ethereum, “many mining uses renewable or undeveloped energy in remote areas.” However, Ethereum claims that many industries destroyed by NFTs and cryptocurrencies also have huge carbon dioxide emissions, such as the financial sector.
Of course, the two “mistakes” are incorrect. The impact of the financial sector on climate change also needs to continue to improve.
4. Addition of electronic waste
E-waste is a problem that extends beyond NFTs, but cryptography does play a role, especially for Bitcoin mining, which requires specialized integrated circuits. Ethereum mining is done using the graphics processing unit (GPU) found on all home computers.
The mining “rig” will eventually fail, producing a large amount of e-waste. According to a 2019 UN report, the world produces up to 50 million tonnes of e-waste, with less than 20% of e-waste being officially recycled.
The problem with e-waste is that when exposed to heat, it releases toxic chemicals into the atmosphere. This has a negative impact not only on our climate but also on our health.
So … is NFT killing the earth?
In the big picture, the main cause of climate change is the burning of fossil fuels. So far, cryptocurrencies are just a fragment of other factors that are damaging to our environment.
Of course, it does not justify the impact of cryptography on the climate. But when the Internet began to become obsolete, there was much debate about its environmental footprint.
This CNBC article interviewed Jonathan Koomey, a lecturer at Stanford University. He helped uncover the widespread predictions of Internet power consumption in the 90’s. At the time, research showed that the Internet’s share of US electricity consumption was exaggerated and was predicted to double in 10 years.
And now look at us. They just swallow memes on Twitter and send DMs to each other on Instagram.
Still, the fact of the matter is that the core NFTs still have a legacy of high electricity usage and positive carbon dioxide emissions. We know that.
But this journal from HBR undoubtedly raised a better, context-sensitive, subtle issue. How much energy does the industry deserve?
Everyone knows that cars leave carbon dioxide emissions, but many of us collectively decided that it was some sort of necessary evil. It is our willingness to sacrifice for efficiency.
Some people think cryptography is stupid. And for others, it’s their livelihood. And perhaps, like the Internet, cryptography may inevitably be in the future.
In any case, I’m personally happy to see that platforms like Ethereum are transparent, at least for their carbon footprint. As stated on its website, “We are not here to protect the environmental footprint of the mining industry, but I would like to explain how the situation is improving.”
- Read other articles about NFTs here.