The Environmental Impact of NFTs

The latest blockchain craze is non-fungible tokens, more commonly known as NFTs, however there’s begun to be some pushback from the artistic community that does many of the NFT designs. While there are still many who are enthralled by the profit potential of these new digital artworks, there are others who have begun telling the tale of an earth-killing monster. But whether thought of as financial savior or ecological disaster, there’s no doubting that many still consider NFTs to be the cutting edge and possibly the future when it comes to digital art.

The lingering issue is the environmental impact of NFTs, particularly in this age of climate change, carbon offset, and the New Green Deal. Artists who are also staunch environmentalists have recently begun moving away from NFTs, even where it could potentially cost them millions of dollars in revenue. These artists claim that the environmental impact of NFTs is simply too great.

For those just being introduced to this digital art form we are going to examine just what an NFT is and how we can decide whether their environmental impact is justified or not.

What is an NFT?

A non-fungible token, or NFT, is a unique digital construct that’s been registered on a blockchain ledger in order to indelibly record the authenticity and ownership of the construct. NFTs were created as a way for artists to ensure that their digital art cannot be counterfeited. This ability to establish authenticity and ownership is critical for digital artwork, since replicas are so easy to produce and so difficult to uncover.

Because NFTs are recorded as blockchain assets they are minted in the same way as cryptocurrency tokens. Currently most NFTs are created on the Ethereum blockchain. When minted a unique entry is created in the blockchain ledger that identifies the asset created. Whenever it is sold the asset transfer is also recorded on the blockchain, which means the ownership of the asset is always known and publicly available. This also allows the artist to make a percentage of the sale price not only on the first sale, but also on every subsequent sale of the NFT.

When a digital artwork is minted in this fashion it can still be copied and distributed as a .jpg or .png or .gif as usual, but the associated NFT will always remain unique.

What is the Carbon Footprint of an NFT?

Before we discuss the carbon footprint of an NFT we need to know what a carbon footprint is exactly. A carbon footprint is an estimate of all the carbon that’s emitted during the process of creating and consuming a product. Depending on what the product is this process can be dramatically different. For example, when manufacturing a glass bottle what type of input is being used? Is it raw materials or recycled materials? What type of energy is used in the manufacturing process? What is the bottle holding and how will it be transported to its final destination? All of these things will have an effect on the carbon footprint of the glass bottle.

Because there are so many variables in the carbon footprint we almost always have to estimate what the carbon footprint is for any item or person. Because calculating the exact footprint would be so complex, using an estimate can be extremely useful in understanding the impact an item, such as an NFT, might have on the environment.

In the case of NFTs there are a number of steps in the process of minting that don’t have a known carbon footprint, and there are few research studies on the subject. That said, Digiconomist, a website that examines the unintended consequences of digital trends, has developed an Ethereum Energy Consumption Index (you can see it here) that estimates the carbon footprint of a single Ethereum transaction to be 37.29kg CO2 (as of May 2021). That’s equivalent to the carbon footprint of 82,648 VISA transactions or 6,215 hours of watching YouTube.

There are others who’ve made forecasts regarding the carbon footprint of NFTs which account for the fact that every time an NFT is minted or sold it creates another transaction on the Ethereum blockchain. For example, artist Memo Akten has suggested minting an NFT has a carbon footprint of roughly 48kg CO2. In either case we can tell that the carbon footprint being created by NFTs is unusually high and probably unacceptable for the act of creating a digital artwork.

Because of this there have been a number of artists who’ve decided to avoid NFTs, even if it means losing a great deal of income. A choice like this has been compared with avoiding airplane flights, or biking to work, or avoiding beef in your diet. That’s because all these things are not a necessity, and by cutting them from our lives we can have a positive impact on our own carbon footprints.

For example, beef has a carbon footprint that’s roughly ten times greater than chicken, so cutting beef from our diets can have a significant impact on our carbon footprint over the course of years and decades. And if avoiding beef is a worthwhile thing to lower our carbon footprint, then certainly avoiding the creation or purchase of NFTs is worthwhile.

Climate Change isn’t Caused by Individual Choices

Some people claim that making individual choices to reduce our own carbon footprint is almost useless since just 100 companies are responsible for 71% of the carbon emissions in the world. Reducing personal carbon emissions can seem like trying to empty a lake using a thimble. Isn’t it the responsibility of corporations and governments to make the changes necessary to reduce our impact on the Earth’s climate?

Actually individuals collectively hold greater power in their consumption choices. We can see this is the increasing use of sustainable items rather than single use products. This is the very definition of how consumer choices can impact how corporations behave. Similarly by avoiding NFTs we can send a message that they aren’t valued by the public, which would result in less NFTs being minted.

Airlines have a Massive Carbon Footprint. Why are they OK, but not NFTs?

At first glance it might seem like NFTs are being unfairly targeted simply because they are new, but the fact is there has been a large push towards decarbonization globally for some time. After all, that’s what the Paris Accord is all about. And industries have been innovating in many ways to reduce the amount of carbon being emitted in order to reverse climate change and avoid a climate crisis.

So we can take whatever steps are necessary to increase sustainability, whether that means walking rather than driving, avoiding beef and airplanes, or avoiding NFTs. However the real question that needs to be answered is whether or not an activity or product, such as an NFT, is an acceptable creation given its cost.

 NFTs can Make One Wealthy

Many people still choose to take airplanes and eat beef, because they perceive some greater value in those activities in comparison with the activism necessary to fight climate change. Of course they might change their minds at a later date, if more evidence is presented that their behavior is hurting our planet. Or if the push to decarbonizes causes airline tickets and beef to become too expensive that could dramatically reduce their usage.

The same can be said about NFTs. Whether or not you choose to participate in the NFT ecosystem will depend on your own decisions regarding the need to reduce carbon emissions. It will also revolve around the options that are available to you. Just what are those options?

Options for Reducing our Carbon Footprint

Carbon Offsets

Carbon offsets are payments made to fund a project that lowers carbon emissions, or removes carbon dioxide from the atmosphere. The theory is that a government, corporation, or individual can purchase offsets that match their carbon emissions, thus cancelling out the emissions. While this seems like a perfect solution to the problem of large carbon footprints, experts have warned that carbon offsets should only be used when there are no better alternatives.

The warning comes because the use of carbon offsets also raises the issue of new carbon-intensive activities being started simply because carbon offsets are available. It’s fallacious thinking at a time when the world should be looking for ways to reduce emissions whenever possible. It’s also been found that carbon offset projects don’t always work as intended, making them unreliable. In some cases it could take decades to offset carbon being released, and in others the carbon being saved now is simply released later into the atmosphere, providing no long-term benefit.

What about Low Carbon NFTs?

The Ethereum blockchain that’s used to mint NFTs uses a mechanism called Proof-of-Work (PoW) in order to verify transactions are legitimate and to store data. It is this PoW mechanism that leads to the incredibly high energy usage of the Ethereum network. However there are alternative mechanisms that can be used, such as Proof-of-Stake (PoS), which are far less energy intensive. In fact, several blockchains that also support NFTs (Polygon and Tezos for example) already use the PoS mechanism and have far lower energy consumption when compared with Ethereum. For example, Tezos has an estimated annual energy consumption of 0.00006Twh, compared to 33.57Twh for Ethereum.

Ethereum is transitioning to the PoS mechanism itself, and staking has already begun for the network, and while there’s no set date for the full move to PoS the Ethereum.org website says it is estimated to occur in 2021 or 2022. That will significantly decrease the carbon footprint of NFTs.

ethereum proof of stake merge

Some have also said that PoW blockchains could be considered acceptable too if they were running on a renewable energy source such as wind or solar. In fact, a study done by Cambridge University in 2020 found that 39% of the energy used by PoW blockchains is already renewable energy. The researchers also concluded that this number may increase in the future.

We do have to keep in mind that no matter what blockchain we’re considering, the total consumption of electricity is not the only factor in the carbon footprint and environmental impact. As cryptocurrencies become more popular and move into the mainstream the number of miners and stakers is bound to increase. This will mean more computer hardware will be brought into service for cryptocurrency uses, and this hardware comes with its own carbon footprint that derives from the manufacturing and extraction processes. This means that the estimates of the carbon footprint of NFTs is already higher than previously thought, and that it could remain quite high even on a PoS blockchain.

In Conclusion

At the end of the day the energy being consumed for NFTs is a very tiny part of all global emissions. It’s even a small fraction of the total energy used in blockchains alone. And yet our actions in the NFT space will reflect the type of mindset needed if we are to successfully reverse climate change.

The good news is that many of the potential fixes for the carbon emission issues seen with NFTs are already being worked on, they just need greater adoption in many cases. Which is true of the entire carbon neutral movement. And while a solution hasn’t come about yet there are many artists and even environmentalists who are optimistic regarding NFTs. They believe that in the next year or two emissions will become a non-issue for the NFT space.

Ultimately it is the artists themselves who have been most vocal in reaching for a change. They have the power, and if the NFT marketplaces fail to meet their demands they could easily stop minting NFTs or move to an alternate marketplace where NFTs are minted on the “cleaner” blockchains.

Already some artists are offering bounties to those who can find new ways to improve the sustainability and carbon footprint of NFTs. It’s a perfect example of the community tackling the problem on their own terms rather than ignoring it and hoping someone else will eventually solve it.