You’ve heard of NFTs by now. But have you considered the environmental cost of NFTs? As unique cryptographic tokens, each one must be stored forever and the transactions verified across their entire lifetimes. As the market for NFTs grows, the need for computing power also increases.
Nonfungible.com says there were 11 million completed NFTs in existence as of April 2022. Now, the amount of data represented by a single, completed NFT is relatively tiny compared to other files you view or share online. But the energy-suck isn’t about storage. It’s about the ongoing transaction verification used by blockchain ledgers.
Today, we’ll learn about the environmental cost of NFTs, how much energy they require, and what businesses can and should do to ease the strain. Let’s begin with an understanding of NFTs as artwork.
What Are NFTs?
Non-Fungible Tokens — NFTs, usually pronounced “en eff teez” but occasionally “nefts” — are cryptographic assets on a blockchain with unique metadata and identification codes. They’re considered a form of digital artwork.
Non-fungible means that a thing cannot be replaced with another identical item.
- Examples of fungible tokens include US dollar bills, Beanie Babies, Pokemon cards, and even Bitcoin. They aren’t unique, and one can be traded for another with an identical value.
- Non-fungible items are always unique, like da Vinci’s Mona Lisa or van Gogh’s Starry Night. Notice that unique items can be duplicated, but the copies are worth only a tiny fraction of the value of the original, which is the real prize.
There are several distinct ways organizations and individuals can use NFTs. From a business perspective, they can become creative and shareable uses of logos and marketing materials. Artists and owners can sell the rights to the artwork like any other asset.
Let’s digress for a moment and talk about the valuation of NFTs, but you’ll see how that matters to the environmental cost of NFTs in a moment.
What Defines the Cash Value of NFTs?
Taking a macro-view, we could ask, “What makes anything worth money?” Much like gemstones, Pez dispensers, and clever domain names on the web, the price of an NFT boils down to what someone will pay for it.
The value of most artwork is a blend of subjective and objective measures. A hand-drawn Christmas card illustrated by your child is priceless to you. The sculptures of an emerging artist are worth the price tag the artist applies to them, based on their personal experience, effort, and skill. Hundreds of Blue Books exist to help collectors price the works of more established artists.
Some notable examples of NFT pricing include:
- A collage by Beeple that sold for $69.3 million in March 2022
- Twitter co-founder Jack Dorsey’s first tweet was made into an NFT, which sold for $2.0 million.
- A GIF of a cat with a Pop-Tart body, which sold for $600,000
But anyone can join in the NFT game with a tiny investment. Just hop on a platform like FTX.us or NFTkreator.com and browse through the tokens. Unlike other investment games, like RINs and RECs, anyone can play. You don’t need $10,000 or even $1,000 to get in the game. NFTs can be cheap, only a few bucks, and you can get in the game with $40 of beer money.
That’s why the computing resources tied to NFTs are bound to be immense.
How Much Energy Do NFTs Suck? (Good Luck Figuring That Out)
NFTs may seem like a fad right now — the way email was a fad in 1997. But they are fast becoming the standard of digital artwork ownership. Since NFTs are available to anyone with an internet connection and beer money, we’re looking at massive energy consumption, emissions, and climate control costs in the upcoming years.
There is no way to account for the amount of energy used by a single NFT and its future possibility of transactions. Even if you could, many people would choose not to listen. A now-defunct website, CryptoArt.wtf, once published numbers aimed at assessing climate damage attributed to NFTs. But its founders shut it down due to harassment and violent threats.
Also, there’s no way to predict how many millions of NFTs will be minted. So it’s truly impossible to gauge the future impact on energy and the “real” environmental cost of NFTs on the energy consumption side.
The Ethereum Platform Uses More Energy Than Some Entire Nations
We do know that most NFTs exist on the Ethereum platform. In its current state, the Ethereum network consumes more electricity than entire nations like Egypt, Turkey, or Ukraine on a given day. Since the ledger is split up on roughly 300,000 individual nodes spread around the globe, energy use might not seem like a big deal unless a big crypto server farm springs up in your neighborhood.
Do you want more specific numbers? Good luck with that. Remember, blockchain — and therefore NFTs — probably don’t rely on renewable energies as their main power source around the globe. The numbers are difficult to verify, and various resources produce vastly different statistics. For instance, a 2019 report by Coinshares states that 75% of Bitcoin crypto mining efforts rely on renewable energy sources. But other studies claim it’s more like 29%, or possibly 39%.
Then other sources are blatantly contradictory. And no one knows how much Ethereum’s network is dedicated to NFTs.
Anecdotally, in February 2021, French artist Joanie Lemercier canceled his release of several works after he discovered the environmental cost of NFTs. He noted on his website that in ten seconds, his release of six NFTs would use as much electricity as his entire studio uses in two years.
The CO2-Related Environmental Cost of NFTs
Carbon emissions do affect the environment, particularly the air we breathe. Globally speaking, we burn more than 8 billion tons of carbon each year, pushing nearly 30 billion tons of CO2 into the atmosphere.
Exactly how much energy pollution do NFTs cause? One study suggests these excruciating numbers:
- 100 KgCO2 to mint — that’s equivalent to a two-hour flight on a commercial jet to publish one NFT
- 200+ KgCO2 to sell — assuming there are only a few bids, which is equivalent to a three-hour flight
- 500+ KgCO2 for more bids and future sales — that’s as much carbon released into the environment as a flight from LAX to NYC
Another study suggests the mint of 100 NFTs creates 10 tons of CO2. That’s about the same carbon footprint as an individual European living for one year (but less CO2 than an American generates in the same year.)
So, if you’re particularly green-minded, or if your organization hopes to maintain a green reputation, NFTs may not be an appropriate investment at the moment beyond a token few.
Once we have more ways to generate clean electricity to power both server farms and the climate control they need to operate, this could change. So let’s think about that.
Encouraging Environmentally-Friendly NFTs and Blockchain
The Proof of Work (PoW) vs. Proof of Stake (PoS) Discussion
The original crypto platforms operate on a Proof of Work (PoW) system. If you’ve read our previous posts or know anything about Crypto, you know a PoW system works via individual nodes computing and verifying transactions to an immutable public ledger. They require immense computing power, and nodes compete with each other to add blocks of data to the chain.
Proof of Stake (PoS) systems use capital accumulation and algorithms to mint blocks and ensure they’re valid. They require a moderate to large investment to start, but the individual nodes don’t compete.
Ethereum is moving towards PoS because “it is more secure, less energy-intensive, and better for implementing new scaling solutions.” The Ethereum website says that while it’s “always been the plan to transition to proof-of-stake, it is also more complex than proof-of-work, and refining the mechanism has taken years of research and development.” The current challenge is implementing PoS in a process they call “The Merge.”
It’s difficult to quantify precisely how much the move to PoS will reduce the environmental cost of NFTs specifically or even blockchain in general. But the consensus among experts is that a PoS system will reduce energy use by something like 33% to 65%. Maybe 66%, who the f$%k knows?
It will be interesting to see how this plays out, and if your organization plans to play in NFTs, you should pay attention. The Merge is expected to occur in August 2022, but we all know how reliable target dates are, am I right?
Part of This Responsibility Lies With the Artists
As we wait for The Ethereum Merge, we can look into other ways to make NFTs more sustainable. Artists could take steps to offset emissions associated with the sale of NFTs. For example, a single buy-it-now price would be practical rather than encouraging ongoing bidding. Artists could also choose to create and sell their works on less energy-intensive networks.
Buyers Must Take Responsibility, Too
Leafscore.com says more energy-efficient networks, compared to Ethereum, include:
- Algorand
- Polkadot
- Tezos
- Hedera Hashgraph
- And the Stellar Network
So be sure to explore these platforms for NFTs if you’re interested in buying them.
Whether you think of NFTs as a fad, an investment, or an artistic outlet, you must understand their ongoing environmental impacts. Over the upcoming months, keep an eye on Etherium for The Merge and related publicity, which may make your current stock of NFTs worth more.
Related Reading & Resources About the Environmental Cost of NFTs:
Seniorsbluebook.com The Basics on NFTs: The Newest Cryptoverse Craze
Digiconomist.net: Ethereum Energy Consumption
Niwa.co.nz: How Can Carbon Emissions be Weighed?
Nonfungible.com: The Ecological Impact of NFTs
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