Can you buy or sell NFTs without affecting the environment?
An independent analysis of 18,000 NFTs found that the average NFT has a carbon footprint of more than a month’s worth of electricity for a person living in Europe.
How much would you be ready to pay for a piece of digital art? Going by recent trends in the crypto world, you would easily have to shell out millions of dollars for crypto art collectibles, also known as non-fungible tokens (NFTs). Last year, a relatively unknown artist, Beeple, sold his piece “Everydays: The First 5000 Days” for a whopping $69 million. This was a clear signal to the digital art community that this is their chance to hit the mainstream — a space typically reserved for niche artists that hob-knob with the elites of the world.
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Almost overnight, even the works of unknown artists started selling for princely amounts. NFTs have the potential to usher in a world where the artists dictate the rules, not the record company or the auction house. While the initial success of NFTs blindsided many, it was no surprise that they also had a major downside — NFTs cause substantial carbon emissions just like some other cryptocurrencies such as bitcoin.
The NFT trading models consume substantial energy, which results in carbon emissions that harm the planet’s ozone layer, warming the planet. Artists believed they could offset the carbon emissions and make sustainable NFTs a possibility. In an interview with The Verge, Beeple said he believes artists can offset carbon emissions by investing in renewable energy and conservation projects. But in reality, it is much more complex than individual artists combating the high levels of energy their art consumes by taking part in conservation projects.
How do NFTs affect the environment?
In the world of crypto, the mining process is to be blamed for environmental damage. Mining is integral to introducing new crypto coins in circulation and recording transactions on the distributed ledger, a central database of transactions that are not controlled by a single central entity. Many blockchains use the proof-of-work model to keep transactional data secure in a distributed ledger. This model involves users solving complex computational puzzles to add new blocks to the blockchain (distributed ledger). The high level of energy consumption is the point of the proof-of-work model rather than a side effect. It is a security measure.
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The Ethereum network is the second most popular blockchain in the world that also uses the proof-of-work model for recording transactions and adding blocks to the network. It is estimated that the Ethereum network consumes about as much electricity as the entire country of Libya .
Most of the NFT marketplaces currently use Ethereum for NFT transactions. If you are looking to buy NFTs from popular marketplaces like SuperRare, OpenSea, and Nifty Gateway, you need Ethereum tokens, and you even have to pay a minting fee in Ethereum’s native currency ether (ETH) if you want to list and sell your NFT.
cryptoart.wtf, a website that estimates greenhouse gas emissions associated with individual NFTs, analyzed 18,000 NFTs and found that the average NFT has a carbon footprint of more than a month’s worth of electricity for a person living in Europe. The creator of cryptoart.wtf, Memo Akten, later took down the post saying, “
Many detractors in the NFT world believe the assessment made by Akten’s site is unfair and sensationalises the issue by attaching a specific energy use figure number to an artwork. They also believe that even if artists don’t sell NFTs using Ethereum, miners will still be mining Ethereum in the network.
Are environment-friendly NFTs possible?
One big game-changer in the crypto world that can lower energy consumption is the proof-of-stake model of verifying transactions. In proof-of-stake, instead of solving complex computational puzzles, validators (miners) stake their own coins in the blockchain (distributed ledger) to verify transactions and add new blocks in the blockchain. This can drop energy consumption to zero while adding many quality-of-life improvements to the blockchain. Many blockchains like Solana, Polkadot, and Cardano already use the proof-of-stake model. Marketplaces using any of these networks will cut down energy consumption significantly.
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Even Ethereum is in the midst of a switch from proof-of-work to proof-of-stake model, but it has been going through this transition for the past two years, and there is no final date for when the change will be complete.
Michel Rauchs, a research affiliate at the Cambridge Centre for Alternative Finance, said in an interview with The Verge talking about Ethereum’s switch to proof-of-stake, “That would essentially mean that Ethereum’s electricity consumption will literally over a day or NFT overnight drop to almost zero.”
In the end, it will be shakers and movers of the digital art world, the artists, that decide the sustainability of NFT trading. It is incumbent upon them as they hold power in this new NFT trading platform. They can choose to mint their NFTs using cleaner cryptocurrencies that can force the hands of marketplaces that want to stay relevant in the fast world of digital art to switch to sustainable technologies.