The past few years have seen a massive spike in the popularity of cryptocurrency, and with it has come the rise of NFTs. NFTs, or non-fungible tokens, are digital assets that are bought and sold online, from audio clips to artwork and anything in between.
NFTs may seem like a new and enticing–if not confusing–addition to the cryptocurrency buzz. They also come with a major cost to the environment. Before involving yourself with the NFT craze, learn about its environmental impact.
What Are NFTs and How Do They Work?
NFTs are non-fungible, meaning you can’t interchange them with other valuables. Most often, people see these digital assets like images or artworks but can come in any form of data. They gain their worth through artificial scarcity. Therefore, they’re valuable because people cannot fully replicate them. It’s similar to how an original Van Gogh holds its value in its rarity. However, unlike tangible artwork, buying an NFT means owning the digital certificate or code identifying the sole owner. Most NFTs range from $1 to $500, though some reach into the millions, with the most expensive buy at the equivalent of $91.8 million.
Bought and sold on the Ethereum blockchain, NFTs are run through a series of computer programs that give the owner their unique proprietorship. People can primarily exchange them through cryptocurrency, which is digitally mining through physical servers. These servers use a process that we call “proof of work” (PoW). Essentially, that’s when computers race to solve complex equations that confirm the transactions and validate new tokens. NFTs use the same type of PoW processes. It helps make the transactions from buyer to seller and also validates the proprietorship. While people can run PoW on a home computer, large-scale processes require massive amounts of processing power. People can only do this efficiently on industrial servers.
These servers are where cryptocurrency and NFTs become environmentally detrimental.
How Do NFTs Affect the Environment?
While NFTs may seem like a harmless investment of digital collectibles, they come with an unseen consequence. NFTs require massive amounts of processing power. Generally, people power them through the cheapest available energy source. That allows data miners to earn the highest profit. While the cheapest energy source varies from place to place and we’re seeing a growing availability of renewable energy sources, many of these servers run on fossil fuels.
As it currently stands, cryptocurrency and NFTs generate a growing average of 38 million tons of carbon dioxide per year. To put it in perspective, that’s more than the entirety of the annual carbon emissions of the Netherlands. Studies suggest that the emissions from cryptocurrency alone could raise the global temperatures to 2°C in less than three decades if this trend continues.
Experts debate on the potential for NFTs to be sustainable. Even when servers run on renewable energy, their significant energy consumption still poses ethical questions. With such high rates of consumption, the renewable energy used for intensive data mining could be allocated to more important usages. For example, homes and transportation.
Can NFTs Be Sustainable?
In an effort to curb environmental impacts, many blockchains are transitioning away from the energy-intensive proof of work method to the “proof of stake” (PoS) method. This method requires significantly less processing power to complete the complex equations, and subsequently results in fewer emissions. The transition to PoS has been a slow and arduous process with significant delays, but Ethereum is expected to run fully on PoS by 2022.
Outside pressures can also push NFTs towards sustainability. NFT artists and collectors can press their blockchains to comply with environmental standards like ISO 14001 to measure and mitigate the energy consumption of their servers, ensuring sustainability in their practices.
While ethics and environmental sustainability of NFTs are subjects of heavy debate, most experts agree that the non-fungible tokens will play a significant role in our future. Pushing for more environmentally friendly systems of blockchain transactions is critical. It can ensure that the growing fad of NFTs is safe and sustainable.
Author: Lena Milton