The recent boom in non-fungible tokens (NFTs) has been fraught with controversy and concerns about the technology’s environmental impact due to the computing power required.
Of all the transaction types on a blockchain, NFTs are among the most intense of all, as they often involve numerous complicated transactions and the execution of smart contracts in the coin, bid, sell, and transfer process. This is sometimes reflected in transaction costs hundreds of times higher than that of a simple transaction.
Almost 5,000 is the price to take a bid on @rariblecom now !! Is it because of the high gas fees at ETH or a mistake?
Thoughts ? pic.twitter.com/tYoV1ilB85
– Olive Allen (@IamOliveAllen) February 3, 2021
In the past, the impact of such concerns has been minimal, but in the past few weeks some artists and platforms have begun to cancel NFT plans. Digital artist Joanie Lemercier canceled her second Nifty Gateway drop after becoming aware of the environmental impact of the platform’s sales:
“It turns out that my release of 6 CryptoArt works in the last 2 years used more power in 10 seconds than the entire studio.”
Art portfolio platform ArtStation has canceled the NFT decline of prominent artists hours after it was announced due to excessive environmental impacts of NFTs.
However, concrete figures behind the actual carbon footprint of NFT are not yet known.
In December 2020, computer artist and engineer Memo Akten developed the CryptoArt.wft platform, which calculates the energy consumption and CO2 emissions of NFT on SuperRare, Nifty Gateway or individual transactions on Ethereum.
According to the website, the aforementioned NFT on SuperRare used 421 kWh, which is the same as an EU resident’s electricity consumption for 1.5 months. On the website, Akten provided a link to his in-depth analysis behind his calculations, adding that the average NFT has a footprint of around 340 kWh.
Offsetra, a project that helps offset the carbon footprint of cryptocurrencies, uses the same method as Akten, but admitted that the calculations had “significant gaps”. These numbers, alarming as they are, only apply to proof-of-work blockchains (including Ethereum and Bitcoin) and use different assumptions.
“For the time being, we have included a buffer of 20% in our calculations in order to take into account both unknown mining pools and inefficiencies in the network that can lead to energy losses (e.g. through waste heat on site).” Offsetra added. This 20% buffer was removed on March 8th.
However, with the emergence of proof-of-stake blockchains like Eth2, a light is emerging on the horizon. These are viable alternatives to NFT minting and use a fraction of the processing power needed to handle them safely, explained Files.
“ETH2 aka Serenity [uses] a proof-of-stake (PoS) consensus algorithm that is computationally more efficient by orders of magnitude. “
Nifty Gateway responded to artist Lemercier’s concerns that Layer2 scaling on Ethereum could be implemented in weeks. In this way we can reduce the impact by 99% today.
SuperRare wrote an article responding to some environmental issues and found that calculating transaction costs for NFTs was a wrong approach because the total cost of the blockchain stayed the same regardless of the transaction numbers.
“In other words, if everyone took a break from using Ethereum apps and didn’t send any transactions for an entire day, the network’s carbon emissions would essentially stay the same.”
SuperRare stated that they, along with many in the Ethereum community, are aware of the inefficiency of PoW blochains and promised to donate money to support ETH2 research while exploring alternative scaling options.
But what if crypto was good for the planet?
In a counterintuitive approach, Delphi Digital’s co-founder and head of research, Medio Demarco, recently wrote a post arguing that cryptocurrency mining could actually help save the planet. He states that the network is incentivizing cheap energy, which now means clean energy.
Part of his thinking revolves around miners using otherwise unused clean electricity, allowing clean energy farms to monetize 100% of their production, rather than a fraction of it. This, in turn, could be enough to fund a new clean energy infrastructure. He argued:
“The impact that affects the bottom line can mean the difference between funding new solar infrastructure or waiting for profitability to improve.”