Can NFTs help the environment?

Can NFTs help the environment?

Non-fungible Tokens (NFTs) have dominated the headlines since their inception, with environmental concerns and climate controversy being an issue. You may have heard the great debate on the environmental impact of NFTs. Do NFTs harm the environment, or can they benefit the environment? 

Do NFTs Affect the Environment?

NFTs are generally considered harmful to the environment. In a nutshell, the whole NFT system consumes a lot of computing power. However, intricate details arouse the debate about whether NFTs are overall harmful to the environment. To understand the effects of NTFs on the environment, you need to understand the industry’s carbon footprint and the differences between the Proof of Work and proof-of-stake mechanism.

Do NFTs have a Carbon Footprint?

Carbon footprint is the average carbon emission released in products’ creating and consuming processes. The estimates are essential when looking into the environmental impact of the product.

It is hard to estimate the carbon footprint of minting and trading as many of the steps involved have yet to know resource estimates. 

There are a few peer-reviewed studies on the NFT carbon footprint, including the Digiconomist, which estimates that one Ethereum transaction’s carbon footprint is 33.4kg CO2. An artist and programmer, Memo Akten, estimates that an average NFT transaction leaves a carbon footprint of 48kg CO2.

The estimates do not account for the many times NFTs switch ownership. However, the estimates show that a single NFT transaction leaves a carbon footprint 14 times more than mailing a physical piece of art, which Quartz roughly determined to be 2.3kg CO2.

Industries like agriculture and airlines leave greater footprints as compared to NFTs. Why are NFTs being targeted? 

NFTs have not been singled out in the fight for lower carbon emissions. There is a lot of activism to research and develop new technologies to decarbonize every sphere we live in. 

NFT energy consumption

NFTs are built on blockchain systems such as Bitcoin and Ethereum, which use Proof-of-Work (PoW) systems that consume much power. PoW is a deliberate effort by these blockchains to disincentive people who might try to compromise the safety of the systems. 

NFTs demand energy during creation, selling, buying, and any other transaction they take part.

In addition, the more miners on a blockchain, the more secure it is. Blockchains offer incentives to miners to motivate them to continue mining; the more the nodes on a blockchain strive to verify blocks, the greater the system security. More mining nodes mean more power consumption by the blockchain. 

Large blockchains have massive power consumption. The annual combined energy usage of Ethereum and Bitcoin before the Sep 2022 Ethereum merge was over 317 TWh. Bitcoin consumes so much energy that the University of Cambridge developed a Bitcoin Electricity Consumption Index, which uses different analogies to help diverse audiences understand Bitcoin’s electricity consumption and compare it with other Electricity uses.

Proof-of-stake is an alternative that requires orders of magnitude less energy to operate. Ethereum did a proof-of-stake merge in September 2022, reducing its energy consumption by 99.5%. The PoS validation process does not use competitive number generation to strengthen the system, so the transactions utilize less than 0.03 kWh of energy.

How Can NFTs Use Less Energy?

Bitcoin consumes less than half the energy of the banking or gold industries since the blockchain industry is often compared to the two sectors. Opposite to the belief that Bitcoin power harms the environment, the Galaxy Digital study shows that bitcoin miners use non-rival energy that would have otherwise been underutilized or gone to waste. The report indicates that about 2,205 TWh is wasted annually, which is 19.4 more than what the Bitcoin network uses. 

Bitcoin is a perfect energy ink since the miners have the luxury of flexibility, turning on the machine at their convenience, and the machine uses the energy that would have gone to waste. Mining also acts as an energy sink in the oil industry by utilizing and reducing methane emissions. 

Companies such as Upstream Data, Great American Mining, and Crusoe Energy Systems are developing technologies to capture methane produced by the oil industry and use it to mine bitcoin. These innovations allow users to reduce methane emissions into the air by 24 times.

There are continuous calls for sustainability that cannot be ignored. NFTs are not doomed to be entirely harmful to the environment. Sustainable blockchain technology research from Aalborg University shows there are various ways to integrate NFTs in a greater planet through the following ways and more:

Using Alternative Consensus Mechanisms

Blockchain technologies can substitute proof-of-work mechanisms with different ways to validate transactions without consuming excess energy. These mechanisms include:

  • Proof-of-stake
  • Proof of Burn (PoB)
  • Proof of Capacity
  • Proof of Elapsed Time
  • Proof of Authority
  • Proof of Activity
  • Proof of Importance (PoI)

With new blockchains coming up at a high rate, there are innovations in consensus mechanisms. Each mechanism is built on the end of the already established ones but consumes less energy than PoW.

These new technologies have led to the development of energy-efficient NFTs such as Tezos, Symbol, and Polygon.

Innovations to Promote Carbon Neutrality 

Companies are investing in carbon-neutral companies to reduce the NFT carbon footprint. For example, MetaWorks Platforms, Inc., formerly CurrencyWorks, is a leading Web3 development platform based in an oil-drilling centre in Alberta, Canada, turning oil waste into environmentally-friendly energy powers crypto mining. The project also powered the dispersion of a new movie, Zero Contact. The film starred Anthony Hopkins and was released on May 27, 2022, as an NFT with zero carbon food print. 

Canadian municipalities pay MetaWorks Platforms to take care of their waste and take solid organic waste through pyrolysis, decomposing at very high temperatures under pressure. CurrencyWorks then uses the generated energy and oilfield waste in crypto mining to power up to 200 miners.

“Zero Knowledge” Rollup

Zero-knowledge rollups (ZK-rollups) bundle transactions are layer two scaling solutions exploited on the Ethereum Mainnet by transferring computation and state storage off the main chain. The innovation saves energy by bundling transactions and dealing with them in batches. 

Integration of NFTs into a Greener Tomorrow

The NFT and cryptocurrency industries are still in their infancy stages, with unlimited room for growth. Blockchain technology cannot be passed as harmless to the environment. 

However, there are good choices that are pro-environmental wellness. Many in the crypto community are investing in projects promoting carbon neutrality as the existing technologies adopt new eco-friendly mechanisms.