NFTs: Cool Art or Eco-Threat?
You’ve probably been hearing a lot about NFT’s for a while now and how they are changing the digital art landscape. Although recent market data showed that NFT sales have drastically dropped, the path for an alternative and promising market has been paved and could be significantly active in the future. While this creates many new opportunities, there has been a debate on the environmental impact of this new NFT market. The purpose of this article is to investigate that, but first, let’s explain what NFT’s are.
What are NFTs?
NFT’s or Non-Fungible-Tokens are crypto-assets stored into blockchains and most commonly the Ethereum blockchain. The way NFT’s differ, compared to other crypto-assets, such as cryptocurrencies, is that each token is unique and irreplaceable while all coins of a cryptocurrency are identical; for example, 1ETH has an equal value and is exactly the same as every other 1ETH. That is what fungible means.
Most people were aware of the use of NFT’s as a way to buy (or trade) digital art but after the CEO of Twittersold his first-ever tweet as an NFT, many other applications have emerged. NFT’s can be any kind of digital collectibles such as images, video clips, music, video art, virtual trading cards, virtual pets and even virtual real estate. It may sound impressive but to many, it’s very daunting and confusing.
Even though the art market has been around for centuries, it is the first time that we are able to create a market for and monetise digital assets. One might think that anybody can just copy and save an online image from their computer screen which raises concerns about the ownership of the asset. The difference is that because of the blockchain technology and how smart contracts work, every time an NFT is released, sold or resold, a record is created and stored in the blockchain which is visible to everyone and impossible to erase. That means that there might hundreds of copies of an artwork but only one collectible and one verified owner.
Are NFTs bad for the environment?
Truth is that NFTs as collectibles aren’t bad for the environment in and of themselves. The controversy surrounding this market revolves around the payment process necessary to acquire these tokens. Every creator decides which cryptocurrency coin he will accept as payment for his NFT, (usually the ETH because of hosting it in the Ethereum blockchain as we’ve already mentioned). Every time a transaction happens there, it produces a fee called a Gas Fee. Gas fees act as compensation to miners for the computing energy used in the process of validating transactions. This mining process is called Proof-of-work and it consumes enormous amounts of energy, so much so, that Iran banned crypto mining for four months after facing significant power blackouts in several cities.
Although someone might say that physical art is no less of an environmental burden, (all the energy consumed in the artist’s studio and the carbon footprint created when transporting and shipping the art), it has been calculated that every Ethereum transaction corresponds to the energy consumption of approximately 4 US households and it doesn’t stop there. Every single Ethereum transaction is equivalent to the carbon footprint of 121,190 VISA transactions. Frightening, we know.
Is there a solution?
Yes, there are ways that could minimise the NFTs’ climate pollution problem, but their adoption is still in very early stages. Some of them are: using clean energy to offset the massive energy demand, building layers on top of the Ethereum blockchain that act as payment channels allowing transactions to happen outside of it, or just choosing greener cryptocurrencies and other blockchains.
On the bright side for NFTs and other crypto- assets, it is common knowledge that Vitalik Buterin, co-founder of Ethereum is working on releasing Ethereum 2.0 which will use the Proof-of-stake process to validate transactions. It is believed that this approach will make transactions faster, more efficient, and reduce the energy requirement by 99%.
The NFT market is currently poised to become an even bigger entity in the online landscape of the future. All that remains to be seen is whether it will be able to overcome its environmental burdens and provide a greener path towards a more sustainable economy.
By Annita Xenou
