NFTs or Non-Fungible Tokens have been a revelation in the crypto industry. They have allowed artists to bring their work to millions of people across the globe with complete ease.
NFTs have also found utility beyond art; brands have used them to provide customers exclusive access to events, products and experiences. As such, these digital assets have shot to popularity in the last couple of years.
However, as amazing as they are, NFTs do present issuers and users with one big issue. While NFTs themselves do not cause any pollution or harm to the environment, the process of creating them can.
So, this World Environment Day, let’s delve a little deeper into the problem, examine one promising solution – green NFTs – and find out whether they can really make a difference.
Most NFTs are primarily minted on proof-of-work (PoW) blockchains like Ethereum. These blockchains require tremendous amounts of computing power for their mining process.
Miners need to use powerful hardware that consumes vast amounts of electricity. Any operation that guzzles electricity also leaves behind a large carbon footprint. This is why PoW blockchains are constantly receiving criticism from lawmakers and environmentalists.
Moreover, on PoW blockchains, miners are always racing to be the quickest among their peers. Their mining rewards depend on how fast they can process transactions. The transaction data they validate is bundled into blocks and added to the blockchain.
The more blocks they complete, the higher is their reward. Thus, miners are incentivised to constantly update/increase their mining power. This leads to increased energy consumption and a larger carbon footprint.
It is the same computing power that is deployed in the creation of new NFTs. According to the Ethereum Energy Consumption Index, every NFT created on the Ethereum blockchain consumes 223.85 kilowatt-hours of electricity. That is equivalent to over seven days of power consumed by an average American household.
Studies have shown that a single NFT transaction (including NFT minting) on the PoW Ethereum blockchain releases 124.86 kg of carbon dioxide. This is equivalent to the carbon footprint left behind by 276,733 VISA transactions or by watching 20,810 hours of YouTube videos.
Green NFTs are a possible solution
That’s right, green NFTs could provide a solution to this problem. The best part is that they are so simple. They are not some special digital assets, they are just NFTs that are minted on Proof-of-Stake (PoS) blockchains.
PoS blockchains do not require miners to devote massive amounts of computing power. Instead, they ask miners to pledge cryptocurrency to the network to qualify as transaction validators.
Hence, miners require very little computing power to verify transactions. Also, they can pledge more crypto to increase their chances of becoming a validator. This eliminates the whole rat race of adding more computing power and solving complex cryptographic puzzles.
Companies like OneOf and Serenade harness the Tezos and Polygon blockchains to mint NFTs as they are extremely energy efficient. The Tezos blockchain only leaves behind an annual carbon footprint equivalent to that of 17 average humans. The OneOf website claims that Tezos uses two million times less energy than any other blockchain for NFT minting.
But will green NFTs really work?
It is not entirely clear whether these Green NFTs can make a difference. A blog post on Digiconomist by founder Alex de Vries noted that since layer-2 blockchains like Polygon are built atop the Ethereum ecosystem, creating NFTs using these networks is as bad as using the Ethereum blockchain itself.
That’s why, when the World Wildlife Fund (WWF) announced plans for an NFT collection powered by Polygon, it was met with widespread public objection. Even though the project aimed to raise funds for wildlife conservation efforts, it faced severe criticism; some even went as far as calling it “grim,” “insane”, and “unbelievable”.
This is despite the WWF reiterating that “each transaction on Polygon produces just 0.206587559 grams CO2”.
Therefore, the effectiveness of using Green NFTs is still up for debate. However, one thing is for sure – they are definitely a welcome transition.
If more artists and brands move over to Green NFTs, the environmental impact of these digital assets could be greatly reduced. And at this point, where the entire world is staring down the barrel of a climate crisis, every step, no matter how small, is a step in the right direction.