Climate experts raise concerns about Kraken’s NFT partnership; team says it did due diligence – The Seattle Times

climate-experts-raise-concerns-about-kraken’s-nft-partnership;-team-says-it-did-due-diligence-–-the-seattle-times

The Kraken became the latest NHL team to have an NFT partnership when they announced Monday that they will work with a company called Orange Comet.

As an organization that has publicly led the way on climate issues in the NHL, including naming its home Climate Pledge Arena, working with NFTs (which stands for nonfungible tokens) could, according to environmental experts, contradict that mission, given that NFTs generally are considered harmful to the environment. 

The Kraken, though, say they did their due diligence in picking an NFT partner, something they say has been in demand.

“There’s been a great enthusiasm that’s been generated by some of these other NFT launches,” said Todd Humphrey, Kraken senior vice president of digital and fan experience. “And so we want to be really two things, one, to give our fans some of that same experience that we’ve seen with some of these other launches, while at the same time making sure that we make the right choice and, you know, we’ve got a huge commitment to sustainability, and we really wanted to ensure that we were remaining grounded around that.”

Some NFTs — a form of unique digital currency such as art, trading cards and photos — sell for thousands of dollars. The industry is sometimes referred to as CryptoArt, and it has taken off in the past year. NFTs by lesser-known artists sell for a lot of money. The New York Islanders, who like the Kraken work with The Oak View Group, partnered with the same company for their foray into NFTs, and made more than $100,000, according to the Orange Comet website.

Unlike other internet art, NFTs have more value with some form of a verified token giving evidence that the art is theirs, like a digital signature. That comes in the form of a code stored on a virtual ledger called a blockchain.

The sports world has entered this market because of the financial potential, and the Kraken cited a desire to be involved in the strong Seattle tech scene.

For something so small, and virtual, the environmental impact in the real world is large, according to climate scientists, due to the energy needed to store the NFTs on physical servers.

“We need to call out a question when it’s just virtue signaling. It’s really not doing anything,” said Aseem Prakash, founding director of the University of Washington Center of Environmental Politics. “Now it’s a digital world. So people want to collect things which are digitally rare, digital scarcity. But I think the direction in which all this blockchain and not only (the) Kraken and the collectibles and the NFTs has occurred, but I think it’s a completely different direction and the wrong direction.”

Dave Broome, the Orange Comet CEO, used to produce the NHL Awards show for television. The company approached the Kraken to form a partnership.

“We get why the fans are concerned,” he said. “We understand that, we totally understand that. It is important to us, as it is to the fans of Seattle or the fans anywhere, for that matter. … I think it’s important that not all NFTs are the same; they can’t be clumped together. They’re not all the same. You (need) a distinguishing line between what a blockchain is using and what’s going on behind that blockchain.”

Orange Comet, the company building these NFTs, uses a blockchain — Avalanche Blockchain — that claims to have a net-zero carbon impact. The Kraken are donating a portion of the proceeds to their OneRoof fund, giving money to the “environmental justice pillar to support and elevate the voices of the communities disproportionately impacted by climate change.”

Humphrey declined to disclose the exact portion but called it “significant.”

According to The New York Times, 300 pieces of NFT digital art “would have burned through the same amount of electricity that an average European would otherwise use in two decades.”

Orange Comet was co-founded by Broome, Pro Football Hall of Famer Kurt Warner and Grammy winners Gloria and Emilio Estefan. Their blockchain, Avalanche, became the fifth-largest cryptocurrency by market cap in 2021, according to cointelegraph.com.

On its website, Avalanche says it uses Proof-Of-Stake as a consensus algorithm, which allows it to have a reduced environmental impact. It calls itself “incredibly fast, low-cost and environmentally friendly” compared with other blockchains. Though Proof-Of-Stake blockchains are generally considered better, they still have a wide range in environmental impact, according to a University College London study.

Broome said Orange Comet partnered with Nori to reduce its carbon footprint; but even with good intentions, it might be impossible not to have a negative imprint with NFTs. Nori, a Seattle-based company, says it removes carbon to offset NFT energies.

“The short answer is they purchased what are called Nori Removal Tonnes (NRTs) from Nori that accounts for CO2 that has been removed and sequestered by farmers who sold through Nori’s platform,” Nori CEO Paul Gambrill wrote in an email. “The way the carbon is removed is by farmers adopting what are called regenerative agriculture practices. This includes no-till, planting cover crops, and implementing complex crop rotations. By doing so, farmers can increase the amount of organic matter that is growing in their soil — effectively reversing soil erosion by increasing carbon.”

Even so, climate experts don’t believe that does enough to offset climate emissions.

“I think that’s a very superficial way, in my opinion, to think about climate issues,” Prakash said. “The fact is, even if you go solar and wind, the fact is to support solar and wind you need a lot of (materials). … I think there’s a broader question, or the first thing to ask that, are we having an unsustainable business model? This is known as increasing our energy consumption and saying, ‘Well, it’s all zero emission.’ That’s a very narrow way to think of it (as), maybe zero emission, but to create zero emission. … How much energy has to be used in that process?”

Broome said there is an independent study, set to publish in January, from the Crypto Carbon Ratings Institute (CCRI) supporting these claims. Orange Comet says it had access to this report before choosing Avalanche. The CCRI said it could not comment on the “corporate carbon footprint or offsetting activities” but estimated the Avalanche’s carbon footprint as 230 tons, which is significantly lower than the 57 million tons from Bitcoin, for comparison.

According to Orange Comet, the study says Avalanche uses the equivalent of “46 U.S. households worth of carbon — compared to Ethereum which uses 1.63M and Bitcoin which uses 8.46M households worth.” The Seattle Times was not given access to the study.

Avalanche is built on the blockchain Ethereum but doesn’t operate on it, something Broome stressed; however, Avalanche does allow transferring NFTs onto Ethereum.

Many blockchains claim to be environmentally green, but there aren’t many independent sources backing that claim. At the 2021 United Nations Climate Change Conference, Avalanche announced it was net zero; there hasn’t been any other independent corroboration made public yet, though the CCRI report will publish in January.

Net-zero is also generally an estimation and still implies a large carbon footprint. The term means offsetting, which means there is still a significant amount of fossil fuel.

“Net zero refers to the balance between the amount of greenhouse gas produced and the amount removed from the atmosphere,” said Jennifer Wong, the curator of the Seattle NFT museum. “We reach net zero carbon when the amount of carbon we add is no more than the amount taken away.”

Humphrey referenced the UKCOP26 conference as a talking point Orange Comet brought to them as a certification.

“We went deep on Avalanche, as a blockchain, we just looked at you know where their marketplace where they exchange, where their website operations are, how are they housed? How are they powered?” Humphrey said. “And what we discovered was, they’re using renewable energy to power those exchanges and marketplaces. So everywhere we turned, I think, they approached us very thoughtfully, it was sustainability first, they knew it would be a question for us.”

Even with a green blockchain, some in the environmental community remain concerned.

“Essentially we are kicking the can down the road,” Prakash said. “We are not fundamentally handling the problem of (the) overconsumption climate crisis, (and this) is reflecting a broader problem of overconsumption of resources. And this business model is simply not sustainable.”

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