Are NFTs Bad for the Environment?
Updated: Oct. 17, 2022
Want to get into NFTs but heard they may harm the planet? Find out if NFTs are bad for the environment—and whether that may change in the future.
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These days, it seems like everyone is talking about NFTs (aka non-fungible tokens), digital items that represent physical or digital objects as information. People want to know how to make them, buy them and ensure it’s a smart investment. But as talk of NFTs hits the mainstream, there’s another question on people’s minds: Are NFTs bad for the environment?
Well, not exactly. “An important thing to distinguish is that the NFTs themselves and storing them do not demand a lot of energy; rather, it’s the purchasing and transfer of the NFTs that rely on blockchain technology [mining], specifically the proof-of-work validation method, that is of concern,” says John H. Quigley, director of the Center for Environment, Energy and Economy at Harrisburg University of Science and Technology in Pennsylvania.
If your head starts to spin at the first mention of future tech, you’re not alone. Understanding concepts like what Web3 is, how does cryptocurrency work and, yes, whether NFTs are bad for the environment can be confusing. But we’re breaking down the environmental impact of NFTs in an NFT explainer everyone can understand.
What are NFTs?
Think of NFTs as digital proofs of ownership. They represent the item you own, whether that’s artwork or sports trading cards.
Don’t confuse them with cryptocurrencies like bitcoin, though. These are non-fungible tokens, which means each is unique and doesn’t have the same value as another token. A quarter, for example, is always 25 cents, so it’s fungible. An NFT doesn’t have the same value as another NFT, so it’s non-fungible.
How do you purchase NFTs?
NFTs are purchased with cryptocurrency (most commonly ethereum). While you make your dollars by going to a job or selling things, digital currency is made through a process called mining.
Mining uses a decentralized network of computers to verify and create information on the blockchain, a digital ledger run and regulated by the users. As payment for their computer use, miners get cryptocurrency. Miners then save or sell their crypto—or use it to buy things like NFTs.
But people don’t just use mining to buy NFTs; they also use it to create them. An NFT starts as just a digital file posted to an NFT marketplace, waiting to be sold. Before someone can purchase it, the digital file needs to be minted, which is the process of adding it to the blockchain. Minting is a form of mining.
Why are NFTs bad for the environment?
So, how are NFTs bad for the environment? It all comes down to mining. Mining is done through a process called proof of work. It’s a digitally labor-intensive process to prevent people from gaming the system to create fakes or steal items. The proof-of-work operation needs computers far more powerful than the computer you use at home.
Many miners compete to mine at the same time, but only one person gets the crypto for minting an NFT or verifying information. The result: A lot of powerful computers are working to complete the task, all at the same time.
Powerful computers plus hordes of competing miners equals massive energy usage. According to the University of Cambridge, mining just one type of cryptocurrency, bitcoin, uses an estimated 150 terawatt-hours of electricity each year. That’s more energy than a small country consumes. According to the Ethereum Energy Consumption Index, ethereum, which is used most widely to buy NFTs, has an annual carbon footprint that is comparable to Hong Kong. Just one ethereum transaction uses as much power consumption as an average U.S. household over almost seven days.
Most of these mining operations use power from countries (including the United States) that primarily use energy sources that are bad for the environment and affect climate change. For example, Kazakhstan, the leader in bitcoin mining, uses coal, oil and natural gas to fuel its power grid.
“Worse, here in the U.S., coal-fired power plants, which were dormant or slated to be closed, are being revived solely to power bitcoin mining,” says Quigley. “Gas-fired power plants, which are increasingly economically uncompetitive, are also now being dedicated to bitcoin mining. The net result is increased carbon emissions at a time when we must be reducing them.”
Is there a future for eco-friendly NFT sales?
Proof-of-work mining’s effect on the earth is enough to give anyone climate anxiety. So if NFTs are bad for the environment, what can we do?
Ideally, mining operations need to be powered by clean energy, like wind, water, solar or zero nuclear. According to the Clean Energy State Alliance, 21 states, plus Puerto Rico and Washington, D.C., are committed to providing 100% clean energy in the coming decades.
While that’s encouraging, it doesn’t solve the problem right away. But there is something the crypto and blockchain marketplaces can do to be more eco-friendly in the meantime. It all hinges on proof of stake.
Proof of work vs. proof of stake
While the proof-of-work process pits miners against one another to essentially win crypto, proof of stake chooses a random miner to do the job of minting and verifying, using less complex processes. This cuts down on the number of computers used for any mining task. As a result, it uses less energy.
Environmentally friendly NFT platforms
Many NFT platforms are jumping on the proof-of-stake bandwagon, including Splinterlands, Band NFTs, Doge Capital, NFTX, Polychain Monsters and The Sandbox.
They’re not alone. Blockchain platforms like Tezos, Cardano, Solana and Avalanche also use proof of stake. Ethereum is moving from proof of work to proof of stake as well.
While NFTs may not be great for the environment, they’re getting better. As energy production around the world gets cleaner, so will NFTs. The industry is becoming increasingly aware of how it is affecting the environment and is making positive changes to become more eco-friendly.
Does all this talk of NFTs have you thinking about the future? Find out what lies ahead for the future of space tourism and virtual reality.
Sources:
- John H. Quigley, director of the Center for Environment, Energy and Economy at Harrisburg University of Science and Technology
- University of Cambridge: “Cambridge Bitcoin Electricity Consumption Index”
- Columbia Climate School: “Cryptocurrency’s Dirty Secret: Energy Consumption”
- Digiconomist: “Ethereum Energy Consumption Index”
- Clean Energy States Alliance: “Table of 100% Clean Energy States”
- Nashville Film Institute: “What Is Minting an NFT? Everything You Need to Know”
Originally Published: August 23, 2022
