The Environmental Impact of NFTs: Why We Need to Rethink Digital Ownership

Recently, non fungible tokens (NFTs) have gained attention due to their environmental effects. NFTs themselves do not harm the environment, but the process of making them can use a lot of energy. In this post, we’ll examine the environmental impact of NFTs and the mitigation measures taken by developers.

NFTs

Non Fungible Tokens (NFT): A Comprehensive Guide to Unlocking the Bene...

Jackson Mitchell - February 6, 2023 20 minutes read

The Environmental Impact of NFTs

NFTs themselves do not affect the environment, but the way they are minted can have significant environmental consequences. Let’s take a look at how NFTs are manufactured:

We need to find a way to make NFTs more sustainable, or else we risk contributing to the climate crisis.

Trevor Jones

• NFTs are minted in a digital marketplace (usually): The creator of the NFT uses a marketplace platform to upload the NFT information, which is then tokenized and stored on the blockchain. Tokenization is the process of generating keys for an asset. The NFT is “minted” through this process.
• The NFT is listed: once the NFT is minted, the creator can place it on the marketplace. The NFT can be listed at a fixed price or auctioned.
• The NFT is purchased: When the NFT is purchased, a blockchain transaction is initiated. The blockchain network goes to work to validate the transaction and transfer ownership of the NFT to the new owner.

Advertisement

Different blockchains will process the transaction according to their programming. Let’s look at the two most commonly used consensus algorithms, proof of work and proof of stake, and how an NFT is processed in each.

Regulations and Taxes

Slay Your Tax Obligations: Navigating Cryptocurrency Taxation with Eas...

Jackson Mitchell - April 24, 2023 20 minutes read

NFT by Proof of Work

Buying the NFT constitutes a transaction. This implies that in a proof of work blockchain, the network of miners must compete to validate the transaction first in order to get the blockchain’s reward. The procedure is as follows:

• The transaction is transmitted to the network after being queued.
• As soon as it is assigned task, the network starts mining.
• In mining, a large hexadecimal value is sent through a hash function, like SHA-256, to produce a shorter hexadecimal number than the block header hash given to the NFT.
• The initial hexadecimal number is multiplied by a random number on a miner’s first try, and the random number is increased by one on each succeeding attempt.
• The first random number might be 21, for instance. 22 would be used in the subsequent try, then 23 and so on.
• The mining procedure is transformed into a computerized number generating process called “mashing.” The likelihood of getting the hexadecimal number right is 1 in 115 quadrillion. (115 followed by 75 zeros). Being the first to produce a number that is less than the block header, or the initial hexadecimal value, can require trillions of attempts.
• When the hash is solved, the block is committed, the transaction is completed, and the network moves on to the next impossibly large number of attempts. Hashing is the process of sending an integer through the hash function. At a specific rate, a miner “hashes” or is able to “hash.” A miner can do millions of hashes per second. One attempt equals one hash. For instance, the entire Bitcoin network works on one block at a time, takes an average of 10 minutes each block, and hashes at roughly 228 exahashes per second (228 followed by 18 zeros).

The large proof of work network only processes one block at a time, and all miners compete to generate fewer blocks, which results in the high power usage.On the Bitcoin network, a single NFT transaction produces roughly 748 kilos of carbon dioxide, which is comparable to 1.7 million Visa transactions or 124,714 hours of YouTube viewing.

Cryptocurrencies

Dive Into Decentraland: The Ethereum Based Virtual Reality World

Jackson Mitchell - April 23, 2023 16 minutes read

NFT via Proof of Stake

In a proof of stake blockchain like Ethereum, the NFT process through the marketplace is the same until the transaction begins:

• The transaction is queued on the network.
• A validator that has wagered 32 ETH is randomly assigned to validate the transaction.
• Only one validator is doing the work, so energy consumption is much lower. In fact, Ethereum claims it now uses 99.95% less energy than with consensus proof of work.
• The validator verifies the transaction and relays the information to other validators, who vote to confirm the block and the transaction.
• This process does not use competitive number generation, so the transaction uses less than 0.03 kWh of energy, or 30 watt hours (the equivalent of about six 9v batteries).

A single NFT transaction on the Ethereum platform emits almost 0.02 kilograms of carbon dioxide, which is equivalent to 44 Visa transactions or 3 hours of watching YouTube.

Can NFTs Consume Less Energy?

Minting and transferring an NFT can consume a lot of energy, but it doesn’t have to. Blockchain platforms that use the proof of stake method of operation can generate NFTs without consuming excessive electricity and without adversely affecting the environment. Unfortunately, reduced energy use in proof of work blockchains is not yet achievable.However, there are some options for NFT creators and fans:

• Use renewable energy: Miners using proof of work blockchains can use renewable energy sources to power their machines. While proof of work mining is energy intensive, the source of the needed energy can be emission free.
• Invest in renewable energy: Since some NFTs sell at impressive prices, it is possible to dedicate a portion of that revenue to renewable energy investments. A large scale shift to renewables could slow or eliminate the environmental impact of NFT production.
• Invest in experimental technologies: Proceeds from NFT sales can also be invested in experimental technologies designed to mitigate or reverse the effects of climate change. Carbon capture and storage, which collects and pumps carbon dioxide emissions underground, is an example of an experimental technology that some believe can solve the climate change problem.
• Choose NFTs minted on proof of stake blockchains: The most obvious choices are to buy only NFTs minted on proof of stake blockchains, and mint them only on one.

Blockchain

Unlock the Power of Blockchain: A Comprehensive Guide

Jackson Mitchell - February 8, 2023 41 minutes read

Where to Buy Energy Efficient TFNs

If you want to buy an NFT without causing damage to the environment, you have several purchasing options. Choosing a marketplace that uses a proof of stake blockchain or NFTs minted on one can significantly reduce your environmental footprint. Some proof of stake blockchains are:

• Ethereum: The blockchain used for everything from simple token exchanges to NFTs, smart contracts, dApps and more. The OpenSea NFT marketplace uses Ethereum.
• Solana: The Solana blockchain supports a wide range of NFT marketplaces, including Magic Eden, Solanart and Rabbit Hole.
• Algorand: The Algorand blockchain supports Aorist, a weather centric NFT blockchain for artists, in addition to several NFT marketplaces. The Algorand blockchain is ideally suited for NFTs because it is designed not to fork or split into duplicate versions.
• Cardano: Cardano is the blockchain known for being environmentally friendly. NFT marketplaces hosted on Cardano include CNFT and Galaxy of Art.
• Tezos: the Tezos blockchain hosts several NFT marketplaces, including Rarible, which operates an NFT marketplace and supports the creation of NFTs by artists.

Wrap Up | Environmental Impact of NFTs

Although NFTs do not directly affect the environment, producing them can be quite energy intensive. However, by utilizing proof of stake blockchains, developers have significantly reduced the environmental impact of NFTs. By using renewable energy, investing in renewable energy, investing in experimental technologies, or by choosing NFTs issued on proof of stake blockchains, NFT developers and supporters may also do their part to lessen the impact they have on the environment. For people looking to purchase energy efficient NFTs, marketplaces that use proof of stake blockchains or NFTs created on them are an excellent choice. Because of the greatly reduced environmental impact of NFTs produced on proof of participation blockchains, ESG investors can purchase them as well.

FAQs | Environmental Impact of NFTs

How are NFTs Manufactured?

On a digital marketplace, where the author uploads the NFT data that is tokenized and kept on the blockchain, NFTs are created. When the NFT is bought, a blockchain transaction is started to transfer ownership to the new owner. The NFT is priced and posted on the market.

Do Non Fungible Tokens (NFTs) Harm the Environment?

NFTs by themselves have no negative environmental effects, but producing them can be quite energy intensive, especially if a proof of work blockchain is used. If the energy is derived from non renewable sources, this may result in an excess carbon emission.

How Much Energy do NFTs Consume?

Coining an NFT on the Ethereum platform consumes less than 0.03 kilowatt-hours of electricity, about three hours of watching YouTube. Coining one on a proof of work blockchain consumes the same amount of electricity as a U.S. household in about 47 days.

Can NFTs consume less Energy?

Yes, proof of stake blockchain platforms can generate NFTs without using excessive amounts of electricity or negatively impacting the environment. Using renewable energy, investing in renewable energy or experimental technologies, and selecting NFTs issued on proof of stake blockchains are all options available to those who create and support NFTs.

Can Environmental, Social and Governance (ESG) investors buy NFTs?

Investors who prioritize environmental, social and governance (ESG) issues may consider NFTs minted on a proof of participation blockchain because their environmental impact has been significantly reduced.

Can Environmentalists Invest in NFT?

NFTs issued on a proof of stake blockchain should be considered by investors who place a high priority on environmental, social, and governance (ESG) issues because their environmental impact has been greatly decreased.

Where can I buy Energy Efficient NFTs?

You can drastically lessen your environmental impact of NFTs by selecting a marketplace that employs a proof of stake blockchain or NFTs that were produced on one. Blockchains that use proof of stake include those for Ethereum, Solana, Algorand, Cardano, and Tezos.