Over the past few months, terms such as NFTs and blockchain have taken the internet by storm. Especially the popularity with which NFTs appear in the news is huge. You’ve probably seen or heard about the artwork “Everydays: The first 5000 days” by digital artist Beeple. This digital artwork, or NFT actually, was sold for a whopping $69 million at Christie’s, the world-famous auction house in New York. Although there are many advantages to this digital way of selling art, there is also a much darker side: the negative impact that NFTs have on our environment. In this article, you will read everything you need to know about the environmental impact of NFTs and what solutions could make them more sustainable over time.
What’s an NFT?
In short, Non-Fungible Tokens (NFTs) are tokens that serve as proof of ownership for digital items. NFTs allow us to tokenize things like artworks, collectables, or music albums. The term ‘non-fungible’ in NFT is an official economic term that you can use to describe items such as a chair or file format on your computer. These items cannot be traded because each item has its unique properties and has a different value. On the other hand, the term ‘fungible’ refers to items that can be exchanged because their value defines them rather than their unique properties. Think of €1 that you can exchange for 1 ETH or $1 and vice versa.
Proof of ownership
NFTs make it possible to claim ownership of these unique objects through a digital transaction via the blockchain. Other examples of NFTs could be: music songs, video’s, legal documents, signatures or even something as simple as a tweet. But you can just copy and paste a tweet, right? Correct. That is exactly where the power of NFTs lies: proof of ownership. Especially in a digital society where everything is arranged with just a click of a button – or copy-pasted for that matter – NFTs are of added value. This is because NFTs can only have one official owner at a time as they are embedded in the Ethereum blockchain. This means that it is impossible to copy-paste an NFT and then sell it or keep it for your use: every transaction is being tracked, verified and added as a ‘block’ to a decentralized ledger called the blockchain.
The energy-guzzling world of NFTs
Ethereum, like most cryptocurrencies, is based on a system known as “Proof of Work,” which consumes a lot of energy and that energy is commonly generated via gas, fuel or coal. So, for every transaction that takes place to buy or sell an NFT, large quantities of energy must be generated. To better understand how and especially why the blockchain transactions take place in this way, it is interesting to look at what Proof of Work exactly entails.
Proof of Work
To ensure that your digital transactions and NFTs remain safe and protected from online copycats, the blockchain works with the so-called ‘proof of work’ (POW) system. To secure those financial records, the POW system inquires people to solve mathematical puzzles using energy-guzzling machines. Solving such a mathematical puzzle is rewarded by paying those who solve the puzzle, also called miners, with new tokens or transaction fees. Any puzzle that is solved by miners is called a “block”, which is a verified transaction that can be added to a decentralized ledger of the blockchain. This process is extremely energy-consuming and for a reason. Because validating these transactions takes a lot of energy – which comes with a high price on your energy bill – it will be less profitable for people to mess with the ledger. To paint a better picture, Ethereum consumes more energy per year than countries such as Belgium and Finland, see the graph below:
How do we make NFTs more eco-friendly?
Ok, so, Ethereum’s PoW is anything but good for our environment but one thing is certain: it’s here for the long run. Especially with the increasing popularity of NFTs that are bought or sold via Ethereum, there will be more miners and therefore more pollution. This greatly increases the need for eco-friendly solutions, but are there any? And what can users do themselves to create a better understanding of what their actions cause? Here are two ideas:
Proof of Stake
Although PoW is the most popular and perhaps well-known system for cryptocurrencies, there are more environmentally friendly ways. An example of this is the Proof of Stake system (PoS). The PoS system requires users to prove that they own a certain amount of cryptocurrencies or tokens. So instead of having to pay for huge amounts of electricity with PoW, users can simply ‘lock up’ some of their tokens to “prove” they’ve got a “stake” in keeping the ledger accurate. If users still do something that creates suspicion, they’ll run the risk that their tokens will be taken away. The main difference between PoW and PoS is that you need to use a lot of electricity with PoW, which makes PoS energy efficient and an eco-friendly solution.
How you can help too
Anyone who is a fan of NFTs and digital art can contribute to a better environment. Before you buy or sell your NFTs, consider the impact of your purchase and its effect on your carbon footprint. Also, more and more eco-friendly NFT platforms are emerging such as Kodadot, Viv3 or Atomic, to name a few. After all, change starts with yourself, so choose the best option.
Even though a lot still needs to be done to make NFTs (and Ethereum specifically) environmentally friendly, the future looks positive. Ethereum has pledged to create a greener environment and improve its cryptocurrency and platform. In any case, we are curious about what the future has to offer and what other green solutions there will be!
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