Do Non-Fungible Tokens, (NFTs), Harm the Environment
You may have heard about non-fungible tokens or NFTs and their impact on the environment. NFTs don’t have any environmental impacts, but the way they are produced has an impact on climate.
NFTs are made using a high amount of energy. NFTs are most commonly created using the proof of work operating method. This requires large amounts electricity. Any energy-intensive process that is crypto-related or not can increase the atmosphere’s emissions of carbon dioxide. However, there are better ways to mint NFTs. These include methods that use proof-of stake.
The Key Takeaways
- Non-fungible tokens, or NFTs, can be harmful to the environment depending upon how they are made.
- The proof-of work method is used to produce one NFT. It takes approximately nine days to produce the same amount of electricity that an American household would use to generate it.
- NFT sellers and buyers are coming up with innovative ways to reduce or eliminate the environmental impact of NFTs.
NFT mining doesn’t require huge amounts of energy. Continue reading to learn how NFT production uses energy and what options are available to acquire NFTs that do not harm the environment.
How NFTs can impact the environment
NFTs do not directly impact the environment. However, how they are created can have significant environmental impacts. Let’s look at how NFTs are produced using proof-of work to understand how much energy they use.
- NFT is listed on a digital marketplaceUsually, an NFT is listed in an NFT market before it is minted. Although NFT listing is not energy-intensive it will affect how much energy the minting process requires. OpenSea hosts the Ethereum platform and is an NFT marketplace. This means that the minting process will require more energy than usual.
- NFT can be purchased: The purchase of an NFT can often be the catalyst for the NFT being minted. The proof-of-work method is used to create the NFT. It is “mined” by cryptocurrency miners who have access to large computing resources. The mining process is very energy-intensive. It requires highly specialized computing hardware and large amounts of electricity. Miners are able to solve complex math problems quickly, earning the right to mint NFT.
- NFT can be stored or transferred After the purchase of NFT is complete, you have the option to store or transfer the NFT to another person. Transferring the NFT from one NFT marketplace that uses proof of work will require the same energy-intensive process to create the NFT. The mere act of storing NFT does not require energy.
You might be curious about how energy is consumed in mining. The miners who have the most computing power will be able solve the most complex math problems faster. Therefore, miners must use a lot more electricity and purchase a lot computing hardware. An international network of miners competes to validate blocks of transactions, including NFT transaction transactions. Each participant miner must extensively consume electricity, even though only one miner is chosen to validate each block of transactions.
Every transaction on the Ethereum proof-of-work platform, including every NFT transaction, uses more than 260 kilowatt-hours of electricityequivalent to the electricity used by an average U.S. household over 9.05 days.
One NFT transaction on Ethereum’s Ethereum platform emits close to 150 kilograms carbon dioxide. That’s equivalent to 331,056 Visa Transactions or 24,895 hours watching YouTube.
Can NFTs Use Less Energy?
It is energy-intensive to mine or transfer an NFT, but it does not have to be. Blockchain platforms that use the proof of stake operating method can generate NFTs while not using excessive electricity or negatively impacting our environment.
Proof-of-stake requires less computing hardware than proof-of work, so it uses less energy. While miners in a proof of work blockchain network are motivated by the need to consume electricity to mine a block, validators who contribute to a proofof-stake blockchain must agree to not trade or sell their cryptocurrency holdings. A staking requirement for validators of blockchains is a way to secure a blockchain without requiring them to consume excessive amounts of energy.
Other creative approaches to NFTs may have less impact on the environment. Here are some alternatives:
- Use renewable energy:Miners who use proof-of work to generate NFTs may be able to use renewable energy sources. Although proof-of work mining is energy-intensive it can produce the necessary energy without generating any emissions. While solar power is a popular option, there are also wind- and hydro-generated options.
- Invest in renewable energy It is possible to invest a portion of the proceeds from NFTs that are selling at high prices to make renewable energy investments. A large-scale shift towards renewable energy could reduce or eliminate the environmental impacts of NFT production.
- Invest in experimental technologies: NFT sales proceeds can also be invested into experimental technologies to mitigate or reverse climate change. Carbon capture and storage is one example of an experimental technology that many believe can solve the problem of climate change.
- Carbon offset credits available:NFT investors can purchase carbon offset credits to offset the negative environmental impact of NFT purchases. Although carbon credits do not reduce carbon dioxide emissions, they can be used to provide a financial incentive for others who want to reduce their total emissions annually.
Where to buy energy-efficient NFTs
There are several ways to purchase an NFT that won’t cause harm to the environment. Each of these platforms supports NFT creation and exchange through proof-of-stake.
- Solana:The Solana blockchain supports a wide range of NFT marketplaces including Magic Eden, Solanart and Rabbit Hole.
- Algorand:Algorand supports Aorist, an NFT blockchain that is climate-focused for artists, as well as several NFT marketplaces. Because the Algorand Blockchain is designed to never forksplitinto redundant versions, it is well suited to supporting NFTs.
- Cardano:Cardano is a blockchain that is known for being environmentally-friendly.Cardano hosts CNFT, Galaxy of Art and other NFT marketplaces.
- Tezos:The Tezos blockchain hosts several NFT markets, including Rarible. Rarible operates an NFT market and supports artists in creating NFTs.
The Ethereum blockchain is set to become less energy-intensive. Ethereum, which currently supports the majority NFT transactions, is gradually switching to the proof-of-stake operational method. According to ethereum.org, the official switch or “merge”, is expected to take place in Q2 2022.
After the merge is completed, the expected energy consumption of a proof-of–stake Ethereum transaction should equal 20 minutes of television.
Can Environmentalists Invest in NFTs?
If you care about climate change, but also want to invest money in NFTs then you might feel they are at odds. While you can save the environment while still purchasing an NFT, you won’t be able to use nearly nine days of electricity.
If you are determined to align your investment portfolio with your climate change stance, then you should only invest in NFTs generated using the proof of stake consensus method. Although it currently limits your purchase options this restriction is likely to be temporary. Once the Ethereum platform has completed its transition to proof-of-stake, environmentalists will be able to buy NFTs with Ether (ETH).
Are NFTs harmful for the environment
It is when an NFT market mints it using an energy-intensive process, such as proof-of-method. The environment can feel an impact like an increase in carbon footprint.NFTs that use proof-of-stake to mint them are intended to limit environmental harm.
How much energy does NFTs consume?
An NFT is created on Ethereum using more than 260 Kilowatt-hours of electricity. This is about the same amount of electricity that an average U.S. household uses in approximately 9.05 days.
The energy consumption of Ethereum will drop to 99.95% once it switches from proofs-of-work into proofs-of-stake. That’s about the same as watching 20 minutes of TV.
Can ESG investors purchase NFTs?
Investors who place a high priority on environmental, social and governance (ESG), can still purchase NFTs. Any NFT issued using the proof of stake method can be considered suitable to an ESG investor’s portfolio.
