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NFTs

Are NFTs Bad for the Environment?

<p><span style="font-weight: 400;">NFTs are a hot commodity right now. Between 2020 and 2021, the market for </span><a href="https://www.statista.com/statistics/1275871/nft-sales-volume-by-segment-last-30-days/"><span style="font-weight: 400;">NFTs increased by over 20x</span></a><span style="font-weight: 400;">, with the most expensive NFT sold to date bought for a whopping $91 Million!</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">And interest in them only seems to be growing!</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">But how are these digital assets impacting the earth and the amount of carbon emissions released each year? Like most things, the answer will likely depend on who you ask.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">In this article, we'll walk you through the good, the bad, and the ugly of NFTs. Then, we'll even give you a few tips for finding greener ways to interact with Web3 and NFTs.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;"><picture><source srcset="https://wizardia.io/images/blog/thumb/01-cryptopunks-bored-ape-yacht-club-nft-mashup.webp 576w, https://wizardia.io/images/blog/inner/01-cryptopunks-bored-ape-yacht-club-nft-mashup.webp " type="image/webp"></source><source srcset="https://wizardia.io/images/blog/thumb/01-cryptopunks-bored-ape-yacht-club-nft-mashup.jpg 576w, https://wizardia.io/images/blog/inner/01-cryptopunks-bored-ape-yacht-club-nft-mashup.jpg " type="image/jpg"></source><img srcset="https://wizardia.io/images/blog/thumb/01-cryptopunks-bored-ape-yacht-club-nft-mashup.jpg 576w, https://wizardia.io/images/blog/inner/01-cryptopunks-bored-ape-yacht-club-nft-mashup.jpg " alt="An image of Cryptopunk Apes." loading="lazy" width="1200" height="716"></picture></span></p> <p class="text-center" style="text-align: center;"><span style="font-weight: 400;">Image source: </span><a href="https://zipmex.com/"><span style="font-weight: 400;">Zipmex</span></a></p> <p>&nbsp;</p> <h2 id="what-are-nfts">What are NFTs</h2> <p><span style="font-weight: 400;">Before we can talk about the impact they're having, we need to understand exactly what NFTs are. NFTs (non-fungible tokens) are digital assets that are traded from one owner to another on a </span><a href="https://wizardia.io/blog/what-is-blockchain"><span style="font-weight: 400;">blockchain</span></a><span style="font-weight: 400;">.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">These assets can be anything. A rare digital picture that only you have access to. A popular meme that you own the rights to. Characters or avatars for a game. Some are even connected to physical objects and have more worth when paired with that physical object, such as the NFTs from </span><a href="https://tomsachsrocketfactory.com/"><span style="font-weight: 400;">Tom Sachs: Rocket Factory</span></a><span style="font-weight: 400;">.&nbsp;&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">Because NFTs are transacted on blockchains, they have pros and cons. The biggest pro of NFTs is they are usually more secure and an efficient means of identification.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">But a major con is it can take a lot of energy to handle NFT transactions. The average emissions generated by just one NFT is </span><a href="https://qz.com/1987590/the-carbon-footprint-of-creating-and-selling-an-nft-artwork/"><span style="font-weight: 400;">211 kg of CO&#8322;</span></a><span style="font-weight: 400;">, which is a lot when compared to the measly 2.3 kg emitted by offline artwork.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">It's this con that causes the biggest controversy around NFTs. Let's find out why it takes so much energy.</span></p> <p>&nbsp;</p> <h2 id="how-nfts-create-a-carbon-footprint">How NFTs create a carbon footprint</h2> <p><span style="font-weight: 400;">NFTs themselves aren't inherently bad. A single NFT image doesn't have much of an environmental impact. The processes around NFTs are where the issues lie.&nbsp;&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">NFTs use blockchain transactions for everything:</span></p> <ol> <li aria-level="1"><strong>Creation (minting): </strong><span style="font-weight: 400;">Before an NFT is created, it is listed on an NFT marketplace such as OpenSea. The blockchain that will be used to create (mint) that NFT determines how much energy this will cost.</span></li> <li aria-level="1"><strong>Buying/Selling: </strong><span style="font-weight: 400;">Then, the actual purchasing of the NFT is another transaction that will take place on the same blockchain and potentially have a significant energy cost.&nbsp;</span></li> <li><strong>Storage: </strong><span style="font-weight: 400;">Once purchased, it needs to be stored somewhere. If the buyer decides to move the NFT to another location, transfer ownership, or trade NFTs, these, too, will create more transactions on the blockchain and lead to higher energy demands.</span></li> </ol> <p>&nbsp;</p> <h2 id="consensus-model-comparisons">Consensus model comparisons</h2> <p><span style="font-weight: 400;">It's important to note that the chain an NFT is located on can make a big difference in the electricity consumption it takes to add a transaction to a block.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">There are two ways in which blockchains validate transactions. Blockchain technology was originally built to function using a consensus model known as Proof of Work. In the last ten years, technological improvements have brought us the Proof of Stake model as well.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">Most major cryptocurrencies are supported on blockchain platforms use a PoW system, but more and more seem to be leaning into the PoS model.&nbsp;&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">Let's look at the difference between the two models.</span></p> <p>&nbsp;</p> <p><strong>Proof of Work (PoW)</strong></p> <p><span style="font-weight: 400;">This system is highly competitive, and its energy consumption is almost unbelievable.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">It works like this: a transaction takes place. Let's pretend we are talking about the creation of a non-fungible token (NFT). The record of that transaction is sent to be validated by supercomputers that use a ton of computing power to solve a complex mathematical equation. The computer that solves the math problem first is allowed to add the transaction to the block, and is given some crypto as a reward.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">These supercomputers are “mining for crypto,” which is a phrase you've likely heard before. When the miners/supercomputers compete to solve a mathematical problem,</span><strong> ALL</strong><span style="font-weight: 400;"> of the supercomputers connected to the network are simultaneously putting a lot of energy into solving the problem.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">To put this environmental impact into perspective, every transaction that takes place on the Ethereum blockchain PoW system uses more electricity than the average American household uses in 9 days! That's a lot of carbon dioxide emissions.</span></p> <p>&nbsp;</p> <p><strong>Proof of Stake (PoS)</strong><span style="font-weight: 400;">&nbsp;</span></p> <p><span style="font-weight: 400;">This system could be the key to a more sustainable future.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">Its more energy-efficient structure works like this: a transaction takes place. Again, let's use the example of minting an NFT. The record of that transaction is sent to be validated by investors who stake their own crypto as collateral for the privilege of adding the transaction to the block. The more money an investor has staked and the longer they stake it, the more likely it is the network will choose them to be the validator. The investor who validates the transaction is awarded some crypto, just like the mining supercomputers.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">While investors do need to keep a computer online to perform validations, these computers are not creating nearly as many emissions as the computers involved in the mining process.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">Also, investors can use a staking pool instead of individually validating transactions. This, too, also means less energy needs to be consumed as fewer computers are needed.</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;"><picture><source srcset="https://wizardia.io/images/blog/thumb/02-bitcoin-harmful-carbon-emissions.webp 576w, https://wizardia.io/images/blog/inner/02-bitcoin-harmful-carbon-emissions.webp " type="image/webp"></source><source srcset="https://wizardia.io/images/blog/thumb/02-bitcoin-harmful-carbon-emissions.jpg 576w, https://wizardia.io/images/blog/inner/02-bitcoin-harmful-carbon-emissions.jpg " type="image/jpg"></source><img srcset="https://wizardia.io/images/blog/thumb/02-bitcoin-harmful-carbon-emissions.jpg 576w, https://wizardia.io/images/blog/inner/02-bitcoin-harmful-carbon-emissions.jpg " alt="An image of someone holding a real-world bitcoin. In the background is a blurry nature scene to show proof of work's toll on the environment." loading="lazy" width="1280" height="720"></picture></span></p> <p class="text-center" style="text-align: center;"><span style="font-weight: 400;">Image source: </span><a href="https://www.bitcoin.com/"><span style="font-weight: 400;">Bitcoin.com</span></a></p> <p>&nbsp;</p> <h2 id="biggest-polluters">Biggest Polluters</h2> <p><span style="font-weight: 400;">The Ethereum network has a carbon footprint that cannot be ignored. Every year this one blockchain alone uses as much energy as Nigeria!&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">Unfortunately, most NFTs found in NFT marketplaces are part of the Ethereum blockchain. Ethereum does utilize PoS validation, but the amount of ETH needed to stake is very high and unaffordable for most people/investors.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">Bitcoin is probably the heaviest hitter, using more energy than Sweden every year! It doesn't have a PoS system, but there has been some buzz around the Bitcoin Lightning Network which is supposed to help lower the amount of energy needed to validate transactions.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;"><picture><source srcset="https://wizardia.io/images/blog/thumb/03-green-nfts-good-environment.webp 576w, https://wizardia.io/images/blog/inner/03-green-nfts-good-environment.webp " type="image/webp"></source><source srcset="https://wizardia.io/images/blog/thumb/03-green-nfts-good-environment.jpg 576w, https://wizardia.io/images/blog/inner/03-green-nfts-good-environment.jpg " type="image/jpg"></source><img srcset="https://wizardia.io/images/blog/thumb/03-green-nfts-good-environment.jpg 576w, https://wizardia.io/images/blog/inner/03-green-nfts-good-environment.jpg " alt="An image of grass and trees with two circles reading GREEN NFTs." loading="lazy" width="1280" height="756"></picture></span></p> <p class="text-center" style="text-align: center;"><span style="font-weight: 400;">Image source: </span><a href="https://medium.com/"><span style="font-weight: 400;">Medium</span></a></p> <p>&nbsp;</p> <h2 id="greener-nfts">Greener NFTs</h2> <p><span style="font-weight: 400;">Now that we've covered the bad, let's talk about how to make decisions around NFTs, digital art, Web3, and crypto that don't negatively impact climate change.</span></p> <p>&nbsp;</p> <ol> <li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;"><strong>Renewable energy</strong>: Finding and using renewable energy sources such as wind or solar power to provide electricity for the supercomputers who are doing the heavy lifting for PoW systems is vital. Clean energy is the only way we can continue forward with these systems.&nbsp;</span></li> <li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;"><strong>Accessible PoS-based blockchains</strong>: There are blockchains, such as the Algorand blockchain, that are 100% PoS-based, as well as others that use PoS to validate the majority of their transactions. For example, Wizardia's tokens are sold on Solana's blockchain and do not use PoW.&nbsp;</span></li> <li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;"><strong>Using NFTs to fund conservation projects</strong>: There is a significant number of digital artists trying to offset their contributions to greenhouse gasses being produced by their digital images by funding projects that plant trees and protect forests. The goal of projects like this is to ensure that the assets they create are ultimately carbon negative.</span></li> </ol> <p>&nbsp;</p> <h2 id="conclusions-on-nfts-and-the-environment">Conclusions on NFTs and the environment</h2> <p><span style="font-weight: 400;">Are NFTS bad for the environment? No, NFTs themselves aren't bad for the environment. The blockchains they're on cause the issues.&nbsp;</span></p> <p>&nbsp;</p> <p><span style="font-weight: 400;">If you want to make an environmental impact but are interested in NFTs you don't have to choose one or the other. Find NFTs that are on chains using PoS systems and stay away from those that rely heavily on PoW systems.<br></span></p> <p>&nbsp;</p> <h2 id="faq">FAQ</h2> <p><strong>How bad is crypto for the environment?</strong></p> <p><span style="font-weight: 400;">Crypto itself isn't bad for the environment. The chain crypto is located on may be the issue. Some cryptocurrencies like Bitcoin are based on blockchains that use a Proof of Work (PoW) system. PoW systems use a ton of energy to validate each and every transaction.&nbsp;</span></p> <p><span style="font-weight: 400;">Other cryptocurrencies like Solana use Proof of Work (PoS) and Proof of History (PoH) systems to validate transactions. Systems like this don't require nearly as much computing power and, in turn, are much better for the environment.</span></p> <p>&nbsp;</p> <p><strong>&nbsp;Why you shouldn't buy NFTs?</strong></p> <p><span style="font-weight: 400;">You don't have to completely avoid NFTs. You just need to avoid buying NFTs that are on blockchains that rely on PoW (Proof of Work). These systems require an immense amount of computing power with a large carbon footprint.&nbsp;</span></p> <p>&nbsp;</p> <p><strong>How are NFTs affecting the economy?</strong></p> <p><span style="font-weight: 400;">NFTs are likely here stay. Right now, there's a lot of buzz around digital art and collectibles, but the technology they're based on could change how businesses around the world operate. This, in turn, could help bring better financial opportunities to populations that have been forgotten or marginalized. </span></p>

7 min read
Sep 13, 2022
Heather Budrevičienė
Read this article

NFTs are a hot commodity right now. Between 2020 and 2021, the market for NFTs increased by over 20x, with the most expensive NFT sold to date bought for a whopping $91 Million!

 

And interest in them only seems to be growing!

 

But how are these digital assets impacting the earth and the amount of carbon emissions released each year? Like most things, the answer will likely depend on who you ask. 

 

In this article, we’ll walk you through the good, the bad, and the ugly of NFTs. Then, we’ll even give you a few tips for finding greener ways to interact with Web3 and NFTs. 

 

An image of Cryptopunk Apes.

Image source: Zipmex

 

What are NFTs

Before we can talk about the impact they’re having, we need to understand exactly what NFTs are. NFTs (non-fungible tokens) are digital assets that are traded from one owner to another on a blockchain

 

These assets can be anything. A rare digital picture that only you have access to. A popular meme that you own the rights to. Characters or avatars for a game. Some are even connected to physical objects and have more worth when paired with that physical object, such as the NFTs from Tom Sachs: Rocket Factory.  

 

Because NFTs are transacted on blockchains, they have pros and cons. The biggest pro of NFTs is they are usually more secure and an efficient means of identification. 

 

But a major con is it can take a lot of energy to handle NFT transactions. The average emissions generated by just one NFT is 211 kg of CO₂, which is a lot when compared to the measly 2.3 kg emitted by offline artwork. 

 

It’s this con that causes the biggest controversy around NFTs. Let’s find out why it takes so much energy.

 

How NFTs create a carbon footprint

NFTs themselves aren’t inherently bad. A single NFT image doesn’t have much of an environmental impact. The processes around NFTs are where the issues lie.  

 

NFTs use blockchain transactions for everything:

  1. Creation (minting): Before an NFT is created, it is listed on an NFT marketplace such as OpenSea. The blockchain that will be used to create (mint) that NFT determines how much energy this will cost.
  2. Buying/Selling: Then, the actual purchasing of the NFT is another transaction that will take place on the same blockchain and potentially have a significant energy cost. 
  3. Storage: Once purchased, it needs to be stored somewhere. If the buyer decides to move the NFT to another location, transfer ownership, or trade NFTs, these, too, will create more transactions on the blockchain and lead to higher energy demands.

 

Consensus model comparisons

It’s important to note that the chain an NFT is located on can make a big difference in the electricity consumption it takes to add a transaction to a block. 

 

There are two ways in which blockchains validate transactions. Blockchain technology was originally built to function using a consensus model known as Proof of Work. In the last ten years, technological improvements have brought us the Proof of Stake model as well. 

 

Most major cryptocurrencies are supported on blockchain platforms use a PoW system, but more and more seem to be leaning into the PoS model.  

 

Let’s look at the difference between the two models.

 

Proof of Work (PoW)

This system is highly competitive, and its energy consumption is almost unbelievable. 

 

It works like this: a transaction takes place. Let’s pretend we are talking about the creation of a non-fungible token (NFT). The record of that transaction is sent to be validated by supercomputers that use a ton of computing power to solve a complex mathematical equation. The computer that solves the math problem first is allowed to add the transaction to the block, and is given some crypto as a reward. 

 

These supercomputers are “mining for crypto,” which is a phrase you’ve likely heard before. When the miners/supercomputers compete to solve a mathematical problem, ALL of the supercomputers connected to the network are simultaneously putting a lot of energy into solving the problem. 

 

To put this environmental impact into perspective, every transaction that takes place on the Ethereum blockchain PoW system uses more electricity than the average American household uses in 9 days! That’s a lot of carbon dioxide emissions.

 

Proof of Stake (PoS) 

This system could be the key to a more sustainable future. 

 

Its more energy-efficient structure works like this: a transaction takes place. Again, let’s use the example of minting an NFT. The record of that transaction is sent to be validated by investors who stake their own crypto as collateral for the privilege of adding the transaction to the block. The more money an investor has staked and the longer they stake it, the more likely it is the network will choose them to be the validator. The investor who validates the transaction is awarded some crypto, just like the mining supercomputers. 

 

While investors do need to keep a computer online to perform validations, these computers are not creating nearly as many emissions as the computers involved in the mining process. 

 

Also, investors can use a staking pool instead of individually validating transactions. This, too, also means less energy needs to be consumed as fewer computers are needed.

 

An image of someone holding a real-world bitcoin. In the background is a blurry nature scene to show proof of work's toll on the environment.

Image source: Bitcoin.com

 

Biggest Polluters

The Ethereum network has a carbon footprint that cannot be ignored. Every year this one blockchain alone uses as much energy as Nigeria! 

 

Unfortunately, most NFTs found in NFT marketplaces are part of the Ethereum blockchain. Ethereum does utilize PoS validation, but the amount of ETH needed to stake is very high and unaffordable for most people/investors. 

 

Bitcoin is probably the heaviest hitter, using more energy than Sweden every year! It doesn’t have a PoS system, but there has been some buzz around the Bitcoin Lightning Network which is supposed to help lower the amount of energy needed to validate transactions. 

 

An image of grass and trees with two circles reading GREEN NFTs.

Image source: Medium

 

Greener NFTs

Now that we’ve covered the bad, let’s talk about how to make decisions around NFTs, digital art, Web3, and crypto that don’t negatively impact climate change.

 

  1. Renewable energy: Finding and using renewable energy sources such as wind or solar power to provide electricity for the supercomputers who are doing the heavy lifting for PoW systems is vital. Clean energy is the only way we can continue forward with these systems. 
  2. Accessible PoS-based blockchains: There are blockchains, such as the Algorand blockchain, that are 100% PoS-based, as well as others that use PoS to validate the majority of their transactions. For example, Wizardia’s tokens are sold on Solana’s blockchain and do not use PoW. 
  3. Using NFTs to fund conservation projects: There is a significant number of digital artists trying to offset their contributions to greenhouse gasses being produced by their digital images by funding projects that plant trees and protect forests. The goal of projects like this is to ensure that the assets they create are ultimately carbon negative.

 

Conclusions on NFTs and the environment

Are NFTS bad for the environment? No, NFTs themselves aren’t bad for the environment. The blockchains they’re on cause the issues. 

 

If you want to make an environmental impact but are interested in NFTs you don’t have to choose one or the other. Find NFTs that are on chains using PoS systems and stay away from those that rely heavily on PoW systems.

 

FAQ

How bad is crypto for the environment?

Crypto itself isn’t bad for the environment. The chain crypto is located on may be the issue. Some cryptocurrencies like Bitcoin are based on blockchains that use a Proof of Work (PoW) system. PoW systems use a ton of energy to validate each and every transaction. 

Other cryptocurrencies like Solana use Proof of Work (PoS) and Proof of History (PoH) systems to validate transactions. Systems like this don’t require nearly as much computing power and, in turn, are much better for the environment.

 

 Why you shouldn't buy NFTs?

You don’t have to completely avoid NFTs. You just need to avoid buying NFTs that are on blockchains that rely on PoW (Proof of Work). These systems require an immense amount of computing power with a large carbon footprint. 

 

How are NFTs affecting the economy?

NFTs are likely here stay. Right now, there’s a lot of buzz around digital art and collectibles, but the technology they’re based on could change how businesses around the world operate. This, in turn, could help bring better financial opportunities to populations that have been forgotten or marginalized.

Heather Budrevičienė

Heather Budrevičienė

Heather is an American writer and editor based in Lithuania. She is obsessed with learning and loves to dabble with new tech in her free time. Heather started her career in Fintech and has only fallen more in love with blockchain through the years. She also loves to unplug and spend time outdoors. When she isn’t working, you are likely her with her family hiking in a forest or kayaking down a river.

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