If you are reading this, chances are you’re aware of NFTs — non-fungible tokens that are bought, sold, and traded on a digital ledger known as the blockchain. But what are their costs, risks, and side effects?
NFTs are one-of-a-kind pieces of digital art and in the last few months have completely taken over the art world. However, NFTs are not new. But their rise in popularity has put increased focus on the environmental toll of a single transaction.
For example, Ethereum, a type of cryptocurrency, consumes roughly 50 TWh (Terawatt-hours) of energy per year, which is equal to the annual carbon footprint of Jordan, according to Digiconomist, which tracks the “unintended consequences of digital trends.”
That’s a lot of energy. And remember: There are over 10,000 different kinds of cryptocurrency, each varying in how much energy they expend. Critics and legislators like Senator Elizabeth Warren want to “crack down” on crypto’s energy consumption, while enthusiasts applaud it for its autonomy and decentralized, peer-to-peer lending system.
So why do NFTs require so much energy? What can be done about it? And, with all things considered, are the cost of NFTs worth the benefits they provide to artists?
PetaPixel spoke with digital artist William Murphy (@wgm_v) and Susanne Köhler, who studies sustainable blockchain technology at Denmark’s Aalborg University, about the relationship between NFTs and the environment.
The Set up VS The Shot
— Michael Shainblum (@shainblum) June 22, 2021
Why Do NFTs Use So Much Energy?
To understand why NFTs consume so much energy, it’s important to understand how the blockchain works. The blockchain, where cryptocurrencies like Bitcoin and Ethereum live, acts as a distributed ledger, which records information, data, and transaction details anyone can see.
The process of validating and verifying the data stored on the blockchain is energy-intensive and generates greenhouse gasses on par with that of small countries and has been blamed for power grid failures across the globe. China plans to dramatically crack down on cryptocurrency trading and mining in the next four years, encouraging the country’s financial institutions to not get involved in the business.
Since NFTs use the blockchain platform to mint, list, and sell digital art, they also contribute to the energy consumption of the system as a whole, according to Köhler.
Read more: How to Mint an NFT: The Photographer’s Guide
“These transactions consume a lot of energy when they are built on proof-of-work (PoW) blockchains,” she said. “PoW is a consensus mechanism that is in place to validate the transactions and secure the blockchain without needing a central authority. PoW is energy-intensive by design as so-called miners compete in a guessing competition of who gets to mine the next block.”
The more miners are involved, the more secure the blockchain is, and the more energy is consumed, Köhler continued.
How Are Carbon Emissions and Energy Consumption Calculated From the Buying and Selling of NFTs?
There are plenty of organizations and individuals keeping track of the carbon emissions and energy consumption associated with cryptocurrencies and NFTs, like Offsetra, Memo Akten, academics, and major financial institutions. Many estimates produce big, scary numbers, but one, which was backed by researchers, equates the listing of a single NFT to driving 500 miles in an average, gasoline-powered car, according to the New York Times.
Energy consumption and carbon emissions are not the same.
Energy consumption is easier to decipher and can be estimated by using the “hash rate” — the power the computers use to mine and process blockchain transactions — plus the energy use of the hardware…