Emilyn Lai/Edge columnist
Since the introduction of the earliest versions of NFTS, dating back to 2012, the digital assets have only exploded in popularity. Within the first three months of 2021 the combined market cap of major NFT projects have shot up 1,785%. NFTs have been dubbed revolutionary and innovative, but many people who are interested in trading them do not realize the shocking impact that NFTs could have on the planet.
What is an NFT?
NFT stands for non-fungible-token, which means that every asset is unique, and that they are not interchangeable. This makes them different from other cryptocurrencies like bitcoin, which are identical to each other and can be used as a means of commercial transaction.
An NFT is a digital asset that exists on a blockchain. The blockchain acts as a digital ledger of transactions that cannot be hacked or changed, and it allows people who are trading NFTs to verify an asset’s authenticity.
An NFT can really be anything that is digital, be it a piece of digital art, a GIF, a video clip, or even the very first tweet of Jack Dorsey, Twitter’s CEO. Every NFT also has a unique digital signature, making all NFTs one of a kind and irreproducible. You can compare an NFTs ‘uniqueness’ to how the Mona Lisa is one of a kind, and while you can try and replicate the painting, it is impossible to make one that is identical to the original. One of the reasons why NFTs have become so popular amongst digital artists is that now, whoever purchases their art has a way of proving that the piece real.
Now, to a lot of people, especially artists and those who are interested in the evolution of the art world, this sounds great. However, with more people buying and selling NFTs, some people have been raising the concern that this new system could be causing harm to the environment.
But how could something that exists on your computer be contributing to the current climate crisis?
It may be obvious, but to some people it comes as a surprise. In short, the system used to record these transactions are incredibly energy consuming and require loads of power.
NFTs are most often purchased and sold on marketplaces like SuperRare and OpenSea. These marketplaces use the cryptocurrency Ethereum (1 Ether is currently worth around $2,900 cad), and it is created on a system called ‘proof of work’, which is absurdly energy consuming.
The system acts as security for cryptocurrencies, and it oversees all of the transactions. In order to continue security and keep all of the financial records protected, one would need to use a machine to solve complicated puzzles. When a highly specialized computer is used to ‘mine’ and solve these puzzles, the user is able to add a new ‘block’ of transactions to the blockchain. The user, or ‘miner’ is then rewarded with cryptocurrency.
It becomes more imaginable to see how using these complex, specialized machines can be taxing on electricity use. In an article titled ‘The Climate Controversy Swirling around NFTs”, Justine Calma, the reporter, says “The process is incredibly inefficient on purpose”. Mass amounts of energy are expensive, and that’s kind of the point, if more people were able to mass mine for cryptocurrency, the value of it would go down.
As a result of so many machines mining, Ethereum is estimated to use more energy than Denmark per year. It is also estimated that as of April 2021, Ethereum uses about 35.5 TWh per year. Ethereum’s carbon footprint is also comparable to Croatia’s.
It’s frightening, but if miners continue to consume exceptional amounts energy and if the popularity of NFTs continue to rise, the effects of the energy use will become more apparent. Keep in mind that the concept of NFTs are still relatively new, but with time will also come more people studying them, and more concise data about to what extent are these systems affecting the planet.
Some people have already gone to making cleaner alternatives more accessible for users to use. ‘Proof of stake’ is currently a popular option, with websites like NBA’s Top Shot, a place where basketball fans are able buy NBA highlights as NFTs, using the system. It still requires users to put something on the line in order to prevent people from tampering with the blockchain, but in this case, instead of having to pay for loads of energy, a user has to simply ‘lock away’ some of the cryptocurrency one already has, in order to ‘prove’ that they’ve got a ‘stake’ in keeping the blockchain accurate. This eliminates the need for these electricity-guzzling machines.
Taking the information that is available and the varying opinions on NFTs into account, the whole concept is intriguing. However, people who want to buy and sell NFTs should first do their own research and consider the options on how they would like to interact with the market. Artists and art buyers are already pushing for more eco-friendly changes, a great step forward into leading us to the new art world.