NFTs or non-fungible tokens took the world by storm. However, people like Elon Musk have criticized them and stopped supporting their growth altogether because they are not environmentally conscious and because there isn’t a green nfts movement with enough force.
An NFT is a unique digital representation of a good, any good. An easy way to understand them is to think of them as trading cards, expensive trading cards that can be sold, bought, and owned in the blockchain. They have been around 2017 but had a massive rise in popularity in the past year.
They can pose, however, a risk to the environment since all types of crypto-transactions happening online require massive amounts of energy because of the high-end computers needed to sell and store cryptocurrency. It is reported that these transactions can consume as much energy as a small country. For example, Ethereum’s annual energy consumption used to process its crypto-transactions is roughly equivalent to Nigeria’s yearly energy consumption. Then you have Bitcoin trading, which consumes more electricity annually than the whole of Argentina. To put things into perspective, Argentina is the eighth-largest country by land area globally.
Of course, all this power consumption can be translated into carbon emissions since most of the electricity used comes from fossil fuels and not renewable energy sources. Because of this, some artists have stopped dealing with NFTs, like a french digital artist called Joanie Lemercier, who realized the sale of six of his pieces would consume enough electricity to power his entire studio for two years in just ten seconds.
Sustainable NFTs Platforms
Although there has been a lot of fuzz surrounding NFTs unsustainable ways, options and solutions are being found.
It is essential to highlight the existence of alternative NFT platforms called sidechains that are less impactful on the environment. Sidechains are separate blockchains connected to another blockchain through a two-way peg to help process some of the data from the main blockchain. Basically, a sidechain is attempting to take some of the work the main blockchain has to do and do it for them.
How? Sidechains are commonly used to test features and experience other use cases. They also help to speed up transaction finality and lower transaction costs. Sidechains also need validators or miners who earn rewards for their work on a sidechain. They also allow merge mining, meaning a miner can validate two blockchains at once, making double the rewards with roughly the same amount of work. Mining NFTs on sidechains lowers the energy consumption because it allows the miners to double their work in the same amount of time.
Another sustainable option in the world of NFTS is the existence of platforms that buy carbon offsets and are more environmentally conscious.
A good example is Aerial, which soft-launched in October 2021 to offset the carbon emissions produced primarily by travel. Aerial owners had long considered tackling cryptocurrency emission and prioritized the decision after NFTs suddenly became mainstream. When someone uses Aerial’s app to offset a purchased NFT, users paste in the collection address of the NFT drop or the wallet used to mint the token, which will generate an estimated carbon footprint. That measure is calculated based on Gas, a measurement which is, basically, the transaction fee paid to Ethereum miners for the validation work (Gas is a fraction of the ether currency measured by a unit called a Gwi): The higher the Gas, the higher the amount of energy consumed. The app then generates carbon credits and a dollar amount that users can pay to offset the purchase.
The Main Solution
Like Aerial and sidechains, other solutions are being developed by the NFT industry to protect the environment. However, the final objective is that more if not all cryptocurrency machines run on renewable energies like wind-solar or hydropower.
This shift’s necessity became apparent when, in 2021, Elon Musk announced that Tesla could suspend vehicle purchases using Bitcoin and only resume once mining shifts to more sustainable energy sources.
It is essential to know that a substantial share of PoW, or proof of work, mining is already being powered by renewables; however, the exact percentage is uncertain.
According to Cambridge, an average of 39% of PoW mining is powered by hydroelectric energy. Other studies like the bitcoin Mining Network from CoinShares estimate the share of renewables in Bitcoin power could be as high as 74%.
The challenge in determining the share of renewables in Bitcoin mining and PoW mining is the variable nature of renewables.
An excellent example to understand the latter is the Sichuan Province in China, where a large share of mining occurs. The average power generation capacity during the wet season is three times higher than during the dry season. Because of these changes in hydroelectricity generation, Bitcoin miners can only use cheap hydropower during specific periods. With electricity as the primary operational cost for miners, there is fierce competition to find the most affordable power sources, making low-cost renewable electricity, which has declined sharply over the past decade, an attractive option.
Many initiatives are trying to accelerate the shift of cryptos to renewables. The Crypto Climate Accord is a partnership between Energy Web, Rocky Mountain Institute, and the Alliance for Innovative Regulations that are working to make sure cryptocurrency as a whole shift to 100% renewables by 2030. This aligns with the objectives of the COP26 objectives, which took place in Glasgow in 2021.
There is still a long road to be walked regarding NFTs and sustainable practices. However, it is hopeful that steps are being taken to make the industry cleaner and, thus, stronger and more sustainable over time.