Critics have trailed the NFT movement since it first began, and one of the weightier allegations these tokens are facing has to do with their environmental footprint. Chances are you’ve run into one of these arguments and honestly, there is some truth to the criticism.

However, the Web3 and NFT space is very passion-driven not just for supporters but also detractors. Due to this, drama is often blown out of proportion, so it’s important to separate fact from fiction. That’s what we’re going to do, we’ll clear the air on how NFTs affect the environment.

The Environmental Cost Of Non-Fungible Tokens

Non-fungible tokens are a component of the Web3 ecosystem which is primarily based on the blockchain. As such, NFTs are also blockchain-based, but what are blockchains anyway?

Well, blockchains are a decentralized way for people to transact. You can think of it as a digital ledger that makes it possible to monitor transactions securely and transparently. Participants can carry out operations without involving banks or centralized bodies. But someone has to maintain the system, and that’s where nodes come in.

A network of computers known as nodes maintains the blockchain. The majority of these computers have to agree that a transaction is legit through a process known as consensus.

There are two main consensus algorithms, the first is the Proof-of-Work (PoW) consensus algorithm. In this model nodes, known as miners, use computational power to solve mathematical problems to validate transactions and add new blocks to the blockchain. In return, these miners receive rewards in crypto.

It’s a very energy-intensive process and that’s the main bone of contention. The more secure the blockchain, the more energy it requires. Since NFTs require transactions to be added to the blockchain, the creation, selling, or buying of NFTs can contribute to this energy consumption, potentially harming the environment.

The Counterargument

First, we have to put things into perspective. Generally, we break up the energy requirements of our technology into smaller units. How much gas do our cars use weekly or how much electricity powers our home for a year?

However, with blockchain networks, blanket statements like “Ethereum and Bitcoin use as much energy as two countries” are pretty common. That can be unfair and biased because blockchain is used for more than just NFTs, so we need to consider the energy used specifically for NFT transactions to understand their environmental impact. Taking it a step further we also need to talk about how much energy each NFT transaction requires.

To start with, miners mine blocks not transactions and each block typically holds multiple transactions. Hence, we can’t equate one transaction to creating an entire block because it doesn’t work that way. It’s also possible to create an empty block if there are no transactions to record.

Miners will simply continue to mine new blocks to maintain the integrity of the blockchain network and to earn their reward for doing so. The energy cost per block is generally the same, regardless of the number of transactions processed. This means whether you make 10 or 2 NFT transactions, the energy per block is the same. So, there aren’t any hard numbers on how much energy NFT transactions are using up.

Also, several other industries likely consume just as much if not more energy than the blockchain sphere. This is not an attempt to give either sector a pass. But as stated earlier we should keep things in perspective, and not jump to conclusions based on incomplete or inaccurate information.

So, Is The Hype Worth The Environmental Cost?

There’s no yes or no answer here. This is what we should consider instead.

NFTs by themselves are not harmful. Rather, the harm tied to these digital assets comes from how they are made and traded which is through blockchain technology. We can’t deny that blockchains can be detrimental to the environment, but we have seen that the extent of the damage is often blown out of proportion.

Also, NFTs have revamped our ideas of ownership and authenticity in the digital realm, and through this artists have gained a new revenue source despite having historically struggled to monetize their work.

So rather than criticizing NFT artists and other users for their environmental impact, we should be looking for better alternatives - like finding more sustainable ways to produce and consume non-fungible tokens.

We already have a few options.

Eco-Friendly Blockchains

Not all blockchain networks are created equal. Platforms vary in how energy-efficient they are, so their environmental footprints vary as well. Some NFT marketplaces are built on energy-efficient and eco-friendly blockchains, such as the Tezos blockchain.

Alternative Consensus Algorithms

A great example of this is Ethereum which is the most popular network for NFTs. Ethereum was extremely energy-intensive until its transition from the PoW consensus mechanism to Proof-of-Stake. PoS requires far less energy consumption compared to PoW because instead of miners competing to solve complex mathematical problems to validate transactions and create new blocks, validators are selected randomly to do so based on how many tokens they hold.

Carbon Offsetting

NFT platforms have collaborated with companies that specialize in carbon offsetting, such as Moss.Earth, to offset the carbon emissions associated with NFT transactions. These activities include tree planting and sustainability pledges. Nifty Gateway for instance pledged in 2019 to reduce its carbon footprint and promote sustainability initiatives.

Conclusion

So blockchain technology has its hijinks, including energy consumption but as we established, we have to keep things in perspective. NFTs are a small and relatively new part of the complete ecosystem and as will any nascent sectors there will be ups and downs. We’re exploring ways to innovate with sustainability at the forefront. With collaboration and more research, we can find ways to mitigate the environmental impact of NFTs and ensure they continue to aid creators and society at large.

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