What is the Environmental Impact of NFTs and How THEOS Can Change That
An NFT is a one-of-a-kind cryptocurrency token that may be practically anything digital, such as art, a song, and the first tweet of Twitter CEO Jack Dorsey’s. There have been some initial estimates about NFTs power consumption and, as a result, how much planet-heating pollution is being generated.
When somebody mints, buys or exchanges an NFT, they’re accountable for some of the emissions generated by those miners. What’s still being debated is whether NFTs are seriously increasing the level of emissions from Ethereum or whether they’re just taking the responsibility for emissions that would have been generated anyway.
Are NFTs detrimental to the environment?
All of the potential fixes to the climate pollution problem of NFTs are being implemented to varying degrees, but they haven’t been extensively adopted yet. Many artists, and even some environmentalists, are still optimistic about crypto art, as they assume that, in the short term, the emissions won`t be an issue to worry about. Artists are, in fact, the ones who are pushing the most for change. They may start minting their NFTs on marketplaces using greener practices if the standard marketplaces for NFTs don’t start to meet their environmental demands.
How do NFTs damage the environment?
The rush towards NFTs has further pushed the topic of environmental damage, with the energy consumption of cryptocurrencies having been proved to be even higher than the consumption of several countries.
The main reason is basically transactions with the Ethereum blockchain. The increase in users of NFTs has aggravated the issue. NFTs’ computation demands are strikingly high because of the various stages involved that include the minting, bidding, and exchanging process. Thus, the energy cost of minting an NFT on Ethereum rises to 332kWh.
Ethereum, Bitcoin, and many other cryptocurrencies are secured by a proof of work (PoW) mechanism, which is a high-energy mining process. So these blockchains are, by design, energy-intensive.
In these cases, many nodes redundantly compute the same transactions, which is one of the main reasons for the considerable energy consumption for these blockchains. To motivate miners to spend energy and money, they are usually rewarded with brand new cryptocurrency units and transaction fees for their work.
The higher the cryptocurrency price, the higher the motivation to participate in the computations, which in turn become more sophisticated and thus require more energy. The NFT market growth and the skyrocketing increase in energy consumption are even more alarming if you take into account that only last year the energy consumption of Bitcoin increased three to four times and the energy consumption of Ethereum increased by around ten times
.Even if the issue of NFT-related emissions is practically overshadowed by this new way to generate wealth, environmentalists and climate experts have currently been sounding the alarm about the unforeseen rise in the earth temperature, the increase of sea level, and several events related to global warming.
What is the carbon footprint of an NFT?
As there are many steps in the minting process that do not have a clear carbon footprint, and also because of the limited amount of scientific research on this topic, it is rather challenging to calculate the carbon footprint of minting an NFT. An estimation by Digiconomist suggests that a transaction with Etherium produces a carbon footprint of 33.4kg CO2. Memo Akten, programmer, and artist, assumes there is a carbon footprint of about 48kg CO2 in an average NFT transaction. As we all know, we need to pay attention to the fact that there is another transaction every time an NFT is sold or minted.
Those numbers let us see that one operation with NFTs is prone to produce a 14 times bigger carbon footprint than the one produced through an art print mail transportation, which is estimated at 2.3kg CO2 by Quartz. In spite of the uncertain estimation results, they make us wonder how necessary it is to allow a carbon footprint of this scale just for the sake of selling art.
As artists bear in mind the unnecessary carbon footprint produced with just one single transaction, some of them try to avoid NFTs. For instance, an operation in Etherium is considered to be similar to 74 000 VISA operations. These Choices are equivalent in carbon footprint to cutting off beef from your diet or avoiding flights. Even if travel and food are necessary, taking planes and eating beef has a comparatively elevated carbon footprint in comparison to other alternatives, so your footprint can be reduced dramatically just by making a few adjustments.
Proof-of-Work (PoW), is one of the principal causes of high levels of energy consumption. As we have stated, blockchains such as Ethereum and Bitcoin work under POW. Proof-of-Stake (PoS), on the contrary, constitutes another, more eco-friendly alternative to the blockchain using a different system. Symbol, Tezos, or Polygon, which support NFTs, rely on PoS blockchains, which means a considerable reduction in computing power, and as a result, a big reduction in the consumption of electricity. Tezos estimates that the average annual energy consumption of its blockchain is 0.00006Twh, in comparison with Ethereum’s 33.57Twh.
Other strategies could be used that aren’t as detrimental to the environment.
A straightforward example of a blockchain adopting the proof-of-stake model might be NBA’s Top Shot, the marketplace which operates on the Flow blockchain where basketball fans can exchange NFTs of several NBAtop moments. To prove they have got a stake in maintaining the blockchain effectively, they have to lock up some of their own cryptocurrency tokens in the network instead of having to pay for enormous amounts of electricity to enter the game. They can of course be penalized if they get caught red-handed and therefore lose all their tokens. By not having to solve difficult puzzles, computers produce fewer emissions and therefore become more environmentally friendly.
To keep a less centralized proof-of-work network, we can try other ways to reduce the environmental impact of NFTs. One feasible solution is to build a second layer on top of the current ledger. Using a second layer can reduce energy consumption as transactions take place off-chain. For example, If two individuals wish to exchange NFTs they can start their own channel using a secondary ledger, and as a result, countless transactions can be held. They can compensate for the net result of their operations back on the ledger when they have finished their exchanges. Through the proof-of-work process, it can later be added to the verified blockchain. You’re basically saving energy by netting all operations on the ledger into some of them, therefore, making the blockchain much more efficient.
If more cryptocurrency machines use greener energy, emissions inevitably decrease. So, a quick solution to NFTs emissions can be the use of clean energy. There’s not enough information regarding how many cryptocurrencies are mined using renewable energy. Several experts have stated that renewable energy consumption doesn’t solve the problem that Proof-of-Work poses. Because of the high demand for electricity by the minting process, energy systems will still continue to be under pressure. We also have the case of clean energy and why we should use it for blockchain operations and not in more important issues such as people’s homes’ necessities. But that’s another discussion.
How THEOS can change that
Which blockchain protocol to choose is a critical area of focus for THEOS, as we must take steps to align our social and environmental responsibility with the sustainability and vision of the underlying protocol.
Therefore, choosing a smart contract platform becomes a decision that is equally weighted in both business acumen and corporate responsibility.
Firstly, any protocol we choose must have live or planned smart contract capabilities, therefore layer one protocols, such as Bitcoin, are automatically ruled out. Secondly, a contender must also meet our focus on environmental and social sustainability. Compared to Proof of Work (PoW) consensus mechanisms, Proof of stake (PoS) consensus mechanisms have been shown to offer a bunch of benefits to energy efficiency. However, to date, few protocols have been able to implement a pure PoS consensus mechanism that offers the same security guarantees as classical PoW blockchains.
In our overall vision, THEOS must take into account both affordability for our platform from a business case and sustainability for our ethical considerations. At present, Cardano looks best aligned with these requirements. Cardano has an ultra-low energy consumption through its PoS consensus mechanism while maintaining the same rigorous security guarantees. This would allow THEOS to meet global sustainable development goals, and achieve our goal of carbon-neutrality. This gives THEOS the potential to become the world’s first sustainable social and financial NFT operating system.
We will keep a close eye on developments in the layer-2 protocol space as we move forward, to identify the blockchain which aligns most closely with THEOS mission.
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