“NFTs are the first time we can meaningfully have scarce or unique collectibles as part of our digital lives.” said the CTO of Dapper Labs, Dieter Shirley.
The non-fungible tokens, so called NFTs, are unique, original digital collectibles that cannot be replaced with anything else (Clark, 2021). Once traded for something else, you do not own the same item anymore, e.g., a painting like Mona Lisa, there is only 1 original. Bitcoin on the other hand is fungible, meaning that each bitcoin is equal to another and they are interchangeable and divisible (Bhalla, n.d.), e.g., you can exchange 1 dollar for another, you still own a dollar.
NFTs can be anything that is digital (an artwork, an avatar from a game, a meme, a GIF or even a picture of someone’s tweet), and it has taken over in the digital art world for its ability to create ownership of digital collectibles (Calma, 2021). Others than the owner can still view the artwork online, but the buyer claims the ownership of the original, which was impossible before NFTs came to life (Lewis, 2021). These one of the kind assets, if unique enough, can be bid and sold in multi-million-dollar sales:
- Gif of Nyan Cat ($500k)
- Picture of the first ever tweet ($2.5m)
- Christie’s sale of an NFT by the digital artist Beeple ($69m)
However, recently, more and more people have become skeptical about NFTs’ environmental impact and their cost to our planet. While NFTs are virtual, the climate impact of it is real. NFTs are typically hosted on an “proof of work” blockchain, such as Ethereum. Even though blockchain has the potential to be a sustainable technology, currently it uses a huge amount of energy and creates an enormous amount of greenhouse gases (Lewis, 2021). Ethereum alone is responsible for 96,200,000 tons of CO2 since its initiation (Mattei, 2021), and one transaction has the carbon footprint emission equaling to 140,893 Visa card transactions or 10,595 hours of YouTube watching (Bluestein, 2021). But how much of that are NFTs responsible for?
The sales of NFTs have increased by 1700% between December 2020 and February 2021 (Sharples, 2021). Offsetra, a company that offers carbon offsetting to companies, have estimated that on average, 1 NFT should be responsible for about 90 kg of CO2, which equals to an hour of commercial flight (Mattei, 2021). The majority of Ethereum’s carbon footprint is associated with mining and not minting, which is how the digital art becomes part of the Ethereum blockchain and is added into circulation.
Another option is for NFTs to use “proof-of-stake’ blockchain, which are said to be 99% more energy efficient. The newer generations of blockchain are adopting this approach and Ethereum as well is going towards the right direction with the announcement to transition to “proof-of-stake” by the end of 2021 (Sharples, 2021).
Sources:
https://www.southpole.com/blog/green-nfts
https://fortune.com/2021/07/29/ethereum-going-green-ether-crypto-carbon-footprint/
https://www.theverge.com/2021/3/15/22328203/nft-cryptoart-ethereum-blockchain-climate-change
https://www.cbsnews.com/news/nft-art-environmental-costs/
https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
https://www.bbc.com/news/technology-56371912
https://www.blockchain-council.org/blockchain/a-quick-guide-to-fungible-vs-non-fungible-tokens/
