HomeWhy Are NFTs Bad for the Environment?

Why Are NFTs Bad for the Environment?

Last updated 16th Feb 2023

Non-fungible tokens, more commonly known as NFTs, are digital assets that exist solely on a blockchain but have real-world value. Kind of like real-world art pieces, they can’t be replicated but can be owned, traded, and sold for the right price. But how can something that isn’t even physically present in our world be harming it? The answer is a little complicated, so let’s dive right in with the explanation.

Are NFTs Bad for the Environment?

The mere existence of NFTs isn’t harmful to the environment. Creating NFTs and keeping them stored on a blockchain doesn’t hurt anyone. However, in some instances, specifically in networks that require proof-of-work consensus, the process of minting, selling, and trading NFTs requires mining, which consumes enormous amounts of electrical energy, among other NFT minting expenses. High energy usage results in high CO2 emissions and can affect climate change.

How Do NFTs Hurt the Environment?

For those that are familiar with Web3 technologies and the crypto glossary, the above answer may provide an adequate answer, but for most people, it only raises new questions. What is proof-of-work, why does it use mining, or even, what is mining in the first place? To fully understand the root of the issue of how NFTs harm the environment, we first must have a basic understanding of blockchain technology, why was it invented, and how it works.

The blockchain is a digital ledger of transactions, conceptualized in a way where cheating is impossible and every transaction is fair, without a central authority regulating it. Every user in the blockchain is connected to each other in a peer-to-peer network, rather than through an intermediary. Now, you may be asking what does this have to do with the environmental impact of NFTs and the answer is mining.

To achieve such a decentralized and democratic network, the blockchain requires the majority of users to confirm the validity of every single transaction, including NFT transactions. In proof-of-work blockchains, the process of validating transactions is known as mining. To validate, users must use their computers to solve incredibly hard mathematical problems. Mining is purposefully made to be so energy intensive, to discourage users from messing with the ledger.

Are the Environmental Effects of NFTs Really That Bad?

Okay so, if mining is so energy intensive, how are users motivated to mine, and how is the majority of users always available to validate the transactions? The answer to both questions is incentivization. For every block of transactions they validate, users get a reward in the cryptocurrency of the blockchain they are mining in. As a result, millions of people create powerful machines to mine as much as they possibly can.

The following mining and NFT impact on the environment facts can best illustrate what happens when so many people try their best to be validators in a PoW blockchain:

  • The annual energy consumption of the Bitcoin and Ethereum blockchains was estimated at 317 TWh, or somewhere between the yearly energy consumption of Italy and the UK.

  • The average energy consumption for the purpose of minting a single NFT is equivalent to the amount of energy that an average US household uses in 47 days.

  • The average NFT carbon footprint jumps to 211kg CO2 when the complete process, from minting to assigning the NFT to its new owner is taken into consideration.

  • A recent study analyzed the transactions of 80,000 NFT sales and concluded that the average NFT transaction has a carbon footprint of 48kg CO2.

As the data suggests, the cost of decentralization through a PoW consensus mechanism is simply too high and unsustainable. And we need to keep in mind that Web3 technologies are still in their inception phase and only a small portion of the world currently uses the blockchain. The NFT carbon emissions would only increase over time, as more people start getting into crypto and taking part in mining. Luckily, there is a solution for the environmental issues posed by the PoW protocol, even though one in every ten adult Americans collects NFTs.

How Do We Stop NFTs From Causing Environmental Damage?

In addition to PoW, there is another consensus mechanism called proof-of-stake and it is the future of blockchains, cryptoart, and the environment. This PoS protocol doesn’t involve any mining and arguably works just as well as PoW. While there are plenty of discussions on whether PoS is as democratic as PoW, one thing is for sure, PoS is infinitely better for the environment than PoW.

The PoS consensus mechanism still requires a majority of users to validate all transactions, but it doesn’t ask them to mine in order to validate, effectively stopping any NFT pollution. Instead, it requests users to stake capital to validate, which acts as collateral and ensures honesty and integrity in validators. If a validator misbehaves and doesn’t meet the conditions of the smart contract, their stake gets destroyed.

Ethereum is the second largest and most popular blockchain for NFTs in the world. After much of the NFT controversy regarding carbon emissions and energy wastage, Ethereum decided to leave the old PoW and upgrade to the PoS consensus mechanism. This switch, commonly known as the merge, was finalized on September 15, 2022, and it immediately yielded results. Ethereum’s annual energy consumption dropped by 99.988%, from 22,900,320 MWh to 2,601 MWh, and its annual carbon footprint also declined by 99.992% from 11,016,000 tonnes to 870 tonnes of CO2e.

How Can NFTs Hurt the Environment - The Bottom Line

Like is the case with most things in our world, NFTs by themselves can never harm anyone but it is the human factor that does the damage. In fact, NFTs hold so much untapped potential for inspiring creativity and initiating fundraising campaigns they will surely find a place in our world of tomorrow. After switching to a PoS protocol, Ethereum as a leading blockchain paved the way for the smaller players to follow suit and help ensure an eco-friendly future for NFTs and our environment.

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Darko Jacimovic

Darko Jacimovic

With over six years of writing experience, Darko is a prolific writer in multiple industries including, but not limited to, digital marketing, SEO, finance, and technology. Acquiring a BA in English pushed him to pursue his lifelong dream to conquer the internet and take over the SERPs with high-quality content. While looking for his next travel destination, Darko developed impeccable research skills that helped him craft some of the most popular stats pages on the World Wide Web.