As we progress through 2021, the steady upward trajectory of NFTs has been a defining factor in the world of digital technology. Sprinkle in the growing interest from celebrities, CEOs, and news outlets around the country, and you've got a new addition to the future of a decentralized world.
Multiple high-profile transactions have helped bring NFTs to the forefront of many individual's radars. From news of an astounding $70 million sale for a single JPG file to the Twitter CEO, Jack Dorsey, selling his original Tweet in NFT form for $3 million, the stories have swept through the nation at an unprecedented rate.
Though NFTs have been around since 2014, their sharp rise in popularity and often association with cryptocurrency has led many to question their environmental impact at a time when concern for the climate is ever-growing. This has caused a stir for the industry and created pressure for responsible parties to implement sustainable initiatives or risk losing customers.
NFTs - The Lowdown
NFTs, or Non-Fungible Tokens, are a unique digital asset that can come in an array of different forms, such as GIFs, art, videos, music, virtual avatars, etc. Though some associate NFTs with cryptocurrency, the two have more differences than they do similarities. They are comparable in that they both exist on a blockchain, a digital ledger used to record transactions, with NFTs predominately supported by the Ethereum Network.
What sets NFTs apart is the ability for the owner to purchase an original form of an asset, meaning that there are no two similar NFTs. Think of it regarding the Mona Lisa. You can find copious copies of the infamous work online, in gift stores, and in books. However, there is only one true original Mona Lisa, and the worth of that far exceeds that of the copies.
Due to this originality, NFTs cannot be transferred for one another, unlike traditional currency or even cryptocurrency; one dollar equals one dollar, one crypto coin equals one crypto coin. NFTs' lack of fungibility adds a layer of exclusivity and is a main factor as to why they are sold for such exorbitant prices.
NFTs also have a built-in authentication system that can make them harder to fake and provide an added layer of security. This, in addition to the opportunity for digital signatures, a wider audience, and embedded royalties, makes the option more alluring for an artist selling their work.
To date, there isn't a significant amount of peer-reviewed data examining the environmental footprint of NFTs. Nevertheless, based on what we do know about how NFTs work in alignment with blockchains and Ethereum, we can gain a general understanding of its environmental impact.
According to Digiconomist, one Ethereum transaction has a carbon footprint comparable to roughly 150,000 VISA transactions. Given that many NFTs rely on the support of the Ethereum Network, we can expect a similar result for each transaction.
Further, many in the field have begun their own research for answers on this topic. One digital artist, Memo Akten, even created a website to raise awareness for the environmental footprint of NFTs. Though the site has since been taken down, it has inspired others to begin delving deeper into this matter. One example is another digital artist, Joanie Lemercier, who conducted independent research and found that one of his NFTs consumed the same amount of energy in 10 seconds as his entire studio apartment did in a year and a half. Though we don't know what type of NFT Joanie had, and the findings are not peer-reviewed, they do show some semblance of correlation with Digiconomists findings in that NFTs are energy-intensive.
As a result of increased environmental awareness, some digital artists have also pledged to refrain from utilizing NFTs. In contrast, those that support NFTs maintain that their beneficial contributions toward a decentralized society are worth the environmental footprint, noting that looking at the whole picture must be done before coming to a concise conclusion.
Some key industry players, such as Ethereum, have also caught onto the notion of sustainable demand and vowed to convert to more eco-friendly methods, such as switching from a Proof of Work (PoW) system to a Proof of Stake (PoS) system. PoS allows more mining rights to miners who have a larger supply of coins, meaning that they don't need as many processing systems and therefore save on energy.
Regardless of when Ethereum transitions fully to PoS, the act will lower the network's environmental footprint and aid in the overall greening of NFTs. This can encourage others to question environmental impacts at a greater capacity and help make a significant change in the industry.
Consequently, though NFTs appear to have a notable environmental footprint, many factors are in the process of change that can ultimately work to make the digital asset greener. Additionally, the recent shift on the consumer side for more sustainable goods and services can certainly aid in more initiatives being put into place. This can catapult a domino effect of change and eco-friendly options, ultimately resulting in a more efficient, sustainable, and prosperous future.