In recent years, with the rapid development of the market, NFT has attracted much attention. NFTs create new value of “unique proven digital assets” through blockchain technology, and are in increasing demand in various fields such as art, games, and sports.
NFTs tend to draw attention to many advantages, such as the realization of digital rarity and the need for third parties when transacting, but on the other hand, the concern is the impact on the environment. In the past, while technological evolution has brought convenience to people, it has also had a considerable impact on ecosystems and climate change.
In this article, let’s take a closer look at the environmental impact of the widespread use of NFTs.
Are NFTs and Bitcoin bad for the environment?
NFTs and Bitcoin (BTC) using blockchain technology are expected to become new means of exchange due to their convenience, but there are also concerns over massive electricity consumption and carbon dioxide emissions. …
A study by the Centre for Alternative Finance at the University of Cambridge found that Bitcoin consumes about 110 TWh (terawatts) per year, which is equivalent to the annual energy consumption of Malaysia and Sweden. In addition, according to a report by Digiconomist, the amount of carbon dioxide emitted from a single Bitcoin mining operation is 158 tons, which is equivalent to more than 1 million VISA card transactions.
NFTs are no exception. The environmental damage caused by NFTs can be estimated by looking up the NFT’s carbon footprint. Carbon footprint, literally translated as “carbon footprint”, is the calculation of the amount of carbon dioxide emitted throughout the cycle of production, distribution and disposal (recycling) of goods and services.
Digital artist Memo Akten analyzed about 18,000 NFTs and found that the average carbon footprint of a single NFT is equivalent to a month’s electricity consumption of people living in the European Union, which is known to be comparable.
Separately, according to a Nasdaq research report, the global banking industry consumes about 263 TWh of electricity annually, but blockchain and Bitcoin alone are equivalent to nearly half of the total electricity in the banking industry. consume.
Various Efforts to Address Environmental Issues
NFT artists strive to be carbon neutral
Against this backdrop, more and more NFT artists are pushing for environmental initiatives. Beeple, author of The First 5000 Days, won the highest bid in the history of NFT work to make his work carbon neutral (balancing greenhouse gas emissions and absorption, resulting in almost zero emissions). Beeple is working to offset CO2 emissions from NFT art creations by allocating a portion of the funds to nature maintenance projects and CO2 reduction projects.
Eco-friendly NFT artists such as Beeple raised funds by selling carbon neutral NFTs and used the funds to form the NPO “Open Earth Foundation”. This non-profit organization aims to create a sustainable society through arts and education. The specific funding purpose is dedicated to researching the impact of blockchain technology on climate change.
Transition from PoW to PoS
Initiatives to protect the environment happen not only with individual efforts, but also with cryptoasset platforms.
Currently, most NFTs are traded on Ethereum (ETH). Many digital artists choose Ethereum for NFT sales because it is the second most stable and reliable crypto asset after Bitcoin, and it is designed to make it easy and secure to trade data using smart contract technology. because it is.
Ethereum mining uses less than half the energy of Bitcoin mining. Nonetheless, Ethereum consumes about 45 TWh of electricity, which is equivalent to the annual electricity consumption of countries such as Qatar and Hungary.
Ethereum traditionally employs a blockchain algorithm called Proof of Work (PoW) similar to Bitcoin. Originally developed to prevent double spending of coins, PoW is a mechanism by which miners (called mining) are rewarded for performing huge computations to add new blocks to the blockchain. ..
However, PoW requires mining equipment for advanced computing, and consuming a lot of energy has become a big problem. Against this backdrop, Ethereum is moving from PoW to another consensus algorithm called Proof-of-State (PoS) in line with the December 2020 update called “Ethereum 2.0” (currently “customary” Do not use the word “Ethereum 2.0”).
PoS is a mechanism that contributes to blockchain security and earns rewards from the network by staking (holding) the Ethereum blockchain’s native crypto asset, Ether (ETH), for a certain period of time. The Ethereum Foundation announced that “the new PoS system will reduce energy consumption during verification by more than 99%”.
Currently, most major NFT marketplaces like OpenSea and Rarible are PoW based Ethereum blockchains, so the problem is that they are very energy inefficient. At the same time, the number of blockchain platforms based on environmentally friendly PoS consensus algorithms is also increasing. However, compared to major NFT markets such as OpenSea, the risk of new platforms being hacked is high, and many users are worried that their work will disappear or be abused, so it is not widely used, and this is the current situation.
In the future, as more and more artists become more aware of energy conservation, the use of environmentally friendly platforms based on the PoS consensus algorithm may increase. Blockchains that use PoS include Algorithm, Tezos, Polkadot, and Hedera Hashgraph.
In this article, I explain the environmental impact of NFTs and Bitcoin, focusing on electricity consumption and carbon dioxide emissions. He also talked about the efforts of NFT artists to address these issues and blockchain platform updates.
Efforts to use crypto assets and blockchain technology are expected to increase further in the future. We are comfortable with the development of technology, but it is also important to consider its impact on the environment.
Supervisor: techtec Research Team, Inc.
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The crypto asset/blockchain team of HEDGE GUIDE editorial department consists of editorial members who have in-depth knowledge of crypto asset investment, blockchain and other financial technologies. Explains the latest news, columns, and basics about crypto assets in an easy-to-understand way for beginners.