NFTs and the Environment – Investopedia
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You may have heard about non-fungible tokens (NFTs) and how they impact the environment. Even though NFTs themselves do not cause any environmental impact, their impact on our climate can be linked to how they are produced.
The way that NFTs are created can be highly energy intensive. Since Ethereum's transition to proof-of-stake, most NFTs are minted using a blockchain that doesn't require the vast amounts of energy that a proof-of-work blockchain does. Blockchains that require an energy-intensive process, crypto-related or otherwise, can generate excess carbon if they consume energy from non-renewable sources.
Keep reading to understand more about how NFT production consumes energy and learn what developers have done to reduce their impact on the environment.
NFTs themselves do not impact the environment, but how they are minted can have substantial environmental consequences. Here’s a look at how NFTs are made:
Different blockchains will process the transaction according to their programming. Here's a look at the two most used consensus algorithms, proof-of-work and proof-of-stake, and how an NFT is processed in each.
When the NFT is purchased, a transaction takes place. On a proof-of-work blockchain, this means the network of miners must compete to be the one to validate the transaction so that they can receive the blockchain reward. The process works like this:
The high energy requirement exists because the vast proof-of-work network works on one block at a time, all miners attempting to generate a lower number.
A single NFT transaction on the Bitcoin platform emits almost 748 kilograms of carbon dioxide, equivalent to 1.7 million Visa transactions or 124,714 hours of watching YouTube.
On a proof-of-stake blockchain such as Ethereum, the NFT process through the marketplace is the same until the transaction begins:
A single NFT transaction on the Ethereum platform emits almost 0.02 kilograms of carbon dioxide, equivalent to 44 Visa transactions or 3 hours of watching YouTube.
Minting and transferring an NFT can be energy intensive, but it does not need to be. Blockchain platforms using the proof-of-stake operating method can generate NFTs without excessively using electricity and negatively impacting the environment. Unfortunately, diminished energy use under proof-of-work blockchains is not yet attainable.
However, there are some options for NFT creators and fans:
If you want to buy an NFT without causing harm to the environment, then you have several purchasing options. Choosing a marketplace that uses a proof-of-stake blockchain or NFTs minted on one can significantly reduce their environmental imprint. Some notable proof-of-stake blockchains are:
If you care about fighting climate change but want to invest in NFTs, you might feel that those two objectives are at odds. You can protect the environment and still purchase an NFT, but to avoid using almost 48 days’ worth of electricity, you can’t purchase just any NFT.
If you are committed to aligning your investment portfolio with your stance on climate change, then aim to invest only in NFTs that are generated using the proof-of-stake consensus method. The Ethereum platform completed its transition to proof-of-stake, so environmentally-conscious investors can buy NFTs minted on Ethereum (ETH) with a bit less concern for the environment.
It’s when a non-fungible token (NFT) is minted at an NFT marketplace using an energy-intensive method, such as proof-of-work, that the environment can experience an impact, such as an increased carbon footprint. Conversely, NFTs minted using a proof-of-stake blockchain have a significantly reduced environmental impact.
Minting an NFT on the Ethereum platform uses less than 0.03 kilowatt-hours of electricity—about three hours of watching YouTube. Minting one on a proof-of-work blockchain uses the same amount of electricity a U.S. household uses in 47.4 days.
Investors who prioritize environmental, social, and governance (ESG) issues can consider NFTs minted on a proof-of-stake blockchain because their environmental impact has been significantly reduced.
Digiconomist. "Bitcoin Energy Consumption Index."
Ethereum. "The Merge."
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Solana. “Ecosystem,” go to “Search Projects,” type “Marketplace” and hit Enter.
Algorand Foundation. “Art and NFTs Page.”
Cardano. “Ouroboros.”
CNFT.IO. “Home Page.”
Galaxy of Art. “Home Page.”
Tezos. “What Is an NFT?”
Rarible, via Internet Archive. “Meet Rarible.”
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