If you have been on the internet for the past year, you have probably heard of non-fungible tokens (NFTs). NFTs are digital assets that represent ownership of unique items, which lets users earn up to millions of dollars by selling digital items and collectibles such as digital art, basketball video clips, or virtual properties.
However, NFTs do not come without a cost. Since NFTs use the same blockchain technology as other energy-intensive cryptocurrencies, NFT transactions use up a lot of energy. According to Digiconomist, Ethereum, where most NFT transactions happen, has a total energy consumption of 54.81 terawatt-hours as of July 2021, which is roughly equivalent to energy consumption of Romania.
To the moon
Besides the allure of seemingly quick and easy money, the hype behind NFTs comes from the fact that each token represents proof of ownership of an original digital item.
These may include “collectibles such as artworks, Pokémon cards, and baseball cards,” explains Dr. Marnel Peradilla, an associate professor from the Computer Technology Department. While copies of digital works can easily be made through downloading or taking screenshots, just like real-life collectibles, replicas or copies of NFTs are seen as less valuable.
Purchasing or selling these unique digital assets means going through a process similar to other cryptocurrencies. “Ang problema sa NFTs, andaming [steps] in between,” stresses Peradilla.
(The problem with NFTs is that there are too many steps in between.)
For transactions to be secure, each step—from updating a user’s account balance to transferring ownership—has to be sufficiently complex and difficult to perform. As such, the whole process consumes more and more energy with each step, requiring excessive amounts of computational power.
Power down
To balance out their carbon footprints, some NFT users have opted to use carbon offsets—paid services that calculate carbon footprint and offset carbon emissions in some other part of the world. Some artists, however, have decided to completely stop NFT transactions, believing them to be detrimental to the environment and to artists themselves.
Peradilla explains how companies are being pressured to provide environmentally friendly alternatives to their platforms. One way to do this is by using renewable energy sources instead like solar and wind energy to greatly reduce carbon emissions.
While this sounds good on paper, transitioning toward clean energy will not change the fact that NFTs are still extremely inefficient and energy-intensive.
In addition, the variability of renewable energy sources means that they rely on batteries for storage during off-peak hours. These batteries, typically of the lithium-ion variety, rely on rare earth elements which are non-renewable natural resources.
According to Peradilla, Ethereum developers are already working on Ethereum 2.0, where proof-of-stake replaces proof-of-work. This will limit the amount of computing power and energy used. “The development of [Ethereum] 2.0 is efficient…[it] is intended to offer many benefits [such as] more energy-efficiency and security,” he adds.
He concludes that energy-efficient machines “that can support and sustain the platform without affecting the environment” might even be developed as cryptocurrency and that NFTs are heading toward the path to being more efficient and environmentally friendly.
Peradilla, however, believes the focus should still be on the bigger picture—on the industry giants.
Last 2019, The Guardian reported that only 20 companies have been responsible for a third of carbon emissions since 1965. Pressuring Ethereum and other blockchains to contribute to the fight against climate change helps pave the way to carbon neutrality. Through persistent collective action something can be done about those who inflict the most damage.
