Just as we’re finally getting a handle on what exactly cryptocurrencies are and how they work, a new crypto cousin has emerged. Enter non-fungible tokens (or NFTs). And, unfortunately, the environmental impact of NFTs isn’t pretty. But before we dive into that, first comes NFTs 101.
Simply put, NFTs are unique digital tokens that—through a series of computer transactions—give someone ownership of a piece of art, like a video, song, or image. Traditional cryptocurrencies, like Bitcoin, are identical and can be exchanged with each other. NFTs, on the other hand, represent unique pieces of digital art. (Similar to how you could easily convert a $20 bill for two tens, but couldn’t trade a Picasso for a Monet.)
The market for buying and selling NFTs is rapidly expanding. Especially because of COVID-19. “The pandemic has increased the amount of time people are spending online, making digitally native products like NFTs more attractive, as we’re living digitally now more than ever before,” Aubrey Strobel, head of communications at Lolli, a Bitcoin rewards app, told Bankrate. Just this week, a collage of futuristic illustrations sold for $69.3 million—the third-highest price received by any living artist.
Clearly, there’s serious money at play. And the non-virtual art world is taking note. Artists with a previous track record of work are beginning to create NFTs, and renowned art auction houses like Christie’s are hosting sales. Increasingly, it looks like NFTs are a new component of the 21st-century art world.
Environmental Impact of NFTs
NFTs share one harmful trait with their cryptocurrency cousins: they both use a ton of energy. Bitcoin ‘mining’ already generates 38 million tons of CO2 per year, more than the carbon footprint of Slovakia. And a 2018 study published in Nature Climate Change found Bitcoin emissions alone could raise Earth’s temperature by two degrees.
To put all of this into perspective, the daily carbon footprint of Bitcoin is the equivalent of watching 57,000 hours of YouTube videos. And, its daily electricity usage is equivalent to the amount of power an average American household uses over the course of 25 days. The environmental impact of NFTs is similar, as it uses energy-intensive computer transactions to authenticate and sell the art.
Shidan Gouran, co-founder of Gulf Pearl, a merchant bank in the blockchain sector, gave Digiday another powerful comparison: One cryptocurrency transaction uses as much energy as more than 700,000 Visa transactions. “Even if you take away carbon emissions, if we move Visa to the same system as Bitcoin, you would still heat the planet up by more than one-and-a-half degrees,” he said. “Just the heat that the system would create would be unsustainable.”
There remains debate about how much of this electricity can be derived from clean energy sources. Many ‘mines,’ consisting of computer terminals, have popped up near hydro-electric dams to take advantage of the lower electricity prices. But in a world where most energy production is still derived from fossil fuels, critics say cryptocurrency and NFTs will continue to contribute to global warming if change doesn’t happen soon.