Are NFTs bad for the environment?? It’s a question that’s been on the minds of many since the craze for these digital assets took off in late 2021. Despite the NFT craze dying down a bit since then, people are still curious about the environmental impact of NFTs and what can be done to reduce that impact.
This guide delves deep into the topic of NFTs and the environment, covering what NFTs are and how they might contribute to climate change. We’ll also discuss ways that investors and developers can combat negative environmental effects, and highlight some of the best environmentally-friendly NFTs of 2022. So, if you’re wondering whether NFTs are bad for the planet and want to make a positive impact, this guide is for you!
NFTs and the Environment: The Basics
Have you ever stopped to wonder if NFTs might be harming the environment? It’s a question that has been on the minds of investors and analysts alike as the importance of combating climate change becomes more pressing.
To truly understand the answer to this question, it’s essential to provide some context. Let’s start by breaking down exactly what NFTs are before diving into how they might impact the planet.
What are NFTs?
Before we can tackle the question of NFTs and the environment, it’s important to understand exactly what NFTs are. Many investors who invest in NFTs may not fully grasp the concept of these digital assets. However, it’s crucial to have a deep understanding of NFTs in order to grasp their potential negative impact on the environment.
According to Forbes, non-fungible tokens (NFTs) are digital assets hosted on the blockchain that represent a real-world object. These objects can be anything, although most NFTs represent artwork. Other types of NFTs include collectibles, GIFs, videos, metaverse avatars, and even music.
The environmental impact of NFTs comes from the fact that they are stored on the blockchain. Each NFT is unique, so tokenizing these assets on blockchain networks is a necessary process that allows them to be easily traded. This process also ensures that the ownership of NFTs can’t be disputed – the NFT holder can easily prove that the digital asset in question belongs to them.
Many of the coolest NFT projects are hosted on the Ethereum blockchain due to its status as a pioneer in smart contracts. However, other chains like Algorand and Solana have started to make inroads into Ethereum’s share of the NFT market due to Ethereum’s high GAS fees, which make the process of trading NFTs relatively costly.
How are NFTs created??
Ever wondered how NFTs are made? It’s actually very interesting! NFTs are built and stored on blockchain networks, which is where things can get a little complicated when it comes to their effect on the environment. It’s not the NFTs themselves that are the problem, but rather the blockchain technology they use (though its changed a lot in the last months!)
The process of creating NFTs, also known as “minting,” is where the environmental concerns come into play. People who want to make some cash with NFTs first have to mint their digital item onto the blockchain. This means taking something like digital art and turning it into a tradeable token. You can mint NFTs through an NFT marketplace or by doing it yourself if you know how to code (which is actually something we will be teaching in the future).
This minting process is the main focus of this article because it’s the source of NFTs’ environmental impact. Now, let’s take a closer look at how the minting process contributes to climate change.
So Can Nfts Be Bad For The Environment?
NFTs might be a hot topic in the digital world, but they can also have a big impact on the natural world. So how do NFTs hurt the environment? Well, it all comes down to the process of “minting.” While the underlying blockchain technology is actually responsible for the environmental impact, NFTs often get the blame.
The Environmental Consequences of NFT Minting
The main reason that NFT minting is seen as harmful to the environment is that it requires a lot of energy. Minting can’t be avoided because it creates verifiable information about where the digital asset is located on the blockchain. Whoever “stores” this information is considered the owner of the NFT, which is why the information is usually kept in a crypto wallet.
When an NFT is minted, a transaction takes place on the blockchain related to the new asset entering circulation. Like all blockchain transactions, the network needs to verify this to make sure everything is accurate. This is where NFTs and the environment intersect.
To keep things simple, let’s use the Ethereum blockchain as an example. Until recently, Ethereum used a process called “Proof-of-Work” (PoW) to verify transactions. This process, called “mining,” has been shown to contribute significantly to carbon dioxide (CO2) emissions. That’s because mining requires advanced computing hardware, and as the size of the blockchain network grows, the need for even more advanced hardware increases.
Aside from Ethereum before the “Merge,” the most widely-used PoW blockchain is Bitcoin. According to The New York Times, the Bitcoin network consumes about 91 terawatt-hours of electricity each year. That’s more than the entire country of Finland uses!
PoW Blockchains and the Environment
When people ask how NFTs can be harmful to the environment, it often has to do with Proof-of-Work (PoW) blockchains like Ethereum (not any more as this chain is now POS) and Bitcoin. These networks require a ton of electricity, which leads to a lot of carbon dioxide production.
The advanced computing hardware used in the mining process, which is necessary for verifying the creation of NFTs, consumes vast amounts of electricity. This is because mining is just a long process of generating a hexadecimal number that is smaller than the block header.
To keep things simple, the important thing to remember is that generating this hexadecimal number takes trillions of attempts – that’s why it’s done by computers and not humans. The process of checking and re-checking takes a lot of electricity, which is why PoW chains have gotten a bad reputation.
The Energy Needs of NFTs
So it’s clear that NFTs minted on PoW chains can have negative environmental effects. That’s why the most environmentally-friendly cryptocurrency projects tend to use different consensus protocols instead of PoW.
But even after an NFT has been minted, there are still energy-related effects. When someone buys or flips NFTs, a blockchain transaction is initiated. Just like minting, this transaction needs to be verified through mining to confirm that ownership has been transferred.
To sum things up, NFTs aren’t actually “bad” for the environment because of the digital assets themselves – it’s because of the energy-intensive process of minting and trading them, which is the responsibility of the underlying blockchain. Now let’s look at how NFTs can be made more eco-friendly.
The Positive Side of NFTs and the Environment
When it comes to NFTs and the environment, people often focus on the negative aspects. But there are also plenty of utility NFT projects that have eco-friendly goals and can actually be good for the environment.
NFTs on Proof-of-Stake (PoS) Blockchains
One way for NFT creators to reduce their environmental impact is to use Proof-of-Stake (PoS) blockchains. These work just like PoW networks in that they allow users to mint, buy, sell, and trade NFTs. The main difference is that PoS networks use much less electricity.
According to Binance Academy, PoS is a consensus mechanism where block validators are chosen based on how many tokens they have “staked.” This means they’ve “locked up” their tokens on the network and can participate in validation.
When a transaction occurs on a PoS blockchain, like when an NFT is transferred to a new owner, a validator is chosen to verify the data. If the validator confirms everything is accurate, the transaction (block) is added to the blockchain. The validator is then rewarded with some of the network’s native tokens for checking the transaction.
So how does this relate to NFTs? PoS uses much less energy than PoW to accomplish the same tasks. Plus, PoS blockchains are more scalable because they don’t require advanced computational equipment.
This means NFT creators and traders who use PoS chains can limit their carbon dioxide emissions. While minting and trading NFTs will always use some energy, using an alternative to PoW makes the process more environmentally friendly and reduces activity on high-energy networks.
Eco-Friendly NFT Projects
Many new NFT projects also have positive impacts on the environment through eco-friendly initiatives. These often go hand-in-hand with the initiatives promoted by the underlying blockchain, creating a positive synergy in the fight against climate change.
One popular example of an eco-friendly NFT project is IMPT. This project is connected to the carbon credits market and aims to slow global warming by reducing or removing carbon dioxide from the atmosphere. The carbon credits in IMPT’s ecosystem are structured as NFTs, which helps improve the reputation of these digital assets.
Another NFT project that’s trying to make a positive impact is the “Cardano Forest.” As the name suggests, this project is facilitated by the Cardano blockchain and veritree, an eco-friendly company that helps businesses take restorative actions.
The collaboration between Cardano and veritree will result in one million trees being planted. People can donate to the project and receive an NFT that acts as a digital record of the donation.
Going Green with Renewable Energy & NFTs!
Another way that NFTs can be good for the environment is by using renewable energy sources for minting and trading. Many eco-friendly crypto projects try to reduce their carbon footprint by purchasing offsets, but using renewable energy sources is less common.
Mining on PoW blockchains is energy-intensive, but it doesn’t have to be. If miners used green energy to power their computing equipment, it would greatly reduce the CO2 emissions associated with the process.
Validators on PoS blockchains can also use renewable energy. While these blockchains don’t require advanced hardware, validators still need to run their validator node on a laptop or PC, which uses electricity.
By using renewable energy sources like solar or wind power, miners and validators can reduce or eliminate their carbon footprint and improve the reputation of NFTs. While these sources aren’t as accessible as non-renewable sources, that’s starting to change, giving network participants more eco-friendly options.
The Best Eco-Friendly NFTs & Blockchains That HELP The Environment.
We’ve talked about how NFTs can be harmful to the environment, and how they can be made more eco-friendly. Now, let’s take a look at some specific NFT projects that are doing their part for sustainability. Here are five exciting projects making a splash in the NFT world for their commitment to the environment:
One project that’s helping the environment is Algorand. It’s worth noting that Algorand is actually a blockchain, not an NFT collection. But it provides a green foundation for creators to mint their digital assets because it’s a top-rated Proof-of-Stake coin that uses a fraction of the energy that Bitcoin does.
According to an Algorand blog post, minting an NFT on their network generates just 0.000000kg of CO2. In comparison, the average electricity source emissions in the US are about 0.50kg of CO2 per kWh. This shows how little energy is consumed by Algorand NFTs.
Another reason Algorand is so environmentally friendly is that the development team is committed to being carbon negative. They’re working with ClimateTrade to use a portion of their transaction fees to buy carbon offsets. This makes Algorand one of the most energy-efficient crypto networks for NFT creators and investors.
Polygon is an environmentally friendly blockchain network that uses a Proof-of-Stake consensus mechanism to validate transactions. As a Layer-2 scaling solution for Ethereum, it’s become a “greener” option for NFT creators who want to avoid energy-intensive processes.
According to Polygon’s Green Manifesto, the development team aims to be carbon-negative by 2022. They’ve also pledged $20 million to various eco-friendly initiatives to fight climate change. These features make Polygon an appealing network for minting and trading NFTs. Although the need for Polygon may have decreased since Ethereum switched to a Proof-of-Stake consensus protocol, the network’s NFTs are still available on many top NFT marketplaces for environmentally conscious investors.
Ethereum 2.0 is the Green Future We Need
Ethereum has always been at the forefront of the cryptocurrency world, and with the recent launch of Ethereum 2.0, it’s taking things to a whole new level. Dubbed the “Merge,” this major upgrade brings with it a host of exciting new features and improvements, including a switch from proof-of-work (PoW) to proof-of-stake (PoS) security mechanism.
But the best part about Ethereum 2.0 is that it’s going green. According to the Ethereum Foundation, the old proof-of-work system used up a staggering 112 Terawatt-hours of energy per year – that’s roughly equivalent to the entire energy consumption of the Netherlands. The Merge will cut emissions by a whopping 99.95%, making Ethereum one of the most environmentally-friendly blockchains out there.
Ethereum 2.0 Brings Simplicity and Speed
The Merge isn’t just good for the planet, it’s also great for users. For starters, it will make the Ethereum network faster and easier to use. Currently, it takes around 13-14 seconds to mine a single Ethereum block. With the new proof-of-stake system, that time will be cut down to just 12 seconds. Plus, Ethereum 2.0 will break up data blocks into smaller chunks, allowing for more transactions to be processed at once.
Ethereum 2.0 is a Win for Everyone
Businesses and consumers stand to benefit from the Ethereum 2.0 upgrade as well. The new fee structure means that users will pay less for transactions, and holders with a certain amount of ETH will be able to “stake” their coins and become validators. Plus, existing apps on the Ethereum network will be able to migrate to Ethereum 2.0 without losing any data or transaction records.
Ethereum 2.0 is a major step forward for the cryptocurrency world. It’s good for the environment, it’s good for users, and it’s good for businesses. With its combination of proof-of-work and proof-of-stake systems, Ethereum 2.0 is set to be the best of both worlds, and we can’t wait to see what the future holds.
Can NFTs be sustainable, eco friendly, energy-efficient and overall GOOD for the environment?
While some may see NFTs as harmful to the environment due to their connection with certain blockchain networks, it’s important to remember that not all NFTs are created equal. In fact, there are plenty of NFT projects out there that are focused on sustainability and making a positive impact on the environment.
One example is the Algorand network, which uses a proof-of-stake consensus mechanism that requires significantly less energy than proof-of-work networks like Ethereum and Bitcoin. The team behind Algorand is also committed to becoming carbon negative and has pledged $20 million towards eco-friendly initiatives.
Another sustainable NFT project is Polygon, which also uses a proof-of-stake protocol and aims to achieve carbon-negative status by 2022. Polygon has also dedicated a portion of its transaction fees towards climate change solutions.
And let’s not forget about IMPT, the carbon credit ecosystem that aims to make a meaningful impact in the fight against climate change. By tokenizing carbon credits and making them accessible to the masses, IMPT is working to reduce CO2 emissions and slow global warming.
So, while it’s true that NFTs can be harmful to the environment if they are minted on certain blockchain networks, it’s important to remember that there are also many eco-friendly NFT projects out there making a positive impact.