NFTs have exploded in popularity in the past year, with sales increasing by 1,700% between December 2020 and February 2021 alone (Nonfungible.com, 2021).
This uptake in digital art has led some artists around the world to earn millions of pounds just from selling one single image.
But what makes crypto art worth this much money? Basically, each piece holds a unique string of code, allowing someone to take ownership of it, and making it more valuable than your bog-standard online image.
There is, however, a dark side to NFTs.
These collectables are partially responsible for the enormous amount of emissions generated by the cryptocurrency industry. How exactly can images on the internet cause so much environmental damage? Scroll down to find out.
What is an NFT?
NFT stands for ‘non-fungible token’ – a fancy phrase that basically means it’s unique and can’t be traded for something else, unlike regular money or various cryptocurrencies.
Most NFTs are part of the Ethereum ‘blockchain’ (another technical word, describing a system that records information in a way that is difficult to alter) and are paid for in Ethereum, which is the second-largest cryptocurrency.
These digital images can depict absolutely anything, and will usually sell for thousands – if not millions – of pounds. Twitter CEO Jack Dorsey even sold an image of his first tweet for £2.1 million, and the unique edition of the Nyan Cat GIF sold for £428,000.
One of the most profitable NFTs so far was created by digital artist Mike Winkelmann in March 2021. He sold a digital collage of 5,000 artworks, titled “Everydays: the First 5,000 Days”, for £50.5 million at Christie’s auction house.
Although the code behind these images is unique, artists retain the copyright over their work – even after it’s sold. On top of this, other people can still copy and paste the artwork or simply download it for free.
For collectors, NFTs are an investment – just like physical art. For others, however, buying an NFT is simply a status symbol.
Are NFTs bad for the environment?
Yes. Although NFTs are literally just images on the internet, they rack up a lot of emissions. In fact, the average NFT generates 211 kg of CO2, compared to an average of 2.3 kg for a piece of print artwork.
In other words, NFTs release 92 times more carbon emissions than a physical piece of art.
To put this into context, we’ve compared the average carbon emissions of an NFT, a piece of physical art, and driving a car for 100 miles in the graph below.
https://flo.uri.sh/visualisation/7853291/embed?auto=1
As you can see, the amount of CO2 released when generating and storing an NFT is significantly higher than driving 100 miles. In fact, the sale of a single NFT is the emissions equivalent of driving the length of England (from the tip of Cornwall, all the way to Newcastle).
Where do NFT emissions come from?
The size of an NFT’s carbon footprint comes down to the amount of energy it takes to power the whole process.
We only need to look to French digital artist Joanie Lemercier to put this into perspective. The artist cancelled his submission of six works after calculating how much energy it would take to sell them. In total, the NFT sale would use enough electricity to power Lemercier’s entire studio for two years in just ten seconds.
But the logic behind this is a little more complicated than simply ‘using a lot of energy’ – and it comes with lots of confusing words, so bear with us.
Proof of work vs proof of stake
There are two popular blockchain consensus tools used with cryptocurrencies, which make sure that transactions on a blockchain are legitimate:
- Proof of work (PoW) – This system involves a function called ‘mining’, which is when energy-intensive computers take turns guessing the combination to a ‘digital lock’ (a long string of random digits). The computer that correctly guesses the combination wins a reward, which is paid in a cryptocurrency. The digital lock resets roughly every 15 seconds, and the competition continues. On top of this, PoW only allows users to validate transactions if they own a large enough percentage of the network’s computational power, encouraging people to use more energy to gain more power
- Proof of stake (PoS) – This is when a validator (someone who is responsible for verifying transactions on a blockchain) keeps a certain value of their own possession of cryptocurrency as collateral – referred to as their ‘stake’. The algorithm periodically rewards one of the validators with the privilege to create the next ‘block’ in the blockchain
Most major cryptocurrencies are built on a proof-of-work system, which consumes far more energy than a PoS system. By having these computers running constantly, some crypto companies are consuming huge amounts of electricity, which then leads to a high level of emissions.
Just how bad is proof of work? The annual electricity consumption by Bitcoin (the largest PoW blockchain) accounts for an estimated 0.6% of global energy usage.
Who are the worst offenders?
Finding out the exact carbon footprint of each NFT is quite difficult, since there are several steps involved and very little research has been carried out on emissions during each stage.
What we do know is that Ethereum is one of the highest-emitting NFT platforms, so any images purchased through it will have large carbon footprints. And unfortunately, most NFTs are part of the Ethereum blockchain, which uses a PoW system and churns through about 31 terawatt-hours (TWh) of electricity per year – about as much as the whole of Nigeria.
One popular NFT, ‘Space Cat’ (a GIF of a cat in a rocket, heading to the moon), is generated and stored by Ethereum, and has a carbon footprint equivalent to an EU resident’s electricity usage for two months.
In comparison, digital artist Akten analysed 18,000 NFTs and found that the average image produces the equivalent emissions to a month’s worth of electricity for someone living in the EU.
Is anything going to change?
NFTs don’t have to be this bad for the environment.
As we stated earlier, the main reason behind NFTs’ large carbon footprints is the various blockchains using a PoW system.
One alternative to this is to swap to a PoS blockchain – a system that doesn’t rely on massive computing power, and therefore consumes far less electricity.
According to Tezos, a popular PoS blockchain platform, the estimated annual energy consumption of its blockchain is 0.00006 TWh, compared to Ethereum’s 33.57 TWh.
Earlier this year, Ethereum stated that it was just ‘months away’ from shifting to a proof-of-state system in a bid to cut down emissions, but nothing has been implemented so far.
Summary
NFT platforms are generating more electricity than entire countries. And when so many people around the world still don’t have access to reliable electricity – whilst others are already feeling the effects of climate change – is this really what we should be prioritising?
Thankfully, there does seem to be a push for more sustainability in the crypto world, so hopefully we can see an increase in renewable energy and a decrease in emissions in the near future.
