The ecological impact of NFTs

Here we are… NFTs are becoming more and more mainstream! Many internationally renowned artists are starting to sell their albums as NFTs, other artists are linking their physical work to NFTs from the perspective of selling them more easily on dedicated platforms such as Makersplace, Nifty Gateway, SuperRare, or Known Origin.

But with the popularization of NFTs certain questions have arisen that have not always been foreseen by artists, users or even developers and recently a debate has started regarding what the ecological impact of NFTs could be for the planet.

The question of ecological impact in blockchain and more precisely of the electricity consumption generated by blockchain using Proof of Work, isn’t new and so it’s not really surprising this question is being asked today in our, no longer so small community! It’s hard to ignore the criticisms leveled at the industry over all, which in less than ten years has seen the need of miners to move from computers to dedicated machines in huge warehouses, comparable to the data centers of Google or Facebook.

Difficult to ignore but by putting things into perspective, certain points put forward by Memo Akten and Joanie Lemercier are still best viewed in hindsight. The initial intention was to raise a debate around the ecological conscience of the users and actors in the NFT space but also to look at the political convictions which surround this new Universe.

Because that’s obviously what we’re talking about here: On the one hand, prevent worsening the disastrous consequences of globalization policies on the planet and not fall back into the trap of neoliberalism, the social consequences of which are well established.

Except that to achieve this, banning is not the right option. It never has been. Even less in the crypto space because it is based on two fundamental principles: censorship resistance and consensus. 

So rather than wanting to enter into an open war by making the actors of this ecosystem feel guilty which will end up leading to a sterile debate at best, let’s think together about the solutions that we can provide to build the world of tomorrow whose digital aspect will be part of our everyday life, no matter what.

A fallacious methodology?

First of all, there is something particularly disturbing about these articles. We have read statements such as: “a transaction costs XXX in CO2”. Stop. The power consumption of miners only comes into action when writing transactions to a new block!

To be more precise: As the blocks are generated ‘automatically’, approximately every 15 seconds or so, the comparison with the emissions from taking a plane journey does not hold. This is because even if it’s possible to leave the ‘planes’ on the ground (and we could see during the first confinement that this was not the case for lack of available places in the airports) it is not possible to stop a PoW blockchain ‘by design’.

Whether for a simple or complex transaction, NFTs are in a kind of waiting room called a “mempool” and these mempools only require the power consumption of the very node that receives it! Making the user feel guilty by saying “your NFT transaction will cause planetary catastrophes” is simply not true! As the size of each block is limited, the number of transactions that can be contained in each block is also constrained.

If the miners decide to turn on more machines to find new blocks it’s not because the number of transactions are increasing but because the price of Ether is increasing and therefore makes the block reward more attractive.

So yes for the moment to have a good ecological conscience by creating NFTs, the only solution is to use a Proof of Stake system and recently Vitalik Buterin is trying to speed up  the process of this transition for Ethereum. But since he will not do this at the expense of network security, it is taking time.

In his article on Medium, Memo Akten specifies that it is a question of the estimated carbon footprint and at the same time recognizes that his methodology is not intended to be scientifically approved but rather to raise awareness that the system of Proof of Work is energy intensive.

A green paradox

So yes, thank you for the reminder Memo! We are certainly all aware that our planet is experiencing global warming, worrying rising waters and we have created a continent worth of plastic in completely artificial ways. But is this a good reason to be so vigorous in this anti-blockchain (and not necessarily anti-NFT) lobbying by believing that the community of crypto-artists have no ecological conscience? What if it was the other way around?

Offsetting

In an article by Everest Pipkin, the issue of “offsetting” is approached as a hypocritical way to take green credit with the planet and buy yourself a clear conscience. What is offsetting? To give an impression: it is the idea of planting a number of trees equivalent to our carbon footprint to compensate. If this idea seems hypocritical it is because the argument against this practice is to consume less and plant more trees, not to consume more and to plant more.

Not everyone wants the choice of an absolute decrease to the point of eliminating all computers and electricity on the planet, but at the same time everyone is aware that something must be done to limit the risks and create harmony. Offsetting is a practice of “risk reduction“, a balance somewhere between risk 0 and the excessive pollution of the planet. Why has this solution increased popularity over time? Probably because one of the big concerns today with companies and associations that offer the offsetting service is that no one can verify where the funds they collect for this type of operation actually go.

“Blockchain fixes this”: The question of trust is fundamental to any blockchain player and often the phrase “any project is a scam until proven otherwise” is true. Anyone today who wants to check in a tamper-proof way where funds really go or how a particular choice of action is voted for has good reason: we are talking about public policy here, what could be more normal than everyone able to openly access this information? 

This is exactly what the Offsetra project proposes: to put $DAI in receivership so that the interest generated in this way will be donated to ecological projects. It is also that of NFTree which aims to raise awareness on the one hand about the ecological issue while using an eco-friendly blockchain (CROWN).

Renewable energy

Equally important is the issue of renewable energy by miners. Here too, it’s a balance between consuming 0 and running the old machines at full speed to try to find a new block.

Trying to determine the carbon footprint with a simplistic calculation to create a sensation is once again, not a good method to convince the actors who will be able to make a difference. Why? Because the miners who responded to the Cambridge University study must remain in good faith until their power consumption can be verified on the blockchain.

Overall, the renewable energy estimate is around 40%, but a closer look shows that mining farms mainly mine…Bitcoin.

It has been shown more than once that the ecological impact of Bitcoin transactions (or here) is not proven, so we won’t go into it here.

Knowing that the majority of NFTs are minted on Ethereum, let’s go even further into this study to find out which resources South America mainly uses as a source of energy.

But before claiming victory over the use of South America’s hydropower, it is important to remember a very important point: the impact of giant dams which is an ecological disaster on the forest ecosystem in this region of the world. We could also question the efficiency of solar panels, particularly because of the maintenance required so that the collection of the sun is not disturbed by dust.
We note that oil is also mainly used, but is this a surprise in a region which has one of the most important oil reserves on the planet? 

No perfect solution?

One solution would be that everyone puts down their weapons, we sit down and we think rather than continuing to bicker over problems which should unite us rather than divide us.

Individual empowerment is the cornerstone of global change since the only real power people have today are their choices as consumers. The term “consume actor” has been appearing for a few years now and it is not surprising: in our time when money is king only the final purchase decision acts as a vote to encourage the companies or individuals behind a product sold.

To those who still doubted it, NFTs are indeed the realization of the oldest dream of *libertarianism: turn the world into an asset and put it up for sale on a free market. Some will find it terrible, others will find it a major development in our society. 

“Terrible” because we have seen the consequences of an unregulated market made available to limitless liberalism. Terrible because of unlimited monetary creation to reinforce the organizations which were responsible for these financial and economic crises. 

The fears are therefore justified to see a new market appear where, freely, everyone can upload GIFs, real estate or videos. Maybe history will repeat itself in a worse way than before…or maybe not.

The solution of using a public blockchain not only makes it possible to have a general ledger searchable by anyone but also to automate complex processes. The issue of transparency is essential for fraud to decrease, but above all for the distribution of wealth and resources to be distributed more equitably. If we trace the problem back to its source, the origin lies in an elite which uses its influence to escape punishment and deepens social inequalities in this way.

This is exacerbated by the problems related to climate change and the gap between rich and poor was further widened in 2020 because of global lockdowns… Starting from this point, is it not an ethical problem to accuse all the ills in the world are due to artists who have been deprived of their main income over lockdown and have used NFTs to try to make a living?

NFT and blockchain are a technological tool

It is important here not to get the wrong enemy and to use blockchain for what it really is: a technological tool. Like any tool, it is how you use it that will determine its positive usefulness or not.

The criticisms around the ecological impact of the PoW are already known and the actors have been trying for years to reduce their carbon footprint. If this industry never gives up on this technology, it is because it is convinced of one thing: it will change the world.

If the goal is to get to ETH2 faster, it can start with rounds on Gitcoin to encourage web3 developers. It can also be to donate the profits obtained from sales directly to reliable NGOs or even ask for more creations linked to political, social and ecological causes.

Blockchain education for the population must continue and to be fully effective, the next steps to avoid repeating the mistakes of the past is on the one hand in raising awareness (and not blaming) users but above all around activism against the use of private and centralized blockchains.

With widespread use of blockchain, it will be possible to have reliable and above all tamper-proof data in almost all industries. Whether in the course of a supply chain, the energy consumption of individuals or companies or even fraud by those responsible for climate change.

Full ownership of its assets should not be called into question because allowing central agencies to have too much decision-making power would amount to the same pattern of deviations that have brought us to this situation that we see today. Rather than saying “don’t create any more NFTs”, it would be better to encourage crypto artists who are successful in helping initiatives to reduce pollution.

Accountability is the dissemination of objective information so that everyone can make an informed choice and certainly not belittling by judging the choices of others without knowing the liabilities of the individual!

*The definition of libertarianism and libertarian in this article is established according to the French definition of the term.