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NFTs and the Climate Change Controversy

cryptoknowmics.com 12 May 2022 22:42, UTC
Reading time: ~4 m

By now, Non-fungible tokens (NFTs) and their environmental effect must have come up in a conversation of yours. Even while NFTs themselves have no harmful environmental impact, the technologies used to make them have a significant effect on our climate. NFTs are manufactured in a very energy-intensive manner. The majority of NFTs are created using the proof-of-work consensus mechanism, which requires a lot of power. Any operation that uses a lot of energy, crypto or otherwise, contributes to climate change by releasing carbon dioxide into the environment. There are, however, more ecologically friendly methods of minting NFTs, namely methods that use proof of stake.

How are NFTs harming mother nature?

NFTs inherently have little to no environmental impact, but the minting process does have substantial ecological consequences. Let's look at how proof-of-work NFTs are created and why they need so much energy. NFT is listed on a digital marketplace: Typically, before an NFT is issued, it is posted on an NFT marketplace. Listing an NFT does not need a lot of energy, but the platform it is being listed on does have a significant impact on the amount of energy required for the mining process. In the short term, choosing an NFT marketplace like OpenSea, which hosts the Ethereum network based on proof of work, implies the minting process will consume more energy than usual. NFT is acquired: The acquisition of an NFT is frequently the impetus for its minting. The NFT is minted—or "mined"—by cryptocurrency miners with massive processing capabilities via proof of work. Mining is an energy-intensive activity requiring specialized computing hardware that consumes enormous quantities of electricity. Mining is an energy-intensive activity that necessitates specialized computing hardware. Miners race to solve complex math equations as quickly as possible to mint the NFT. NFT is retained or transferred: When your NFT purchase is complete, you can keep it or transfer it to another person. If the NFT is moved to another NFT marketplace that accepts proof of work, the same energy-intensive process used to mint the NFT is utilized again. Simply holding an NFT requires no energy. All transaction on the Ethereum network's proof-of-work platform, including NFT transactions, consumes more than 260 kilowatt-hours of power, which is similar to the electricity consumed by an ordinary US family over 9.05 days.

Is there a solution to this problem?

Because of its decentralized structure, one of the finest features of the blockchain sector is that it is constantly innovating and changing. Solutions to reduce environmental harm are already being developed by the industry. For starters, blockchains are being powered by renewable energy sources, which is still taking place as a result of China's prohibition on coal-burning server farms and the emergence of green alternatives. The second and more pressing alternative is to switch from Proof-of-Work (PoW) to Proof-of-Stake (PoS) (PoS). This model, which Ethereum is seeking to implement, consumes substantially less power since the ledger is protected by users "staking" their own cryptocurrency tokens. As the NFT market grows, artists and environmentally aware collectors put more pressure on platforms to use lower-carbon alternatives and offset emissions. As a result, NFT marketplaces have found answers to artists' and collectors' worries about the environmental impact of their activity. The online markets Superrare and Zora have bought Carbon Offsets. Popular NFT Artist Beeple has also pledged to make all future pieces carbon neutral or negative. Another platform, Offsetra, offers an emissions calculator and sells carbon credits to offset emissions from NFT transactions. Nifty Gateway is now implementing a new system that will allow the firm to mint several NFTs in a single transaction rather than many individual transactions, potentially making its use of blockchain 99 percent more efficient. With these technological workarounds and carbon offsets, Nifty Gateway has pledged to become carbon-neutral within the year. Some NFT markets highlight their environmental friendliness by employing cryptocurrencies such as Tezos. Tezos uses less taxing "proof of stake" algorithms than Ethereum's "proof of work" algorithms, spending substantially less energy overall.

To Conclude

If you want to make sure that your investment portfolio reflects your views on climate change, you should only invest in NFTs that are created using the proof-of-stake consensus mechanism. Despite the fact that it now restricts your buying opportunities, this constraint is most likely transitory. When the Ethereum network has completed its shift to proof of stake, environmentalists will be able to buy NFTs with a clear conscience using Ether (ETH).

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