How Are NFTs Bad For the Environment?
13 May 2021
The recent craze of NFTs seems to be growing - but what is their ecological impact, and how can we respond?
Jo Lawson-Tancred
Jo Lawson-Tancred writes about art and the art market for Apollo Magazine, The Financial Times, and The Economist's 1843 magazine, among others. She is also a data scientist, having completed her MSc in Data Science.
Physical representations of Bitcoin and Ethereum.
By Quote Catalog, CC BY 2.0, via Wikimedia Commons.
An original antique, with enough proof of provenance, should speak for itself. When we buy a first edition book or a chair owned by Louis XIV, we know there’s only one, or a few, going and, once we’ve bought it, that only we hold that object in our hands. Those buying digital art have little of the same assurance. As with most things online, digital art can usually be accessed for free anywhere and by anyone. The same jpeg is infinitely reproducible onto screens around the world. Some might wonder, what is even the point of owning a piece of digital art if anyone can have it?
Where there’s money to be made, however, such problems can be solved. The work itself might be duplicable, but by attaching it to a token that is unique or, in other words, non-fungible, an artificial scarcity can be introduced. This non-fungible token, or NFT, is treated as authentic because it is stored in the blockchain, a decentralised digital ledger of records known as blocks. Once a block is on the chain it can’t be changed. Owning an NFT is more or less like owning the original, and pretty much anything could be tokenised, including that Louis XIV chair.
A sudden boom of interest in NFTs means there hasn’t been much time to iron out the details and you have to read the small print to work out what collectors are actually buying, which is not the artwork itself but ‘metadata’ linking to the artwork file. Owning an NFT doesn’t necessarily grant the owner the rights they might expect, in some cases only the right to “claim” ownership.
Meanwhile, though it would be naive to suggest that NFTs exist primarily to benefit digital artists, they have been justified on the grounds that they allow independent artists to bypass gallery representation and receive resale royalties from the secondary market. In a few cases, however, opportunists have stolen and tokenised their work.
Of all the debates and uncertainties over NFTs that have broken out online, and in pub gardens, the fiercest and most urgent is surely the threat of environmental destruction. Though many in the art world are eager to defend the importance of their trade, in the age of climate crisis and mass extinction it is hard to weigh any art market benefits against this ecological cost.
The problem arises because NFTs are bought and sold using the cryptocurrency Ethereum. The coins are mined by computers solving puzzles, an action known as ‘proof of work’. As more coins are mined by more people with more powerful computers, these puzzles get more difficult to ensure a steady rate of new coins. Over time, more energy must be used or, rather, wasted to obtain this proof of work. Ethereum’s annual carbon footprint is currently 19.76Mt of CO2, roughly equivalent to Bolivia’s, and unless something changes this number can only rise.
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Jack Dorsey, founder of Twitter, sold his first tweet as an NFT in March 2021 for $2.9 million.
In much the same way as coins are mined, NFTs are ‘minted’. One online calculator cryptoart.wtf, by artist Memo Akten, estimated that the average NFT uses more electricity than an EU citizen does in one month. Akten closed the site after these results were used to harass artists. In its place, carbon.fyi is run by carbon reduction company Offsetra. Co-founder Brendan McGill says artists considering making NFTs should ‘worry about their brand first - does associating yourself with an energy-hog like Ethereum align with your art and your ethics? If you are a strong believer in blockchain or NFTs, then maybe.’
He adds, however, that ‘boycotting and attacking NFT artists and NFT platforms will never reduce Ethereum’s emissions, because NFTs are a very small portion of the total value of Ethereum. Why do I say total value? Because value is what motivates miners.’ The effect of minting NFTs on Ethereum emissions is pretty indirect, therefore, compared to say driving or flying. For this reason it is tricky to work out their exact contribution to emissions, but this doesn’t make them guilt-free. NFTs still rely on mining and it can be argued that the fanfare surrounding NFTs is a ruse to seduce more people into mining and trading cryptocurrencies, so upping their value and lining the pockets of early investors at the expense of the planet.
Possible solutions have been put forward. Alternatives to proof of work, like ‘proof of stake’, the proof required by the long-awaited Ethereum 2.0, would radically reduce energy consumption. Instead of solving puzzles, people could mine coins based in part on how many coins they already hold. Until this actually happens, however, it’s a hypothetical that helps crypto enthusiasts ward off criticism.
Other proposed solutions include using renewable energy sources or carbon offset schemes, which can provoke some scepticism. McGill suggests dedicating a share of revenue from NFTs towards ‘pro-climate finance’, that could fund projects like protecting forests, ‘landfill methane capture, renewable energy installation, fuel substitutions and biochar’.
So far, no green alternatives have been widely adopted, but if enough people shout about the problem this may change. Nifty Gateway, one of the primary platforms for trading NFTs, has responded to criticism by pledging to go carbon negative this year via offsetting. It is too early to know how effective measures like these will be, or even whether the hype over NFTs will survive long term. What is clear, however, is that the stakes are high and we are already running out of time.
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