The environmental impact of NFTs is an important subject that deserves serious treatment. Much has been written already about their carbon footprint; the consensus, at the moment, among journalists, artists and collectors, is that NFTs are a net negative for our planet.
However, a close examination of the criticism directed towards NFTs reveals that what critics have in mind when speaking about NFTs is this specific brand of NFTs that relies on Proof-of-Work (POW) mechanisms.
It is a well known fact that NFTs that live and die on Proof-of-Work Blockchains such as Ethereum have a large carbon footprint. This fact is beyond dispute.
In order to mint an NFT on a POW blockchain, a large amount of energy and hashpower are required. The problem is not the NFTs themselves, but the way the POW networks function. The Carbon footprint of a single “POW NFT” is equivalent to more than a month of electricity usage for the average person living in the European Union. The large footprint is due to the multiple transactions involved with NFTs: minting, canceling, auctions, sales and transfers of ownership.
However, to say that all NFTs are a net negative for the environment is a clear oversimplification. Not all NFTs are “POW NFTs”. A growing number of NFT projects are moving away from the Power-hungry Proof-of-Work blockchains; outstanding efforts are being made to create a more sustainable and ecologically responsible NFT ecosystem.
The largest culprit in terms of carbon footprint, the Ethereum Network (a single Ethereum transaction’s carbon footprint stands today at 33.4 kg of CO2, which is equivalent to 74 000 Visa transactions) is switching to a new model that will reduce its energy consumption by 99%. The switch from Proof-Of-Work, which requires the Nodes composing the ethereum network to compete against one another to solve cryptographic puzzles in order to generate Blocks and be awarded freshly mined Ethereum, to Proof-Of-Stake, a more ecological and sustainable way to validate and generate new Blocks, will happen, according to developers close to the project, either at the end of 2021 or in the first quarter of 2022.
This transition will have a stunning effect on the amount of energy spent to mint and transfer NFTs, among other operations. Currently, minting a single NFT creates 48 kg of CO2. Every bid creates 23 kg of CO2, every sale, 51 kg, and every transfer, 30 kg. The transition to Ethereum 2 will bring down the carbon footprint of the average NFT to around 2.11 kg of CO2 – which is the same as mailing a physical piece of art.
At the moment, multiple Ethereum “sidechains” (separate blockchains attached to Ethereum using a two-way peg), and “Layer Two” projects (built “on top” of the Ethereum Network) propose elegant solutions to reduce the carbon footprint of NFTs – either by “batching” transactions together, by minting NFTs off-chain, or by adopting a Proof of Stake model, which does not require Nodes to consume inordinate amounts of electricity to validate transactions and find new blocks.