NFTs are growing in popularity, which means they’re also coming under more scrutiny – especially in terms of their carbon footprint. Are the following statements true? What is the environmental impact of NFT? NFTs do not directly increase Ethereum’s carbon footprint.How Ethereum keeps your money and assets safe an currently energy intensive but it is about to be improved.
Once improved, Ethereum’s carbon footprint will be 99.98% better, making it more energy efficient than many existing industries. Let’s find the answer together.
Don’t blame the NFTs
The entire NFT ecosystem works because Ethereum is decentralized and secure.
Decentralization means that you and everyone else can verify you own something. All without trusting or giving custody to a third party who can impose their own rules at will. It also means that your NFT can move across many different products and markets.
Security means no one can copy/paste your NFT or steal it.
These qualities of Ethereum make it possible to digitally own unique items and get a fair price for your content. But it costs dearly. Blockchains like Bitcoin and Ethereum are currently consuming a lot of energy because it takes a lot of energy to maintain these qualities. If it were easy to rewrite Ethereum’s history to steal NFTs or cryptocurrencies, the system would collapse.
Your NFT Foundry
When you mint an NFT, several things must happen:
- It needs to be confirmed as an asset on the blockchain.
- The owner’s account balance must be updated to include the asset. This makes it tradable or verified as “owned”.
- Transactions that confirm the above need to be added to a block and “immortalized” on the chain.
- The block needs to be confirmed by everyone in the network as “true”. This consensus eliminates the need for a middleman because the network agrees that your NFT exists and belongs to you. And it’s on the chain so anyone can check. This is one of the ways Ethereum helps NFT creators maximize their earnings.
All these tasks are performed by miners. And they let the rest of the network know about your NFT and who owns it. This means that mining needs to be hard enough, otherwise anyone could claim that they own the NFT you just minted and fraudulently transfer ownership. There are many incentives in place to ensure miners are acting honestly.
Secure your NFT by mining
The difficulty in mining comes from the fact that it takes a lot of computing power to generate new blocks in the chain. Crucially, blocks are generated consistently, not just as they should be. They are generated every 12 seconds or so.
This is crucial for creating Ethereum tamper resistance, one of the qualities that make NFT possible. The more blocks, the more secure the chain. If your NFT was created in block #600 and a hacker tries to steal your NFT by modifying its data, the digital fingerprint of all subsequent blocks will change. That means anyone running the Ethereum software will immediately be able to detect and prevent that from happening.
However, this means that computing power needs to be used continuously. It also means that a block containing 0 NFT transactions will still have almost the same carbon footprint, because the computing power will still be consumed to create it. Other non-NFT transactions will fill blocks.
Blockchains are consuming a lot of energy
So yes, there is a carbon footprint associated with generating blocks by mining – and this is also a problem for chains like Bitcoin – but it is not directly the fault of the NFT.
A lot of mining uses renewable or untapped energy sources in remote locations. And it is argued that the industries that NFT and crypto are disrupting also have huge carbon footprints. But just because industries are bad right now, doesn’t mean we shouldn’t strive to be better.
Ethereum is evolving to make the use of Ethereum (and thus, NFT) more energy efficient. And that’s always been the plan.
We are not here to protect the environmental footprint of mining, rather we want to explain how things are changing for the better.
A greener future…
As long as Ethereum has existed, energy-consuming mining has been a huge area of focus for developers and researchers. And the vision is always replaced as soon as possible. This vision is being delivered now.
Greener Ethereum: Eth2
Ethereum is currently undergoing a series of upgrades, called Eth2, that will replace mining with staking. This will remove computing power as a security mechanism and reduce Ethereum’s carbon footprint by ~99.98% 1. In this world, manufacturers pledge funding instead of computing power for network security.
The energy cost of Ethereum becomes the cost of running a home computer multiplied by the number of nodes in the network. If there are 10,000 nodes in the network and the cost of running a home computer is about 525kWh per year. That’s 5,250,000kWh1 per year for the entire network.
We can use this to compare Eth2 with a global service like Visa. 100,000 Visa transactions use 149kWh of energy2. In Eth2, that same amount of transactions would consume 17.4kWh of energy or ~11% of total energy3. That is without considering the many optimizations that are being done in parallel with Eth2, such as roll-up. It could be just 0.166666667kWh of energy for 100,000 transactions.
Crucially, NFT’s Environmental Impact now improves energy efficiency while maintaining Ethereum’s decentralization and security. Much blockchain Others out there may have used some form of staking, but they are secured by a select few distributors, not thousands of Ethereum will be. The more permissions, the more secure the system.
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Important Note: All content on the website is for informational purposes only and is not investment advice at all. Your money, the decision is yours.