The massive amounts of energy that blockchain networks use are frequently covered in the media. In recent years, there has been a rise in the number of people using the internet for banking and other purposes (Pepi, 2022). That raises the issue, then: Are NFTs harmful to the environment? Continue reading to learn the results of our study.
IMPT – The Most Eco-Friendly NFTs
Overall, we discovered that while some NFTs and crypto assets may be harmful to the environment, this isn’t always the case. For instance, the recently launched project IMPT made contributions to green causes via its ecosystem of carbon credits.
How NFTs May Have Negative Environmental Effects
Re-evaluation is essential in all of your life’s decisions (ER, 2020). We examine how NFTs harm the environment in much more detail in this section.
1. NFT Transfers
Let’s first discuss why a blockchain network and high transactional throughput are necessary for NFTs. This will contribute to resolving the question of whether NFTs harm the environment.
- When a new NFT is issued, that is the first transaction that takes place.
- This phrase describes the production of a fresh NFT on a certain blockchain.
- The transaction will be added to the recently created NFT on the network, and miners will verify it.
Transaction fees, which are paid by the person who mints the NFTs, are paid to miners, as we will discuss momentarily. Even though, as we have proven, the vast majority of NFTs are Ethereum-based, this can and will vary significantly depending on the network.
The provider will send the non-fungible token to the user’s wallet when the user purchases an NFT from an online marketplace. This will need yet another blockchain transaction that needs to be verified by a miner.
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2. Pre-Ethereum Merge
The bulk of NFTs run on top of the Ethereum blockchain, as we briefly mentioned before. When trying to determine how NFTs impact the ecosystem, this is an important factor to consider.
Before its recent merge to proof-of-stake, Ethereum was utilizing the proof-of-work process – exactly like Bitcoin.
Proof-of-work transactions are quite harmful to the environment even though they are incredibly secure and transparent. This is due to how blockchain miners confirm and validate transactions.
3. Post-Ethereum Merge
Ethereum has been working toward becoming a proof-of-stake blockchain for many years. This indicates that the network is considerably more effective, which benefits NFTs.
To validate NFT transactions, Ethereum no longer requires miners to solve extremely difficult mathematical calculations. The proof-of-stake method, on the other hand, provides a considerably more equitable and energy-efficient solution.
The Ethereum merger has since produced a transactional throughput mechanism that is now 99% more ecologically friendly, according to a recent story published by Reuters. As a result, there is no longer a demand for energy resources for minting and transferring NFTs.
Not least because the proof-of-stake system can now expand to more than 100,000 transactions per second, fees have been drastically decreased.
4. Proof-of-Work (PoW) Blockchains
People frequently inquire, “How do NFTs harm the environment?” Usually, Proof-of-Work (PoW) blockchains like Ethereum and Bitcoin are blamed for it. These networks have enormous electrical needs, as shown above. This substantially raises the amount of carbon dioxide produced.
Large amounts of electricity are utilized by the sophisticated computational equipment required for the mining process, which is essential for confirming the production of NFTs. This is because mining is merely a time-consuming procedure for producing a hexadecimal number that is smaller than the block header.
How NFTs Can Be Environmentally Beneficial
Although it is true that NFTs on the Ethereum network still use energy and have transaction costs, there are several projects in this area that are actively trying to improve the environment.
In the parts that follow, we go into further detail about this attitude.
5. Carbon Offsets
With NFTs, the options are essentially limitless. The fact that NFTs can offer a framework to offset carbon emissions is one such aspect that makes it possible for them to be environmentally friendly.
Many nations have put a cap on the annual carbon emissions that businesses are allowed to produce, and the particular allocation varies from one jurisdiction to the next.
A corporation is forced to buy carbon credits if it needs to emit more harmful emissions than the allocation permits. NFTs are among the most effective means of accomplishing this.
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6. Alternative Minting Processes
We briefly mentioned before that a blockchain transaction is necessary when a new NFT is issued. This indicates that the transaction must be verified by miners, which uses energy.
But with cutting-edge minting techniques, there are currently workarounds for this problem.
A whole NFT collection, for instance, can be minted in a single transaction thanks to “batch” minting. For creators who want to mint a significant collection of thousands of NFTs, this will be extremely helpful.
The creators also have the choice of “lazy” minting. The transaction for each token does not require a blockchain movement until a sale is accomplished, allowing authors to mint a new collection of NFTs.
7. Tree Planting
While NFTs can also apply to other environmentally friendly causes, the planting of fresh trees is one such because that is rising in popularity.
In its most basic form, customers can purchase an NFT that symbolizes a tree that the relevant initiative will plant.
You may obtain a thorough overview of the tree-planting process in a transparent manner because the NFT runs on the blockchain.
8. Charitable Donations
Additionally, we came across some NFT initiatives that contribute sustainably to philanthropic organizations. The transaction fees that are generated when NFTs are bought and sold are used to pay for this.
The project may give a portion of the transaction fees it receives to environmental charities. As a result, the blockchain may become carbon-negative, meaning that it benefits the environment more than it harms it.