ARE NFTS BAD FOR THE ENVIRONMENT?

NFTs have long been criticized for their environmental impact, and with good reason. However, due to recent updates to the Ethereum network where most NFTs are minted, the situation has changed drastically.

While NFTs have certainly gotten cleaner and greener on Ethereum, Cardano, and Solana, not every blockchain is quite so eco friendly.

Let’s take a look at the current and past relationship between NFTs and the environment.

How Do NFTs Affect Climate Change?

NFTs do not affect climate change. However, in the past, they had a staggeringly large carbon footprint due to Ethereum’s reliance on Proof-of-Work consensus mining.

NFTs affect climate change by using up energy via their minting, storage, and sale. The energy used creates CO2 and other greenhouse gas emissions, which are key parts of man-made climate change.

It’s estimated that around 78% of NFTs have been created on the Ethereum blockchain, and while things have gotten a lot cleaner for ETH post-Merge, the damage already done is serious.

However, it’s important to make some distinctions about “pre” and “post” Merge NFT energy usage.

Pre and Post Merge NFT Energy Usage

In the past, systems like Ethereum used a staggering amount of electricity because of their blockchain consensus protocol’s work.

To simplify, the previous Proof-of-Work consensus protocol required a massive amount of energy to validate transactions within the chain. This meant that minting, storing, and trading NFTs required a huge amount of energy and therefore created a huge amount of CO2.

For example, before 2022, the Ethereum chain used about 93.98 TWh per year, which is the energy usage of a modern, developed nation.

But on September 15, 2022, Ethereum completed “The Merge,” which moved the consensus protocol from Proof-of-Work to Proof-of-Stake. This drastically reduced its energy consumption to about 0.0026 TWh/yr (according to Ethereum itself).

Clearly, this means that, as it stands, NFTs are a lot cleaner and more efficient than they used to be. However, that doesn’t mean that they aren’t still damaging to the environment, albeit to a much lesser degree, or that the damage already done isn’t horrendously bad.

Is Cryptocurrency Bad for the Environment?

Yes, proof-of-work crypto is bad for the environment in three key ways.

Firstly, by 2022, Bitcoin mining alone is estimated to have caused 0.1% of greenhouse gas emissions, which is a massive contribution in a very short space of time.

Secondly, a lot of that energy comes from non-renewables or coal-fired electric plants that are enormously harmful in their own way, releasing huge amounts of emissions into the atmosphere.

Finally, crypto creates an enormous amount of physical waste in the form of burned-out computer hardware which is used in mining, minting, storage, etc. Eventually, this hardware will be replaced by newer hardware made of things like cobalt, lithium, and palladium, creating a new layer of environmental impact.

Lots of developers are indeed trying to find more efficient systems like renewable energy consumption and cleaner mining operations, but as it stands, crypto is very harmful to the environment in a largely unnecessary way.

This does not apply to proof-of-stake cryptocurrencies like Ethereum.

Does NFT Cause Carbon Footprint?

In 2021, the Ethereum Proof-of-Work minting process meant NFTs would have a massive carbon footprint. Today, there is essentially no carbon footprint associated with NFTs minted on Ethereum. According to Memo Akten, who conducted analysis on 15,000 NFTs, on average, each NFT had about the same carbon footprint as an EU household over the course of 1.5 months.

Now, with the new Proof-of-Stake approach, NFTs could be between 95-99% more efficient and have a much smaller carbon footprint.

While modern NFTs are much cleaner, they still have a carbon footprint from secondary and tertiary sources but these are much harder to quantify.

How Much Electricity Does One NFT Use?

It is hard to say exactly how much electricity a single NFT uses because different chains have different electricity needs, and NFT usage can include a host of other services and transactions.

Minting, transfer, bidding, and sale all use up electricity, and when they get combined, it starts adding up.  

It’s been stated that the average energy usage of an NFT on the Ethereum chain is around 260 kilowatt-hours of electricity. That’s about nine days of electricity for an American household.

Over time, this was lowered to about 30 watt hours per mint, and now, post-merge, is likely even lower again.

While Etherum is where most NFTs are created, there are, of course, other chains. On Solana, for example, the average NFT uses the same energy as about three Google searches, and over at Cardano, NFTs use even less energy than that.

However, it’s not all good news. 

Some have pointed out that the creation and rise in popularity of Bitcoin Ordinals, which actually inscribe NFTs into the Bitcoin blockchain itself, is incredibly energy inefficient.

What Are Two Disadvantages to NFTs?

NFTs and crypto at large are considered to be extremely volatile asset classes. The entire crypto ecosystem can go through massive upsets or spikes in very short periods of time.

We saw through late 2021 and 2022 how bad things can get, and NFTs got the worst of it. It’s been estimated that NFTs lost, on average, 80% of their value, which is a staggering collapse.

While there are early signs of crypto recovery, many NFT investors were burned, and the sector as a whole is a long way from recovery.

Are NFTs Damaging the Environment?

No, NFTs are no longer damaging the environment when minted on proof-of-stake chains like Ethereum. However, proof-of-stake chains still exist that mint NFTs, and these consume energy and create a carbon footprint.

Are NFTs Money?

NFTs are digital assets. Like many digital assets, it has always been difficult to convert NFTs to spendable cash due to the nature of the crypto industry, which has often been criticized for being unfriendly to users.

At CryptoWallet.com, we’re launching a card that supports direct spending on over 800 cryptocurrencies, more than 15 times the supported cryptos of any competing card, many of which don’t offer direct spending.

If you’re interested in spending crypto as real money, you can join the whitelist for the CryptoWallet.com card launching in 2023 here.