A beginner's guide on How much energy does it cost to mint an NFT?

Learn about the environmental impact of NFTs and how artists and other users are preparing to offset their carbon footprint.

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The hidden costs of NFTs and their environmental impact

The growing public awareness of global ecological damage and climate change caused by technological advancement has prompted industry experts and artists to question the environmental impact of nonfungible tokens, or NFTs. Despite the extraordinary rise of these types of digital assets in the last year, it is still too early to obtain reliable data on the environmental risks of NFTs. While some figures are emerging, none of this information has been reviewed by outside experts and cannot yet be considered reliable.

Nonfungible tokens are a blockchain-based technology that creates unique and one-of-a-kind digital assets. Photos, videos, and music creations can be digitally copied indefinitely, but blockchain smart contracts ensure that one piece of artwork or video, for example, is the only representation of that item that exists.

Furthermore, the technology enables the user to transact in a trustless environment, eliminating the need for third parties to verify their legitimacy.

These factors make NFTs valuable and are at the root of their rise in various fields, particularly the arts. Their environmental impact has also become a top priority for artists, who have taken a variety of steps to combat climate change and reduce their NFT carbon footprint.

Are NFTs bad for the environment?

Beeple, a digital artist who sold his work "Everydays: The First 5000 Days" at Christie's for a staggering $69 million bid, believes in a more sustainable future for NFTs and has pledged that his artwork will be carbon neutral. He believes he can offset the emissions from his NFTs by allocating some of his funds to renewables, conservation projects, and the development of CO2-reducing technology.

Using a simple tool like Offsetra to help artists calculate their footprint, Beeple could calculate that he needs to contribute $5000 to offset the emissions from one of his collections in order to offset his environmental impact. Beeple and other prominent artists came together to sell carbon-neutral NFTs and raise funds for the Open Earth Foundation. Through art and education, the non-profit organization promotes sustainable development and solidarity.

These funds were used to develop blockchain technology for climate accountability. Each artist and artwork received 60 carbon offsets as compensation for their NFT footprint, resulting in a net positive climate impact.

What is the carbon footprint of an NFT?

While determining the exact ecological cost of crypto art is difficult, various estimates can provide us with an idea of an NFT's carbon footprint. A single-edition artwork on Ethereum, for example, weighs 220 pours (100Kg) of CO2, which is equivalent to a one-hour flight.

Memo Akten, a digital artist, examined approximately 18,000 NFTs and discovered that the average NFT's carbon footprint is equivalent to more than a month's electricity usage for the average European Union resident.

The environmental impact of technology can be traced back to the industrial revolution, when technological advancement facilitated the development of new manufacturing processes. As technology advanced, so did environmental damage, with data centers and crypto mining being particularly hazardous to the environment.

Data centers are a networked computer infrastructure used by companies such as Google and Amazon for remote data storage, processing, and distribution.

When we send an email or a WhatsApp message, our information passes through one of these data centers, which require a lot of energy to run efficiently and cool down the equipment.

Data centers account for 1% of global energy demand. Increased internet usage during the pandemic is estimated to have increased emissions by up to 3.2 million metric tons of carbon dioxide equivalent. To grasp the significance of such an assessment, consider one metric ton as the approximate weight of a car or the amount of CO2 produced by driving from San Francisco to Atlanta.

Each digital process uses energy. According to a NASDAQ research report, the global banking industry, for example, consumes approximately 263.72 Terawatt hours of power per year.

Bitcoin (BTC), on the other hand, consumes slightly less than half of that, despite being the world's most popular but also the most energy-intensive blockchain and cryptocurrency.

Another source of concern for environmental consequences is cryptocurrency mining. It has a similar impact to data centers. While more data has emerged in recent years, particularly around Bitcoin mining, it is not yet possible to estimate the overall environmental impact of blockchain technology because it is dependent on various measures, causes, and processes.

There is a significant difference, for example, between blockchain technology powered by a proof-of-work (PoW) consensus algorithm and proof-of-stake technology (PoS). Later in the article, we'll look more closely at the distinction.

The majority of NFTs are traded and stored on the Ethereum network via the proof-of-work mining process. PoW is the type of consensus algorithm that consumes the most energy, and it is here that climate experts begin to debate the environmental effects of NFTs.

Ethereum is the second most stable and reliable cryptocurrency after Bitcoin for digital artists to sell their work. Furthermore, it was designed to transact data other than cryptocurrency transactions using smart contracts, making it an appealing platform for a variety of applications.

How harmful are the NFTs stored on Ethereum?

Various studies on cryptocurrency energy consumption exist, but the results vary. It is reasonable to estimate that renewables account for between 30% and 70% of cryptocurrency mining, but this is a broad and speculative estimate that is not specifically directed at Ethereum.

Ethereum mining uses less than half the energy that Bitcoin mining does. According to the most recent accurate estimate from 2018, the platform consumes roughly the same amount of electricity as Iceland.

Ethereum appears to consume approximately 44.94 terawatt-hours of electrical energy per year, which is equivalent to the annual power consumption of countries such as Qatar and Hungary. It emits approximately 21.35 metric tons of CO2 into the atmosphere, which is comparable to Sudan's carbon footprint.

Each Ethereum transaction is executed using Ether (ETH) as gas, which is transparently recorded on the blockchain. The gas percentage varies depending on the amount of transaction data, as does the emission impact. Because of the numerous transactions involved in the process, such as minting, bidding, trading, and transferring ownership, NFTs are data-heavy digital items. The transaction transparency enables an easy assessment of an NFT's footprint.

What is debatable is whether NFTs have a significant impact on Ethereum mining emissions or whether they would be generated regardless. NFTs are unquestionably more energy-intensive than a simple money-transfer transaction on Ethereum, and Ethereum mining was already in operation and polluting the environment prior to the creation of NFTs. As an example, consider a plane or train that continues to operate regardless of the number of passengers on board.

On the other hand, as more people create, trade, and store NFTs, an increasing number of energy-intensive transactions must be generated, resulting in an increase in carbon emissions. In essence, it is difficult to determine how much NFTs affect Ethereum transactions and harm the environment.

Proof-of-work vs. proof-of-stake energy consumption

Blockchain technology enables NFT investors to buy, sell, or store digital assets without the use of a middleman. However, these transactions currently necessitate some technological know-how because they may be difficult to execute.

As a result, marketplaces like Opensea or Rarible are popular choices for artists looking for a simple and straightforward experience. However, these and most other marketplaces are built on the proof-of-work Ethereum blockchain, which is inefficient in terms of energy and has generated high fees since NFTs have populated the platform.

Alternatives to PoW blockchains based on the proof-of-stake consensus algorithm have emerged, which consumes 99 percent less energy than PoW blockchains and identifies with more ecological NFTs. However, because they are newer to the market and more vulnerable to being hacked, these blockchains are perceived as riskier.

This is the primary reason why these networks are less appealing to art buyers who want to ensure that their artworks will not vanish or be abandoned one day. Furthermore, compared to their less sustainable counterparts, these platforms do not yet have a significant volume, making it more difficult for artists to buy or sell quickly.

As more artists become aware of other, more energy-efficient alternatives, we may see an increase in the use of these platforms as well as the development of more eco-friendly and transparent marketplaces in the future. To name a few, some of the most popular proof-of-stake chains are Algorand, Tezos, Polkadot, and Hedera Hashgraph.

Ethereum announced years ago that the Ethereum 2.0 upgrade would eventually switch to proof-of-stake. Ethereum's energy consumption would be drastically reduced in this manner, and artists hope that this will happen soon.

Other NFT platforms, such as Flow, use private blockchain technology and are already fully functional. Private blockchains, on the other hand, are highly centralized and deviate from the blockchain concept, which implies that a decentralized system does not require the intervention and trust of an intermediary.

What other steps can be taken to improve NFTs’ carbon footprint?

We mentioned that Ethereum could switch to the proof-of-stake consensus algorithm, which would require much less energy. However, the platform's development team has been working on it for years, but the process has yet to materialize, raising legitimate concerns about this accomplishment.

By building systems on layer two on top of the existing blockchain, Ethereum developers could reduce carbon emissions and costs. Because all transactions occur off-chain, these systems could save a significant amount of energy, implying the eventual phase out of the energy-inefficient proof-of-work mechanism.

For example, Bitcoin's Lightning Network is a protocol built on layer two of the blockchain that is now considered the payment system for Bitcoin. It is scalable and eco-friendly because it does not rely on the base.

For example, Bitcoin's Lightning Network is a protocol built on layer two of the blockchain that is now considered the payment system for Bitcoin. Because it does not rely on the base chain proof-of-work consensus function, it is scalable and environmentally friendly.

Following the example of the Lightning Network process, people or organizations that want to trade NFTs could open a second layer channel to virtually limitless trading until they are ready to settle the total transactions back on the PoW blockchain base layer, or layer one. Instead of engulfing the base blockchain with unlimited transactions, only the net result will be time-stamped on the blockchain, saving a massive amount of data-intensive transactions that will require a significant amount of energy to complete.

Here are some additional steps that can be taken to allow the NFT market to thrive while minimizing environmental impact.

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However, renewables have not yet completely replaced the current power generation infrastructure, and it is not prudent to rely entirely on them. Climate experts and blockchain and cryptocurrency critics argue that renewable energy is still extremely scarce and valuable, and that it could be used for more pressing applications such as heating and lighting.

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