Non-fungible tokens unlock endless possibilities for artists, sports persons, clubs, the actors and a lot more. The versatile nature of these tokens makes literally anything possible. Digital versions of any unique product can be minted, sold, traded publicly which opens up a plethora of options to monetize art and other forms of creation. It also has a ton of other benefits including the security, which is provided by blockchain technology, the ease of access that online marketplaces can provide and elimination of forgery and fakes as the entire buying and listing history can be obtained using blockchain. The pros of NFT’s and blockchain are never-ending.
But it has its own set of drawbacks as well. The primary one being the energy consumption and carbon footprint that the blockchain-backed transactions produce.
What is carbon footprint?
It is basically the amount of greenhouse gases- Carbon dioxide, methane, nitrous oxide, ozone and other harmful chemicals that we produce. This contributes to environmental degradation, global warming leading to severe health conditions and depletion in the quality of human life. Reducing our carbon footprint to enhance the quality of our lives cannot happen overnight. It is a slow process that involves taking tiny actions daily to make our tomorrow better.
Now that we know, what carbon footprint is, let’s take a look at how blockchain, NFT’s can lead to severe global warming and long term irreversible environmental damage.
Online transactions based on the blockchain technology require massive amounts of electricity and produce a mammoth amount of greenhouse gases. The main contributor is the process of mining, which requires very high-performance computer systems to solve computational puzzles and produce new cryptocurrency. It is difficult to perfectly understand how much carbon footprint NFT transactions produce as it involves a large series of steps that take place for every transaction.
However, some estimations by Digiconomist reveal that one eth transaction produces around 33.4 kg of carbon dioxide which is approximately equivalent to 74000 VISA transactions. These are just estimates for a single transaction, note that a large number of transactions take place every day which cause immense damage to the environment.
In some cases, the amount of carbon footprint that these transactions leave behind exceed the ones that entire cities leave behind over a period of time.
Now that we know how this harms the environment, is there any solution to improve how art is traded digitally and not produce colossal damage to the environment?
Before we move onto that, let’s understand why so much carbon footprint is produced. It is because every blockchain transaction involves a stupendous network of computers, which need to run and connect to make the transaction safe and secure and that’s how blockchain has been designed to work. It requires a large number of nodes to solve hashes. This is called the proof of work model. The most popular cryptocurrencies- bitcoin and eth use this model to back their transactions. Hence the immense carbon footprint. Proof of work requires all the miners to work towards solving a complex sum and the winner is decided based on the quality of hardware and other energy consuming factors.
Moving towards a proof of stake model can considerably reduce the emissions. It has lower barriers of entry, lower energy and hardware requirements which is a plus. The PoS model makes the use of NFT’s more scalable due to the lower requirements which will allow a larger audience to give it a shot.
Proof of stake decides the winner based on the number of coins that they stake. PoS secures its transactions and keeps the hackers away as it is based on a system where the entire stake of the hacker will be taken away if an attempted malicious transaction has been attempted.
How proof of stake is better than proof of work, and why it might dominate the consensus model game in the future.
Mainly, energy consumption. The energy required to back PoS models is dramatically lesser when compared to the PoW models. This is one reason why even the big names in crypto like eth are migrating to the PoS model with the launch of its PoS Beacon chain.
Centralization- PoW allows centralized organizations to utilize all their devices and generate the highest mining power. This makes it unjust for individuals as they usually never stand a chance to win the crypto mining battle. The PoS model does not allow this and no two forces can combine their resources, which leads to a fairness in the process of obtaining coins.
NEAR foundation has come up with a solution in collaboration with mintbase- Green NFT’s. NEAR protocol has been labelled as Carbon Neutral by South Pole recently. They purchase carbon offsets from South Pole’s climate action projects to neutralize the emissions produced by their blockchain activities. They use the PoS consensus model to further reduce their emissions and build a climate safe marketplace on mintbase which also has other benefits including minimal gas fees. This opens the NFT market to everyone, not just the rich.
The major issue associated with NFT’s is being worked on to produce a viable and safe solution, making the future of NFT’s and cryptocurrency extremely bright. The positives that this brings to the table could possibly outnumber the negatives a few years down the line.
