In March 2021, Christie’s hosted the sale of the first exclusively digital work of art: Everyday: The First 5,000 Days by Beeple, which sold for a staggering $69 million. Although the platform was already familiar with crypto-art and NFTs (such as with Robert Alice’s Block 21, which included both a physical painting and an NFT), this was a record-breaking first for many reasons.

Christie’s certified the sale as the most expensive work of art sold online, the third highest-priced work of art for a living artist. However, it also ignited significant controversy surrounding the environmental costs of each NFT sale. 

Understand what an NFT is, learn about their impact on the environment, and what solutions exist to address these issues and help make NFTs more sustainable.

What Exactly is an NFT?

NFT is short for Non-Fungible Token. It is a unique, non-interchangeable unit of data stored on the blockchain, similar to cryptocurrency.

The primary difference between an NFT and a standard cryptocurrency is fungibility. Crypto-coins are fungible: Each unit has the same value and is, therefore, interchangeable with one another, regardless of its origin. Fungibility is the basis of all currencies. 

For example, even though two $1 bills may each possess a unique serial number (making them different objects), they have equal value (1 US dollar). This equality makes it possible to trade one for the other at no loss.

NFTs are non-fungible, making them non-interchangeable with each other. The main purpose of an NFT is to serve as proof of ownership, using blockchain technology to provide a public record.

NFTs frequently represent objects, such as art, assets, or even tweets. They are the digital equivalent of a unique collectible. The relationship between the NFT and the asset they represent is similar to valuable trading cards; you own a unique, approved representation of that asset, but not necessarily the asset itself.

Some NFTs even take advantage of other technologies (e.g., augmented reality, geotagging) to increase the sense of exclusivity and give their ownership additional prestige. Geotagged NFTs can be exposed in virtual or augmented reality galleries, a practice that has recently become highly popular.

Why Are NFTs So Controversial?

Most of the controversy surrounding NFTs comes from the underlying technology employed to facilitate their sale. Like cryptocurrency, NFTs depend on the blockchain, a notoriously energy-hungry technology. Most creators selling their NFTs use the Ethereum blockchain (the same as the one used for ETH currency).

Ethereum secures the integrity of each transaction using the proof of work system. The system essentially relies on powerful computers using some of their processing power to solve unique puzzles, spending a specific quantity of energy in the process. 

According to London-based technologist Memo Akten, a single NFT sale costs approximately 82 kWh on average to resolve and record into the blockchain, releasing emissions equivalent to about 48 kilograms of CO₂(48 kgCO₂). However, the sale of an NFT can involve more actions than simply selling. Placing a bid, canceling a bid, transferring ownership, or minting a new NFT all have different costs. 

By accounting for these actions, Akten estimated that the average NFT has a footprint of approximately 340 kWh and 211 kgCO₂. These numbers are equivalent to about one month of electricity in a European household or about 621 miles of driving in a gasoline-powered car.

What Are The Solutions?

In May 2021, French digital artist Joanie Lemercier canceled the release of six upcoming crypto-art pieces after calculating that the energy costs involved amounted to approximately 8.7 MWh, enough to power his studio for two years.

Artists such as Lemercier are pushing for greener, more sustainable alternatives to blockchains relying on the proof-of-work system. One of the most promising options today is proof-of-stake.

How Proof-of-Stake Works

Blockchains secured using the proof-of-stake method do not require computers to expend energy and processing power. Instead, they rely on a staking method: Pledging a specific number of coins to verify transactions. You cannot trade using staked coins, but you can un-stake them to free more coins for trading.

Proof-of-stake validates transactions based on how many coins someone holds. The more coins you have, the more you can mine or trade. This transaction verification method requires significantly less processing power and, in turn, has a much smaller energy footprint.

However, some cryptocurrency experts consider the proof-of-stake method to be flawed due to the nothing-at-stake problem.

Currently, only a small number of cryptocurrencies use proof-of-stake. Although Ethereum has announced it will switch to proof-of-stake by 2022, other major cryptocurrencies (like Bitcoin) are not expected to make such changes.

The Future of NFTs

Even though NFTs are among the most controversial tech subjects of 2021, digital artists believe that NFTs, crypto-art, and blockchain-based methods of selling and trading art are here to stay.

As the crypto world adapts and matures, the number of eco-friendly alternatives to proof-of-work systems will also increase, helping crypto-art become more sustainable and environmentally friendly.

photo credit

https://www.pexels.com/photo/close-up-view-of-a-golden-coin-315788/