The world has been going crazy over non-fungible tokens lately. These digital goodies have totally flipped the script on how we appreciate and get down with art, music, and all kinds of creative vibes. NFTs have straight up taken the world by storm, not only in art but in many different industries as well. And with it came some heated arguments about their impact on Mother Earth.
While it is true that NFTs (originally) guzzle up a bunch of energy when they’re created and traded, we’ve also been overlooking the serious efforts to dial down their impact on the environment. And because of that, our view is all out of whack, leaving folks scratching their heads. Let’s not forget that energy consumption is a big deal across all sorts of industries, not just in the world of NFTs. So, let’s keep the conversation flowing, dive deeper into the issue, and find some harmony in this whole situation.
When did the controversy begin?
NFTs burst onto the scene in early 2021. They became super popular, but that also brought on a heap of scrutiny and side-eye from the public. People started freaking out about the environmental impact and sustainability of this technology after countless negative press coverage.
Then, in March 2021, this art piece called “Everydays: The First 5000 Days” by Beeple got sold as an NFT for a mind-blowing $69 million at a Christie’s auction. That sale made headlines everywhere and got everyone buzzing about the environmental cost of NFTs. See, minting and trading these things requires some serious energy (at the time).
Big shots like Elon Musk, the boss of Tesla and SpaceX, chimed in and raised concerns about the carbon footprint of NFTs and the whole blockchain technology behind them. Musk even pulled the plug on accepting Bitcoin payments for Tesla because of the environmental impact. That took the convo to a whole new level.
All this drama sparked a crazy wave of discussions and debates, with the media going wild and environmental activists and artists throwing their two cents in. They were all raving about the energy consumption of NFTs, trying to save the planet from climate change.
Let’s talk about mining and Proof-of-Work
Alright, buckle up because things are about to get a little confusing, but trust me, it’s worth wrapping your head around.
So, we got this thing called Proof of Work (PoW). It’s a way for blockchain networks to keep everything legit and secure. Miners from all over the world compete to be the next ones to validate transactions and create new blocks. This competition involves solving complex mathematical puzzles using their serious computing power.
In PoW, miners need to show that they’ve put in some serious work to earn the right to add a block to the blockchain. The puzzles get tougher or easier to keep the creation rate steady. This mechanism makes it ridiculously expensive and time-consuming to mess with the system and create fraudulent blocks or alter the transaction history. That’s exactly what makes it so secure.
Long story short, PoW and mining use up a lot of energy. When NFTs hit the big time, people started raising concerns about the crazy amount of energy they use when they’re created and traded. Platforms like Ethereum were using this “proof-of-work” system at the time.
The media talked about all that energy consumption leading to a ton of carbon emissions. Most of the electricity in the world (used by PoW networks and all of us) comes from burning fossil fuels like coal and natural gas, which spews out massive amounts of carbon dioxide and other greenhouse gases.
The move to Proof-of-Stake… is it greener?
Proof of Stake (PoS) is a slick alternative to PoW. Here’s the lowdown:
In a PoS system, validators are chosen to create new blocks based on how many coins they hold and are willing to “stake” as collateral. The higher the stake, the better their chances of being selected as a validator. Validators got a major incentive to play fair because if they try any funny business, they risk losing their precious staked coins.
Now, the cool part is, validators don’t need to sweat over complex math problems or set up massive energy-intensive mining rigs. This makes PoS more energy-efficient compared to PoW, as it doesn’t require massive computational resources to keep the network secure.
Compared to PoW, PoS has some serious potential for slashing energy consumption in blockchain networks. Ethereum switched to PoS in 2022, known as Ethereum 2.0. Why? Because it’s more secure, uses way less energy, and paves the way for new scaling solutions. Ethereum dropped its energy consumption by a whopping 99.95% when it made the switch.
And let’s not forget: Ethereum is a key player in the NFT game. Despite other blockchains getting in on the NFT action, Ethereum still holds the crown for most NFT trade volume. After Ethereum made the move, other blockchains like Cardano, Binance Smart Chain, Polkadot, Tezos, Avalanche, and Solana took notice. They’re either adopting or on their way to transitioning to PoS too.
The shift from PoW to greener consensus mechanisms like PoS has been driven by the desire to reduce the environmental impact of blockchain networks and address concerns about energy consumption. By transitioning to a more environmentally-friendly consensus mechanism, blockchain networks can achieve solid security and consensus without using the same amount of energy as PoW.
What other measures are being taken to reduce environmental impact?
The blockchain world is making serious moves to go green. First off, we got the transition to PoS and other consensus mechanisms like Proof of Authority (PoA) and Proof of Space (PoSpace). These systems slash energy consumption by eliminating the need for energy-intensive mining rigs.
But that’s not all. Blockchain projects are getting creative and rolling out energy-efficient protocols. Take Nano, for example. They’ve got this slick block-lattice structure that keeps transactions super-efficient and cuts out the need for mining altogether.
And to take some weight off the blockchain’s shoulders, many projects are busting out off-chain solutions like state channels and sidechains. These solutions reduce the number of on-chain transactions, which means serious energy savings. Lightning Network on Bitcoin and Raiden Network on Ethereum are shining examples.
Some blockchain projects are also taking responsibility for their carbon emissions by participating in carbon offset initiatives. Klaytn, for instance, partnered with the Korea Carbon Capture and Sequestration R&D Center to offset its carbon footprint.
Last but not least, blockchain companies are getting on board with green hosting services and powering their operations with renewable energy sources. By choosing eco-friendly options, they reduce their overall carbon footprint.
These are just a few examples of the steps the blockchain world is taking to be more eco-conscious. The industry recognizes that sustainability matters, and they’re pushing boundaries to minimize energy consumption and keep our environment in check.
Gio Tang | NEST®