Carbon-neutral NFTs are part of a much broader conversation regarding the environmental impact of popular blockchain platforms Bitcoin and Ethereum. Moreover, recent sales figures for NFTs have thrust them into the public’s eye in this climate conversation. Still, the carbon emissions produced by the world’s largest cryptocurrencies, Bitcoin and Ether, have been a significant concern for activists and governments for years.
To be fair, most energy consumption is not carbon-neutral, even if it comes from renewable resources like wind or solar power. Carbon-neutral is a term used to describe carbon offsets from energy consumption. The way most companies offset their greenhouse gas emissions is by planting trees to reduce or even eliminate the environmental impact of their energy consumption.
This blog post will not explore the finer points of environmental policy and energy consumption. There is no such thing as a carbon-neutral NFT, but there are blockchain platforms that consume significantly less energy than others. This blog post will explore why some blockchains consume so much energy, what energy-efficient alternatives there are, and which platforms consume the most and least amount of energy.
NFTs are the future of blockchain technology, but it is vital to create a sustainable future for everyone on the planet too. If you don’t know much about NFTs and you want to learn more before you read on, check out our informative blog post on NFT development to get helpful background information on this topic.
The Problem With Carbon-Neutral NFTs: The PoW Consensus Mechanism
To fully understand why blockchains like Bitcoin and Ethereum consume so much energy, you need to have a basic understanding of how they work. Blockchains like Bitcoin and Ethereum are akin to public ledgers distributed over an entire network. No central governing authority controls transactions on these networks. However, since there is no central authority, these networks require an objective way for all network participants to agree on transactions and the state of the network as a whole. This is known as a consensus mechanism.
Bitcoin and Ethereum use a consensus mechanism known as proof-of-work (PoW). To add a new block to a PoW blockchain, miners must solve complex equations. For their efforts, miners are given cryptocurrency. For example, Bitcoin miners who successfully solve a PoW equation and create a new block on the chain are rewarded 6.25 Bitcoin.
You’re probably wondering how solving an equation can produce such high carbon emissions. The equations that miners solve to add blocks to the chain are complex. These problems are not solved with pencil and paper. Instead, they are solved with advanced computer hardware designed specifically for mining. This computer hardware consumes a lot of energy. Plus, it is not a single computer participating in the process of mining.
Bitcoin, for example, sets a new problem roughly every ten minutes. Every miner on the network competes to solve the puzzle and create a new block. Then, the process repeats. The value of Bitcoin and Ethereum attracts a lot of miners. The more miners that compete to solve equations, the more carbon emissions are produced.
Getting an accurate figure on the amount of energy consumed by miners is difficult. However, current estimates put the total amount of energy consumed to create one Ethereum block at 48.14 kWh. That might not sound like a lot, but 48.14 kWh is equivalent to 1.5 days of energy consumption in the average US household. Considering that nearly six thousand Ethereum blocks are created every day, you can see that electricity consumption is a significant problem.
Bitcoin mining alone generates 38 million tons of CO2 emissions. This figure is greater than the total carbon footprint of Slovakia.
Without miners creating new blocks, there wouldn’t be any new transactions on the blockchain. So while NFT buyers and sellers are likely not mining themselves, their sales and purchases are creating demand for new blocks, thus contributing to the associated carbon footprint of the entire network.
PoS: An Alternative to PoW
If proof-of-work consensus mechanisms consume so much energy, there must be a more energy-efficient solution, right? Proof-of-stake (PoS) consensus mechanisms were developed in direct response to the carbon footprint created by PoW systems. PoS mechanisms are similar to PoW systems.
However, instead of competing to solve a problem and create a new block on the blockchain, stakers (PoS equivalent of miners) lock up a percentage of their cryptocurrency in smart contracts. An algorithm then randomly chooses a staker in a lottery fashion. The more crypto you stake in the system, the greater your chances of being selected to solve the problem and create the new block.
Proof-of-stake mechanisms drastically reduce the carbon emissions associated with blockchain transactions. So if PoS systems are more energy efficient, why aren’t Bitcoin and Ethereum using them instead? Ethereum, the most popular NFT blockchain, has plans to switch to a PoS mechanism when Ethereum 2.0 is released.
On the other hand, Bitcoin will never switch to a PoS mechanism because the significant flaw associated with PoS goes against every tenet of decentralization that Bitcoin was founded on. PoS mechanisms reward stakers with higher percentages of stakes in the system. For example, if a single staker controls 40 percent of the funds staked on the network, they have a 40 percent chance of being chosen to create the next block.
This system rewards stakers with the most coins. The more coins you have, the more coins you can stake, the more coins you can earn. This positive feedback loop concentrates control over the network to those with the most coins.
Energy-Efficient NFT Platforms
Artists, consumers, and businesses who are interested in supporting and using blockchains that don’t consume a ton of energy and produce a large carbon footprint will be excited to know that there are a ton of energy-efficient alternatives to Ethereum, including:
These blockchains have been used to build some of the most successful NFT marketplaces globally, including NBA Top Shots, which was built on Flow. Ethereum is still used to create the majority of NFTs and marketplaces, such as OpenSea and SuperRare. However, if you are an artist or business that wants to take a more responsible approach to selling NFTs, you have many efficient options.
True carbon neutrality does not exist if you consume energy. However, there are ways to avoid contributing to the massive carbon footprint associated with Bitcoin and Ethereum. If you are interested in learning more about blockchain technology and how it can be used to build NFTs, HiTech apps, and FinTech products, reach out to an app development partner.
There might not be any carbon-neutral NFTs, but there are carbon responsible NFTs.