How the NFTs Are Impacting the Environment

Digital Art, Art Market

March 22, 2021

Crypto-art has been in a major spotlight recently, as Beeple's NFT (Non-Fungible Token)-based work of art sold at Christie’s in an online auction for $69.3 million with fees, catapulting the artist to the ranks of the world’s most expensive living artists such as Jeff Koons and David Hockney. At the same time, Damien Hirst, who has always had an unapologetically commercial approach to art, has announced he is planning to jump on the NFT bandwagon, an unusual gesture for a blue-chip artist like him.

The model of ownership seems to have fewer barriers to up-and-coming artists than the traditional art market, while it allowed digital artists to finally authenticate their works and assign value. It also allowed the artists to profit from the value of their work growing, giving them an upper hand in a market.

However, it seems that the NFTs are already creating effects that are quite the opposite of the utopian fantasies so many have placed upon them. Some users of the NFT marketplace Nifty Gateway reported that artworks had been stolen from their accounts, while others reported artworks being commodified as NFTs without the knowledge of their creators.

At the same time, it seems that the tokens are perhaps not so great for the environment, as the model consumes lots of energy. As The Verge reports, the NFTs are "at least partially responsible for the millions of tons of planet-heating carbon dioxide emissions generated by the cryptocurrencies used to buy and sell them." Typically sold in "drops", timed online sales held by specialized platforms, NFTs exist on the energy costly Ethereum blockchain and are created based on a process known as proof-of-work (PoW), which necessitates the use of large networks of processing machines that emit CO2.

While the crypto medium has seduced thousands of artists, who view it as a way to go around the usual barriers of the traditional art market, others are asking the question, at what cost? 

Beeple - Everydays – The First 5000 Days, NFT, 21,069 pixels x 21,069 pixels (316,939,910 bytes). Courtesy Christie's

The NFTs and Environmental Controversies

While artists began making millions overnight as the Crypto art world exploded, their role in emitting carbon skyrocketed. Joanie Lemercier, a French artist known for his perception-bending light sculptures, took a closer look at his own energy use two years ago, vowing to reduce it by 10 percent each year, a goal he had successfully met. After his first blockchain drop, which involved the sale of six NFTs that reference his installations in the physical world, he realized his progress was erased. He learned that the sale consumed 8.7 megawatt-hours of energy, a figure equivalent to two years of energy use in his studio.

Selling just a single-edition artwork on Ethereum has a carbon footprint equivalent to a 1 hour flight, while selling an edition of 100 works has a carbon footprint of more than the per capita annual footprint of someone in the EU - including all emissions from industry and trade. According to the website cryptoart.wtf, designed by technology artist Memo Akten to share the best available information about the energy use and environmental impact of the growing Crypto art and NFT markets, the carbon footprint of Space Cat, a GIF that recently sold as NFT, is equivalent to an EU resident’s electricity usage for two months.

This is because Ethereum, where NFTs exist, maintains secure record of cryptocurrency and NFT transactions through a process called mining, which involves a network of computers that use advanced cryptography to decide whether transactions are valid. To do so, the network uses energy on the scale of a small country. When the community of artists and collectors was tiny, the energy use of NFTs wasn't that much in focus. With the growing craze over the crypto art market, the focus has shifted.

As a result of the growing controversies, ArtStation, an online marketplace for digital artists, canceled its plans to launch a platform for NFTs. Within hours of their announcement, they faced backlash from people who think dealing in crypto art is environmentally unethical, describing it as an "ecological nightmare pyramid scheme."

NFTs Energy Usage, according to artist Memo Akten's research. Image via medium.com

How Harming Is It?

Some claim that the argument that NFTs cause carbon emissions is untrue, and that it is based on a misunderstanding of how Ethereum works. It is true that Ethereum is energy intensive, but it has a fixed energy consumption at a given point in time. The network is constantly processing transactions, and each of these does not not actually increase or affect the energy consumption of the network. Even if there were no transactions made the whole day, the carbon emissions of the network would essentially stay the same.

John Crain, the CEO of SuperRare, a leading NFT marketplace, told Wired that "there is a whole ecosystem of people who are creating emissions, so I don’t think it’s fair to the artists to say that you created this amount of CO2." He compared it to an airplane that will take off regardless of how many Crypto artists climb on board.

At the same time, this is not the first time the art world has come under scrutiny for its part in climate change. When it comes to the traditional, physical art world, artists and activists have been protesting everything from the carbon footprint of physical art fairs and the fossil fuel money funding major museums to the flights and shipping of sculptures in crates and the gallery lights and security systems.

Sara Ludy, a multimedia artist based in New Mexico, told Hyperallergic she is worried about the "anti-NFT mob mentality" and attacks against creators who choose to partake in the new technology. As she pointed out, her peers are "being attacked for trying to survive or find ways to be compensated for years worth of work."

Towards Clean Mining

Using Proof-of-Work (PoW), the consensus algorithm that is hundreds of times more inefficient than the other ones, Ethereum is regarded as the most inefficient and ecologically costly. Its developers have planned a shift to a less carbon-intensive form of security, called Proof-of-Stake (PoS), via a blueprint called Ethereum 2.0. While people have been waiting for years for Ethereum to make the change, the ETH2 development teams currently estimate that the PoS chain will be usable by early 2022.

Akten advocates for the NFT marketplaces to adopt more efficient technology—either tools that handle more aspects of the transactions separately from the blockchain, or leaving Ethereum behind for other blockchains that don’t use mining. "People say that hopefully it will be fixed in a year or two so it’s OK to be exploitative right now," Akten told Wired. "We have to change our existing habits," he says.

Beeple, today's most exciting Crypto artist, says his artwork moving forward will be carbon "neutral" or "negative." As he explains, he would completely offset emissions from his NFTs by investing in renewable energy, conservation projects, or technology that sucks CO2 out of the atmosphere.

SuperRare, a marketplace to collect and trade unique, single-edition digital artworks, says they are committed to reducing the impact of Ethereum’s carbon emissions by using carbon offsets. At the same time, they are donating money to ETH 2.0 research to accelerate the development of a more energy-efficient network, while keeping an eye on multiple more sustainable options such as Polygon and Polkadot.

There are alternative, more sustainable platforms using PoS, PoA etc, such as Algorand, Tezos, or Polkadot, but they have less volume and hence lower number of collectors and sales. However, hopefully as more artists migrate to these emerging waters, this can encourage platforms, developers, investors, and collectors, to bridge to develop more ecologically friendly and transparent platforms.

For anyone wanting to learn more about these complex issues, as well as measure their own participation in carbon offsets, Carbon.fyi has put together a fantastic resource on the topic.

Featured image: Ethereum, via coinmarketcap.com.