With the climate debate being on its peak, many people start questioning their own behaviors. While it is easy to look up the carbon footprint of flying or driving your car, the environmental impact of NFTs is still intransparent and lacks important data, making behavior changes difficult. However with more studies taking on the topic, calculations are becoming more certain and changes are starting to take place.
An average ETH transaction uses roughly 35 kWh, but NFTs are estimated to have an even higher energy consumption, mainly due to the minting process. This energy for this single ETH transaction would be enough to power a US household for more than 2 days.
The unreasonably high power consumption is criticized by many artists, including Beeple, the artist who created the most expensive NFT “Everydays – The First 5000 Days”, selling for $69 million. Voices for more eco-friendly alternatives are becoming louder.
While reducing the carbon footprint of NFTs might seem like a small contribution to the overall energy waste, the demand of consumers is what drives companies to act.
In this article I want to clear all confusion and focus on the current ideas to lower the energy consumption of non-fungible tokens and answer the important question:
>> How to make NFTs more environmentally friendly?
NFT energy consumption right now
Depending on the source you look at, a single NFT is estimated to consume around 370kWh. This is not only 10 times more than the average transaction, but certain artworks can even consume up to 5000 times that number - the equivalent to powering a household for 25 years - in a single transaction. In general the energy consumption of an NFT varies heavily depending on multiple factors:
Blockchain
The by far most popular blockchain for NFTs right now is ethereum. The blockchain is also one of the most important factors, because it determines the underlying technology used for minting and transferring NFTs. The total power consumption of the ethereum blockchain right now is around 62TWh, a number comparable to the power consumption of Israel (estimation by digiconomist.net).
While this number is still more than two times lower than for example the bitcoin blockchain consumption, it is rising fast due to the current hype of NFTs.
The ethereum blockchain was not built with the support of NFTs in mind and is therefore limited and certainly ineffective when it comes to NFTs.
To understand why ethereum is so power hungry we first have to understand the concept of proof of work (PoW) and proof of stake (PoS).
PoW vs PoS
One big difference is the concept of Proof-of-work (PoW), used by most blockchains right now (including ethereum, bitcoin, etc.) versus the concept Proof-of-stake (PoS) that is still relatively new, but promises a much lower energy consumption.
PoW works with a mechanism most people know as “mining”. The miner provides his computing power for a transaction and in return gets rewarded with cryptocurrency. By calculating the authenticity of a block (containing the transactions) he “proves” his work. The calculated problem is complex and miners are competing for the solution, taking up computing power on multiple devices and many attempts to find the solution.
The system is highly effective - by requiring lots of computations whose sole purpose is to solve proof of work problems, the system is almost impossible for attackers to overpower the network. But the security it brings to the blockchain network is at the expense of horrendous energy consumption.
PoS is a mechanism that determines a validator for a transaction by their amount of money. Instead of having to compute a block (PoW) the block is created by a random person depending on their stake in the network, much like an interest rate in the bank. This means users don’t have to compete for a block and offers some major improvements:
high energy efficiency
reduced hardware requirements to become a validator
possibly more nodes in the network (leading to higher decentralization)
better support for scalability of the network
The system almost completely renounces the energy waste from PoW transactions. However to appear for example in the ethereum network as a validator you will need to stake 32 ETH - about $100.000. Investors with less money will have to join so-called staking pools. The system is also newer and has therefore been tested less compared to PoW.
Minting process
As most NFTs are running on the ethereum network and therefore use the PoW concept, I will focus my breakdown of the energy consumption on this network.
The minting process is by far the most energy hungry process in the lifetime of an NFT. Artist Memo Akten calculated the consumption of minting to be around 142 kWh, according to his data from around 80,000 transactions on the marketplace SuperRare. One of the problems of NFTs is that they often come with metadata, including names, descriptions or URLs for the artwork that drives minting costs higher.
Bidding
Another factor is bidding and canceling bids. This process consumes 41kWh and 12kWh respectively, according to Memo Aktens data.
Transactions
Transferring the ownership of an NFT consumes 52kWh of energy.
How to lower consumption
Now looking at those numbers and the current state of the ethereum network some important questions arise:
How do I lower the energy consumption?
What will ethereum do to become more eco friendly?
When will it all happen?
Methods to lower the carbon footprint
Some methods to lower the carbon footprint of NFTs are already implemented, some ideas are still new and just being tested, or they are still a thing of the future.
Lazy minting
Lazy minting is a first step that many NFT marketplaces took, to lower energy consumption without a lot of work. The idea is to only mint an NFT after it has been sold. Some marketplaces let you mint artworks before putting them up for sale, wasting energy for artworks that might never sell and taking up space on the blockchain without bringing value to anybody. Lazy minting makes sure that an NFT only consumes energy for minting when it is necessary.
Layer-2 scaling
With ethereum 2.0 the blockchain moves to the PoS mechanism. While this was always planned from the start of ethereum, the transition is much harder than pressing on “update” on your computer. However with most NFTs being on the ethereum blockchain the transition will have a high impact on the energy consumption and hopefully restore some of the reputation of NFTs that was lost due to recent criticism of the environmental friendliness.
Ethereum 2.0 launched “Phase 1” on 1 December 2020. However, with two phases still to go, the full release is not estimated to happen until 2022.
Of course there are also many other blockchains supporting NFTs that run on the PoS mechanism and are already environmentally friendly (Polygon, Cardano, Tezos, etc.). But these blockchains are still less popular than ethereum so I believe the Layer-2 scaling will help the NFT industry massively.
Bridges
Bridges allow users to transfer an NFT from one blockchain to another. This technology is still relatively new however and not implemented for a lot of blockchains.
The Ethereum ↔ NEAR Rainbow Bridge for example lets you transfer NFTs from ethereum to NEAR, a blockchain working with the PoS mechanism. This helps collectors cut costs for gas fees and can be used directly with MetaMask.
Bridges are a great way for artists and collectors to not miss out on the diversity of NFTs on the ethereum blockchain, while cutting costs and energy consumption after transferring the NFT to a more eco-friendly blockchain.
What can I do to help NFTs become more eco-friendly?
While most NFTs still run on the power hungry ethereum blockchain there are some marketplaces already offering more environmentally friendly solutions or are even carbon neutral. While users generally don’t have a big influence on how a blockchain works and what blockchain an NFT is minted on, one main decision an artist or collector can take is about the marketplace. Here are the best alternatives you can start using now:
Full marketplace list here.
Curate
Curate is a marketplace running on the Curate blockchain. The blockchain follows the PoS mechanism and is completely gasless. Sellers should expect a 4.00% fee for every sale, which I think is a fair amount compared to other marketplaces. Their native token XCUR has a trading volume of 13,665.7447/day at a price of $4,84 (23.08.2021).
Next to serving as a marketplace for NFTs and physical goods Curate also provides a gasless multichain bridge between ETH, BNB, ALGO, EGLD and AVAX.
Curate is also completely carbon neutral.
NFTMagic
NFTMagic is a marketplace built on the Ardor blockchain, a pure PoS solution, making the platform much more feasible to artists and collectors. According to NFTMagic some nodes in the network run on a Raspberry Pi or are even powered by solar panels.
However the platform is still relatively new and not yet matured.
hic et nunc
Hic et nunc is one of the more popular platforms running on the PoS mechanism using the Tezos blockchain.
This makes minting extremely cheap with costs of only around ~0.08 tezos (around $0.35). The platform also charges a very reasonable 2.50% fee for swaps that carry a value (free NFTs also don’t pay a fee).
OpenSeas announced that their platform will support Tezos in the future opening up the market to resellers.
Conclusion
NFTs are an incredible thing and offer many opportunities to artists but also collectors, investors - the list goes on. But the technology behind NFTs has also been criticised many times due to its wasteful mechanisms. While most NFTs are still using the ethereum blockchain with PoW protocols, many people are starting to rethink the mechanisms behind it.
In the end companies always follow the demand of their users so while we have to wait for ethereum 2.0 to be fully released I want to encourage everyone to think about the small things they can change in their behavior. Not only do PoS blockchains help with the environmental issue of NFTs - but you also gain advantages in form of lower gas and minting fees.