This has been a HOT topic when it comes to NFT's for quite sometime now. What is the NFT environmental impact to our earth? Now it doesn't take much researching around to find out that most concerned by this topic are those who are environmentally friendly, a good thing.
But let's start off by asking those who are environmentally consensus; who's the number one politer in our earth? Meat consumption, factory smoke, cars? ... No. It's the military complex and the US military complex to be specific, considering they have the largest military in the world. And guess what, no one talks about it .. it doesn't make sense. Now without getting too political, I think it's important to be aware of all aspects of this subject if you're going to go on criticizing NFT's for their current electricity consumption.
What is the NFT Environmental Impact?
Evidently, all economic activity has some environmental impact. The carbon footprint of fiat currencies worldwide is approximately 400 billion kilograms of CO2 per year. This includes the production of physical coins and powering electronic and mobile payments. Each dollar that is transacted generates approximately 10g of carbon dioxide.
However, blockchains are more resource-hungry that other forms of commerce. The Cambridge Bitcoin Electricity Consumption Index ( CBECI http://ccaf.io), who calculate the average carbon footprint for a single NFT at 200kg of CO2, has shown that they are much more resource-hungry. This could lead to an unsustainable burden on our environment.
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What can be done to make the blockchain more environmentally-friendly? Renewable energy is the first fix that comes to mind and is already being used for blockchain mining, the Bitcoin network and it's miners are currently using approximately 50-60% renewable energy. This is good for both the miners from an economic point of view and the environment.
Putting Bitcoin aside, the largest cryptocurrency in the space, we are here to discuss NFT's and blockchains hosting NFT's are Ethereum, Solona, Tezos and more. All of these blockchains currently use a Proof Of Stake protocol, which does NOT require any sort of mining.
Ethereum hosts majority of the NFT's in the world, the network is currently upgrading to ETH 2.0 which will make it a Proof Of Stake blockchain, just like competitors Solona, Tezos, etc. So this means the discussion of NFT environmental impact discussion chapter will close, there's not debate to be had.
What is the Future of NFT's?
NFTs do not have a better or worse use case than any other use cases, but their sheer size makes them an important contributor to the overall sustainability of blockchain. Although the underlying technology is still in its "hyper growth" phase, and cost are often emphasized over sustainability, there is no reason why blockchains shouldn't be used in an environmentally-friendly manner.
The future is bright for NFT's as soon as Ethereum scales into Ethereum 2.0, which is scheduled to complete sometime in quarter two of 2022. All NFT's will not have 99% less environmental impact to the environment and this discussion can finally be put to bed!
Artists all around the globe were delighted to learn that NFTs allow them to make substantial money, reach a wider audience, and link a file to a creator. This ensures authenticity. Another reason the future of NFT's is bright is the various use-cases for NFT's, this is not discussed as much as it should be. Currently NFT's are mostly being used to buy/sell or exchange digital art. Yet NFT's stand for "Non-Fungible Tokens", NFT's are a token of ownership on the blockchain and can be attached to pretty much anything .. NOT just digital art!
Famous contemporary artist Damien Hirst, recently launched a collection NFTs on the Palm sidechain, which states to be 99% more energy efficient than Proof of Work blockchain systems.
NFT's can represent ownership of music, domains, or fractional/full ownership of property or other tangible things in the real world. I believe in the next few months into Q2 of 2022 and further after ETH 2.0 completes it's upgrade, everyone will begin to discuss other use cases of NFT's and this will be quite impactful to many sectors in the real world.
Is Ethereum Environmentally Friendly?
This is a popular debate, not only to Ethereum, the blockchain which hosts majority of the NFT's in the world, but with all cryptocurrency. As discussed earlier in this article, Ethereum can be more environmentally friendly and is on its way to do just that after Ethereum 2.0 is completed and the network is upgraded in the second quarter of 2022. This transition would make Ethereum transactions much less energy-intensive. Cardano, Tezos and Solana, on the other hand have already adopted the proof of-stake blockchain system.
Experts also suggested another alternative: adding a layer to the existing blockchain. The second layer is where all trading takes place. Once a deal has been completed, parties move to the first layer and verify the transaction on the Blockchain. But this will not all be needed as soon as Ethereum completes its upgrade.
"I'm definitely very happy that one of the biggest problems of blockchain will go away when proof of state is complete" - Vitalik Buterin
Vitalik Buterin, the creator of Ethereum, has confirmed that the cryptocurrency will undergo a major overhaul in 2022. This will result in a reduction of energy consumption by nearly 99 percent and make Ethereum 2.0 more environmentally friendly than Bitcoin will ever be.
Disclaimer: This Article is NOT investing or financial advice, we're sharing our opinion respectfully from a speculative point of view.