Opinions expressed are solely those of the author and do not reflect the views of Rolling Stone editors or publishers.
There is an ongoing conversation about the energy consumption surrounding cryptocurrencies and their environmental impact. As new digital assets like NFTs (non-fungible tokens) grow in popularity, it is time to start looking at the best ways to evolve blockchain technology so it requires less computational energy.
As the founder of a creator and artist community with over 4 million members, I’ve seen firsthand from our community that there is a growing demand for more knowledge from artists who are seeking to NFT their work. In response, we create learning material and funding opportunities for our artists in response to this increase in interest. This allowed me to dive deep into all the innovative and new paths NFTs offer and the environmental considerations coming to light.
We’re still a long way from NFTs becoming the standard for storage, exchange and representation of digital and physical goods. But lately, NFTs have been enjoying wider adoption among artists, painters, musicians, athletes, writers and fashion brands. Some musicians have had great success with their NFT offerings, and there have even been artists who have allowed their fans to monetize by owning royalties on their songs. With big names like Grimes, Ozzy Osbourne, Melania Trump and even Volkswagen Malaysia, it’s clear everyone wants in on the NFT craze, with the market approaching an estimated $17 billion in sales.
While the popularity of NFTs continues to climb, there’s a dark side to the NFT world many are oblivious to. As the dialogue about climate change and clean energy continues, we need to include NFTs in the discussion. To get a sense of NFTs’ energy consumption, we need to talk about how they are created.
Mining’s massive consumption of energy has become damaging. The problems stem from the proof-of-work (PoW) consensus algorithm of the blockchain(s) on which NFTs are created. The PoW algorithm uses what is known as “mining.” This is the process of generating (creating) new coins or NFTs by confirming transactions on the network. Miners are the users who verify and confirm said transactions, working to secure and expand the blockchain. While good in theory, this process has one significant drawback: the vast amounts of energy (computing power) to handle encryption and validation on the network.
So is there a way to still jump on the NFT trend but do it in an environmentally conscious manner? There is one practice that’s developing traction, and it’s called a clean NFT. Let’s break it down.
Going back to the mining process, we see that the reason miners compete for each transaction has to do with the way the system is set up. Currently, a lot of existing blockchain systems use the competition-based PoW system.
But what if we move to a different system called proof of stake (PoS)? With proof of stake, the system randomly chooses one person to solve the block. This eliminates the competition and the copious energy consumed in the process. And this trend is gaining momentum: Ethereum is moving to a PoS consensus mechanism from its current PoW with the highly anticipated ETH 2.0 upgrade. The shift could be implemented later in 2022, and most importantly, the result would be an estimated 99 percent reduction in energy consumption.
Naturally, there are some concerns regarding the change from the competition-based PoW model to the non-competitive PoS model. If not all participants in a network agree to a model change, this could lead to a drop in user activity and a subsequent crash in the price of the cryptocurrency. Some developers have noted improvements from alternative methods that offer better energy efficiency, less hardware requirements, stronger immunity to centralization and stronger support for shard chains. In my opinion, it’s a code change, as Ripple founder Chris Larsen previously referenced, that can avert our climate disaster. Even some artists like Grammy award-winning musician Ashanti are sharing their concerns about the environmental impacts of the NFT space.
As more awareness is raised around the energy consumption of cryptocurrencies and NFTs, we are bound to see efforts regarding mitigating their carbon offsets with each sale or purchase.