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Are All NFTs Bad for the Environment?

Saying that every NFT is bad for the environment is a big claim. But overall, NFTs aren’t environmentally friendly. Here’s what you need to know about the environmental impact of NFTs, and why a digital asset could be causing physical harm.

NFTs Are a Source of Environmental Worry

An NFT, or non-fungible token, is a way for a creator to sell unique digital assets. NFTs were huge business in late 2021, but since that time the interest in them has declined sharply.

But it’s not the cost of NFTs that’s the concern. It’s the fact that they aren’t easy on the environment. Most of the NFTs today are traded on the Ethereum network. Every transaction requires a mining process to confirm the transaction and the trade.

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There is energy used in mining, and that’s a concern for people who feel the trading will add to emissions of carbon. Sometimes clean energy sources are used, but that’s often not the case.

Here’s How the NFT Process Works

The majority of NFTs are on the Ethereum blockchain, and that means they require a confirmation with each new block. Then:

  • A computer network has complex problems they have to solve, for the right to confirm that block.
  • The network uses energy, and vies for the gas fees that come from the block’s confirmation.
  • The system offers incentives for miners who invest in hardware, which takes more grid power.
  • Power sources affect the environment through the emission of greenhouse gases.

When an NFT is resold, it also uses an equal amount of energy in that process. That can quickly create energy usage issues, along with a lot of problems for the environment. A sale that takes only 10 seconds can consume around 8.7 megawatts of energy.

There Are Some Options for Improvement

Fortunately, the fact that NFTs are bad for the environment is something that can change. First, not every NFT uses non-green energy sources. Some of them aren’t actually harmful. Second, there are ways to incentivize the use of NFTs that use green sources of energy.

Ethereum is also working toward a different system, much like those used by Solana and Cardano, that is proof-of-stake. Because this system validates transactions based on a number of coins, the amount of problem-solving is smaller. In turn, that makes it easier to move through transactions with less energy.

Proof-of-stake uses the machines of coin owners to change the way blocks on the chain are verified. Owners offer their coins as collateral, which gives them the opportunity to validate blocks. When the owners have staked coins, they’re listed as "validators."

Then a validator is randomly selected to validate or "mine" the block. Since the selection is random there’s no competition. When enough validators have "mined" the block, it’s considered validated and the transaction involving it can be finalized.

Batching transactions is another way that NFTs can be easier on the environment. Transactions would be made outside the network and batched at a certain time. Doing that makes it easier to reduce energy usage, and would help protect the environment more easily.