The Environmental Impact of Non-Fungible Tokens (NFTs)

Learn about the carbon footprint of Non-Fungible Tokens (NFTs). We break down every Watt-hour of energy that is consumed from creation to sale.

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0:00 Foreword
In this video you will learn about a subject that no one likes talking about: the environmental impact of Non-Fungible Tokens, or NFTs.

We take an in-depth look into the carbon footprint of blockchain technology and we break down every Watt-hour of energy consumed in processing NFTs from creation to sale.

We created this video to provide a factual, un-opinionated view based on a recent study, with the idea to spark a well-informed conversation.

0:35 NFTs Defined
NFTs are a way to verify true ownership of a digital item by attaching a unique key to it via a process called minting.

When an NFT is minted, data that represents ownership is stored on a blockchain network and whoever started the minting process is given the key that unlocks the ownership data on the blockchain.

When you buy an NFT, you buy the only verifiable version of the item. This naturally increases its value because the item is unique in comparison to it’s copies that are non-NFT versions.

01:09 Power Consumption of Blockchain Technology
NFT data is stored on the blockchain and through the Proof-of-Work mechanism, data blocks are checked by miners in order to reach consensus about the integrity of the data.

This process is what makes blockchain technology highly secure and decentralized, but the continuous data checks costs computational power.

02:03 Carbon Footprint Calculations
A carbon footprint is the sum of all carbon emissions released throughout a product's manufacture process and use.

As you can imagine there are many variables, so we usually refer to an approximation when discussing carbon footprint.

In the case of calculating the carbon footprint of NFTs there are several phases in the process that have no known carbon footprint and there are very few scientific peer-reviewed publications on the topic.

04:01 Carbon Footprint Data
80,000 transactions were examined, involving 18,000 NFTs on the SuperRare NFT marketplace, which is one of the more popular NFT marketplaces at this moment.

The average footprint of a single transaction involving an NFT, including minting, bids, sales, and transfers is 82 kilowatt-hour, with outputs of 48 Kilograms Carbon.

06:07 Impact on Environment
The total number of NFTs currently on SuperRare is 18,159. The ecological cost of keeping track of all these amounts to the energy usage of 6,154,717 kilowatt-hour, or roughly 6 Gigawatt-hours, and emissions amounting to 3.8 Metric tonnes of CO2.

This is equivalent to 2000 years worth of electrical energy consumption by a single person in Europe, or driving for 20 million kilometers and flying for 37,000 hours.

07:59 Solution: Lower-carbon NFTs
The fundamental reason for the high energy consumption of blockchains like Ethereum and Bitcoin is that they use a consensus mechanism called Proof-of-Work.

Proof-Of-Work is an excellent system to verify data integrity, but as global adoption of blockchains that use Proof-Of-Work technology increases, so does the power consumption by miners to verify the data.

09:13 Solution: Carbon Offsets
A carbon offset is a payment you make to help fund a project that reduces carbon emissions, such as developing solar power plants to reduce the use of fossil fuels or removing carbon dioxide from the atmosphere, like planting forests.

09:52 Afterword
Now you know how NFTs impact the environment and you are better equipped with knowledge to make an educated decision whether you support or disapprove of their usage.

Keep in mind that, regardless of whether the blockchain uses Proof-of-Work or Proof-of-Stake, electricity consumption isn't the only factor that contributes to its carbon and environmental footprint.

#nft #nonfungibletokens #environmentalimpact