A Commitment to a Pristine World Ecology by the NFT Ecosystem

Image by Simon Berger courtesy of Unsplash

Some have raised concerns about the emission of carbon by NFTs. This paper reviews the extant literature addressing such concerns.

Who we are

New Pavilion is a creative consultancy developing authorized, respectful,
non-fungible tokens (NFTs) and creating digital works in collaboration with
some of the world’s most celebrated artists, creators, arts foundations, and
cultural institutions.  New Pavilion transforms iconic creators’ works
into authorized non-fungible tokens and other digital creations.

Our Commitment to a Pristine Ecology is Passionate

Some commentators, such as the SuperRare team, take the position that No, CryptoArtists Aren’t Harming the Planet.

SuperRare, a leading marketplace for NFTs, obviously is not objective. Their team rests their case, credibly, on the credible argument that the Ethereum blockchain network on which most NFTs are based would be generating about the same carbon footprint with or without NFTs.  Per SuperRare:

“It is important to note that Ethereum has a fixed energy consumption at a given point in time. While the network is constantly processing transactions (financial trades, NFT minting etc.) these transactions do not actually increase or affect the energy consumption of the network.”

Artist and public intellectual Sterling Crispin writes at Blogspot on Feb. 22, 2021, in NFTs and Crypto Art: the Sky Is not Falling:

“You may be surprised to hear that Bitcoin accounts for 0.07% and Ethereum is roughly 0.02% of our total CO2 footprint based on estimates, depending on the year, crypto mining rates, and how much coal renewables you think they use. I’ll return to that last point later. Also keep in mind that NFT’s and crypto art are an even smaller fraction of that 0.02%, I haven’t been able to estimate NFT’s portion of all Ethereum use, but if someone has it send it over. My guess is that NFT’s are less than 10% of that 0.02% but I’d love to know. Update: SuperRare has clarified that minting NFTs doesn't even add to the energy usage of Ethereum (25). Even if you don't believe SuperRare, you can use services like etherscan.io/gastracker to see that NFT's use about 3% of the Ethereum network's energy. For context, YouTube and the entire Ethereum network have a similar carbon footprint (26). Either way, here’s a graph that might help put all this into perspective, although the amount Bitcoin and Ethereum are responsible for is so small it can’t be plotted accurately here.” (Editor's note: Some strikethroughs in original text not here reproduced.)

Sammy Edwards, writing in Shepherd of the Hills Gazette, provides an unconventional but grounded assessment of the relative carbon output of crypto (of which NFTs are but a small fraction) in Critics Declare Bitcoin
is a Menace to the Atmosphere. They’re flawed.

Even after putting aside the proposition that much of the energy consumption in crypto mining comes from renewable sources he concludes that:

“… it would take between 500 and 1,000 years of mining just for bitcoin to match the carbon cost of the 2008 recession alone. Add in the other 17 recessions the Fed has created in the past century alone—one every 5 years—and that’s an awful lot of carbon. Indeed, divide that 2008 recession footprint by a recession every 5 years and you get an annual recession carbon footprint about 100 to 200 times higher than bitcoin.”

Nevertheless, many in arts and blockchain ecosystems express understandable concern over the energy use associated with Ethereum. The concern relates both to the attendant costs and as to CO2 emissions. Even Ethereum’s inventor and chief evangelist, Vitalik Buterin, emphatically shares and is innovating (although more slowly than hoped) to remedy
this. 

“Ethereum mining consumes a quarter to half of what Bitcoin mining does, but that still means that for most of 2018 it was using roughly as much electricity as Iceland. Indeed, the typical Ethereum transaction gobbles more power than an average U.S. household uses in a day.

“’That’s just a huge waste of resources, even if you don’t believe that pollution and carbon dioxide are an issue. There are real consumers—real people—whose need for electricity is being displaced by this stuff,’ says Vitalik Buterin, the 24-year-old Russian-Canadian computer scientist who invented Ethereum when he was just 18.”

New Pavilion respects these concerns. We offer two mechanisms to resolve it, Plans A and B.

Plan A:

The first approach is a “Level-2” or sidechain mechanism. Palm.io, among other entities, proposes this solution. Damian Hirst reportedly will use Palm.io for his forthcoming major NFT offering as detailed at ARTnews on March 30, 2021 at NFT breakthrough: Ethereum co-founder Joe Lubin creates 99% energy efficient blockchain—and Damien Hirst is its first artist.

In addition to Palm.io here are other Level-2 sidechains such as Immutable X and Polygon (formerly Matic Network).  Polygon has established first mover advantage in applying Proof of Stake rather than the Proof of Work consensus algorithm (details on request) reducing energy consumption by something like 99%, thus reducing toward nil both carbon emissions and transaction costs (“gas”). 

Some respected experts have expressed confidence in L-2 based sidechains. As reported in ARTnews, on March 30, 2021,in NFT breakthrough: Ethereum co-founder Joe Lubin creates 99% energy efficient blockchain—and Damien Hirst is its first artist,

“Dan Heyman, the co-founder and chief executive of Palm, tells The
Art Newspaper: ‘We are trying to enable the best set of trade-offs for
creators and curators in the NFT space in the short term, while Eth2 rolls out, but in the long-term we really want to be a home for creators as a complement to Ethereum.’

“Heyman estimates Ethereum’s upgrade from Proof of Work, which
is 99% more wasteful, to a Proof of Stake consensus mechanism will happen within a year. “The next big milestone will be in six months,’ he adds. Palm, meanwhile, is using the more centralised Proof of Authority algorithm, which Heyman says will convert into a decentralised system over time.

We note, however, that TechCrunch, on March 30, 2021, in an article
headlined ConsenSys launches a more energy-efficient NFT ecosystem with a project from artist Damien Hirst as its first drop cautions:

“Ethereum has already committed to transitioning to a more
energy-efficient proof-of-stake consensus structure, but it’s unclear how
quickly that’s going to happen. The network currently relies on a proof-of-work system (as does bitcoin), which use an energy-intensive manner of prioritizing where the next block in a chain is mined that gets more intensive as a network sees more traffic. It’s a reason why crypto mining operations have had to consistently invest in the latest hardware to maintain an edge and use more power. Proof-of-work does away with most of that, instead choosing nodes on the network to mine the next block based on reputation or their existing stake. There are some real security tradeoffs that have required workarounds though plenty in the crypto community aren’t quite satisfied with the compromises, though proponents argue that environmental concerns should take precedent.” (Emphasis supplied.)

Also, as reported by Fortune, on March 10, 2021, Are your NFTs on the wrong blockchain?, drawing on an interview with Sam Kazemian:

“Of the top NFT lines, the overwhelming majority reside on
Ethereum, which has the advantage of age and broad adoption. ‘It’s totally
decentralized,’ says Kazemian, ‘[but] it’s a little bit expensive to use.’
(Incoming Ethereum patches are trying to address the cost problem.)

“The other system currently winning the NFT war is called Flow
Blockchain, created by Dapper Labs. NBA Top Shot, the currently most successful NFT line, runs on Flow. Kazemian describes Flow as ‘slightly more permissioned,’ meaning more centralized and more controlled by its creator. This is important, he says, because it allows greater integration with mainstream payment systems. But the downside is that more centralized chains may be more vulnerable to decay in the long run, and in very broad terms may provide a weaker guarantee of digital ownership.

“Kazemian considers Binance Smart Chain another viable environment
for NFTs. It’s less expensive to use than Ethereum, but it has some of the same centralization concerns as Flow Blockchain.

“Then come a few dark horses. The EOS blockchain has NFT
functionality, but hasn’t caught on the way Ethereum has. Tron (TRX) also
launched NFT functionality in December, but the system has a strong reputation as a hype-driven Ethereum knockoff with few real users.

“Kazemian urges a cautious approach to NFTs created on those
outliers. ‘That’s the scary thing about picking these different small [chains].
They haven’t been battle tested the same way Ethereum has.’

“’[If] the smaller blockchain gets attacked, if there’s a security
issue,’ Kazemian says, ‘do you really want to buy an NFT for $50k and if
something happens, it’s gone?’”

New Pavilion does not warrant that any NFT acquired through our services is immune from issues such a vulnerability to decay or a weaker guarantee of ownership.

The risk rests entirely with the purchaser. A creator’s decision to offer an NFT on an outlier chain may cause a discount for buyers’ unquantifiable security concerns. While we make this option contingently available we do so hereby with a good faith disclosure of the attendant risks.

An additional factor in the calculus, Everipedia’s NFT team advises us, is that while L-2 solutions are being readied few are yet fully available. Those that are available, such as Polygon, which has established first mover advantage, do not as yet enjoy the depth of market (number of ready buyers on chain) as Ethereum. This potentially limits the market clearing price to more modest sums than those achieved by the headline “jackpot” valuations.

Therefore, as it cannot be predicted how soon L-2 solutions will
be fully available, fully safe, or provide the desired full liquidity, we offer
a Plan B.

Plan B:

New Pavilion also offers a carbon sequestration solution. Sequestration is
different from  carbon offset. As the New York Times’s Kevin Roose wrote
in his reflection on the sale of an NFT of one of his columns for $560,000, Why Did Someone Pay $560,000 for a Picture of My Column?:

“(The Ethereum blockchain, like the Bitcoin blockchain, requires vast computational power, and critics have called it an emerging environmental hazard.) I fully support developing less computationally intensive ways to do blockchain transactions, and to mitigate any harmful effects of this experiment, I’m personally buying $400 in carbon offset credits — enough to offset about 100 times as many carbon emissions as I generated by auctioning off this NFT.”

Whether or not one is convinced by Team SuperRare’s analysis that NFTs do not materially contribute to carbon generation we consider the mitigation of whatever carbon may be generated by a factor of ten, much the more by a factor of a hundred, ample. Such levels of mitigation more abundantly support a clear conscience.

Some deem carbon offsets inadequate as reported by Gizmodo on March 25, 2021 in Carbon Offsets for NFTs Don't Address the Deeper Problem. There is a better way, although there are some respectable voices, such as at the World Resources Institute, who consider soil regeneration sequestration inadequate.

As noted in ARTnews, March 30, 2021, NFT breakthrough:
Ethereum co-founder Joe Lubin creates 99% energy efficient blockchain—and Damien Hirst is its first artist there are respected figures who hold carbon sequestration as “known to reverse global warming:

“However, offsetting carbon emissions is widely believed to be ineffective, unlike carbon sequestration which is known to reverse global warming. Last week the artist John Gerrard released his first NFT, described as “superneutral” for its lack of carbon footprint. Proceeds
from its sale will go to Gerrard’s emergency Ethereum cryptofund,
regenerate.farm, which focuses on soil restoration and soil regeneration in his native Ireland.”

New Pavilion considers soil regeneration to be the superior solution. This provides the security of Ethereum while sequestering more carbon than is generated, while simultaneously addressing endemic soil degradation. This is a big deal. We currently recommend The Carbon Underground as the appropriate recipient for sequestration funds.  Per GreenBiz:

“The Carbon Underground (TCU) acts as an umbrella organization
connecting academia, businesses, organizations, schools, governments and the general public, communicating and educating about the power of healthy soil to combat climate change. TCU coordinates a globally interconnected set of research groups working to demonstrate the impact of sustainable agriculture, land management and regenerative enterprises as principal tools for sequestering carbon. Through its focus areas of corporate impact, education and training, policy, and communications, TCU aims to facilitate the widespread transition of farms, ranches and grasslands from industrial into regenerative enterprises.”

Soil degradation is a less glamorous, more slow motion, worldwide ecological crisis. It has received far less attention than climate change. Yet it appears to us at comparably serious. Credible sources hold that at current rates Planet Earth’s soil will lose its ability to grow food in less than 60 years.

Per Scientific American:

“ROME (Thomson Reuters Foundation) - Generating three
centimeters of top soil takes 1,000 years, and if current rates of degradation continue all of the world's top soil could be gone within 60 years, a senior UN official said on Friday.

About a third of the world's soil has already been degraded,
Maria-Helena Semedo of the Food and Agriculture Organization (FAO) told a forum marking World Soil Day.

"Soils are the basis of life," said Semedo, FAO's deputy director general of natural resources. "Ninety five percent of our food comes from the soil."

Unless new approaches are adopted, the global amount of arable
and productive land per person in 2050 will be only a quarter of the level in
1960, the FAO reported, due to growing populations and soil degradation

Soils play a key role in absorbing carbon and filtering water,
the FAO reported. Soil destruction creates a vicious cycle, in which less
carbon is stored, the world gets hotter, and the land is further degraded.”

Thus, New Pavilion respectfully submits that this sequestration funding mechanism might well be considered superior to a low-emission Proof of Stake solution, at least until Ethereum 2.0 has been successfully implemented or full security and liquidity is established by other L-2 solutions.

We submit that simultaneously providing a deep enough market
for optimal reward of the creators while amply sequestering CO2 emissions would be considered the optimal solution by many.

New Pavilion thus believes that there are or are portended
two ethically authoritative solutions: either to avert carbon emissions or to
sequester more than those arguably generated. We leave it to the originators of the NFTs to select which available course is preferred.