In late March, renowned digital artist Krista Kim sold her "Mars Home" NFT design for a whopping $500,000, which is no minor credit card charge. While the world fixated on the sheer wealth she could generate from a virtual design, it paid less attention to the inner workings of the cost to produce it—and not in the out-of-pocket sense.
Each year, our appetite for energy and material supplies grows—especially as we move into an increasingly digitized economy. As this transition unfolds, a number of technologies have emerged, such as blockchain—designed as a solution to democratize and reduce resource intake required to operate centralized data centers.
Despite the progress blockchain was expected to bring as a cheaper operational alternative, blockchains like Bitcoin and Ethereum require massive quantities of energy, which often translate into high gas fees, to process transactions.
Since Bitcoin's rapid resurgence in February, crypto experts like Cardano creator Charles Hoskinson have expressed concerns about the environmental cost of Bitcoin mining, its underlying blockchain and cryptocurrencies like Bitcoin. But alternatively to Bitcoin, EOS and WAX, which both utilize EOSIO technology, do not command such high energy needs—precisely why they will power the future of the latest digitized craze: NFTs.
NFTs are designed by nature, as it has become well documented, to function as digital certificates of existing digital or physical objects signifying ownership. And they can function as digital alternatives to tangible items that require extracting finite, non-renewable resources to produce. But even resource-saving digitization also requires complex systems to support it, and the cost can be great.
An NFT ecosystem would be reliant on developers and a blockchain network to tokenize digital items. Moreover, for NFTs to reach mass adoption and for artists to not be required to pour piles of cash into tokenizing their artwork, blockchains must be scalable and operating costs must be affordable, which, technically-speaking, means keeping gas fees low and keeping energy consumption reasonable.
Tokenization on the Ethereum network, which is the most popular platform for NFTs at the moment, operates on the proof-of-work (PoW) system until it shifts to the proof-of-stake (PoS) system in summer 2021.
Mining on Ethereum requires an estimated 26.5 terawatt-hours of electricity per annum, which totals almost as much as the entirety of what Ireland consumes in the same period, according to a Time Magazine report by Alejandro de La Garza.
Moreover, during the recent oil price collapse of 2020, a handful of entities plugged right into the wells and reaped the benefits of low petrol costs or, alternatively, flare gas to power their mining operations. In China, a country that consumes the most energy in the world and harbors the largest Bitcoin mining operations, is expected to emit 130 million metric tonnes of carbon by 2024.
Using existing means to tokenize NFTs, Andrew Bonneau, carbon market advisor for Offsetra, estimates that the average NFT creation would emit 90 kg of carbon, equivalent to an hour of international flight on a jet—a lot for a simple digital asset.
As public outcry over the reported carbon footprint of NFT creation came to light, marketplace developers started to bail. ArtStation, which had planned to create an NFT platform for artists, canceled its program within hours of the announcement due to negative feedback on social media channels.
Garza writes: "The recent boom is raising fresh awareness of crypto’s environmental toll, and there’s a chance that activism could lead to real change…" While Garza's words ring true, not all hope is lost.
Already 39 percent of Bitcoin miners, for example, are estimated to be utilizing green energy sources, according to research by a team at the University of Cambridge. Meantime, there are other blockchains out there offering low energy solutions—both of which use EOSIO, EOS and Wax.
In a comparison between EOS, Ethereum and Bitcoin blockchain, a 2018 analysis by Genereos found that "EOS is 66,000 times more energy efficient than Bitcoin" and "17,000 times more energy efficient than Ethereum."
Wax and EOS operate on dPoS systems and charge far lower gas fees than competitors like Ethereum, which has come under heavy scrutiny lately for its high gas fees. If Ethereum's PoS-shift plans go as expected, the platform could also become far more environmentally viable for NFT use, but will likely face adoption barriers with consistently high gas fees.
Either way, an inevitable resurgence in oil prices, a growing demand for greener solutions, and a growing popularity of crypto and NFTs will drive wider adoption of PoS systems.
The intrigue is there for digital certifications and the possibilities for NFTs are endless. Whatever the future holds, it must be green in order for it to last. If NFTs are to survive and see a long-term boom, developers will need to find a better solution than industry leaders using PoW like Ethereum. EOSIO-driven networks will be waiting.