The non-fungible tokens or NFTs are tokens that ring a bell as something linked to cryptocurrencies, blockchain, or at least something sold and bought on the internet. The NFTs are acknowledged as the new frontier of digital technology, but organizations brought into question the impact that mining of those tokens has on the environment.
Non-specialists in this area would never suppose NFTs can be described as earth-killing polluters. Still, that is why the community is divided into two groups: supportive individuals who tend to reap financial gains and opponents who condemn the NFTs for accelerating climate change.
What is Mining?
Most people think that crypto mining is a simple process that creates new coins and enters them into circulation. Although it is partially true, since crypto mining is a process that creates new digital currency units, it also involves validating cryptocurrency transactions on a blockchain network and adding them to a distributed ledger.
New crypto coins are created by solving an extremely complex mathematical equation with sophisticated hardware. When an individual invests funds in cryptocurrency, the investment details are recorded on a blockchain-distributed ledger. This, however, doesn’t mean that the process is finished. Namely, the process is complete when a “miner” verifies the transaction as legitimate. This is the last step in locking the transaction into the blockchain and making it available and visible to everyone. After that, the process begins again.
The verification process requires miners that will solve complex equations. The problem-solving process is an actual race against each other, and the fastest is the winner. The first who solve the equations are paid a fraction of the transaction fee for the effort. Only successful transactions result in new coins that enter into circulation. This process requires high-functioning computers that consume a lot of time and electric energy, making the mining process very costly and harmful to the environment.
How does mining work?
Buying and selling coins on the marketplace is a simple process that requires enormous funds. On the other hand, the creation process of coins is meticulous, expensive, and only sporadically rewarding. As previously mentioned, mining is a process by which new currency units are created or “minted” and introduced into the market.
Banks around the world are centralized and have physical locations. Cryptocurrencies are specific decentralized banking ledgers, and all transactions are simultaneously recorded in multiple locations and are updated by contributors to the network, a process known as the blockchain. Each insertion of new blocks adds data to that chain and contains information regarding the transactions. Confirmation of the new transactions resulting from the mining is a critical component of maintaining and developing the blockchain ledger.
The extensively questioned subject is how energy use translates to carbon emissions? How exactly does the process of mining leave a carbon footprint on Earth?
Miners use advanced and expensive mining rigs to make the necessary calculations, and more power means faster and easier mining. Mining rigs are PCs with intricate setups and specialized equipment to maximize the capability, which requires more electric energy. Over the years, the need to process more equations simultaneously rises, which requires additional investments. As the need for an upgrade requires additional equipment, the price of mining increases. This, in turn, means more power, better cooling, and ventilation for the heat produced.
Fast processing implies more guesses of the correct solution and a higher chance of finding the correct answer faster than others. Regardless of whether the miners first arrive at the correct answer, they use the same power.
Why Does Mining Use So Much Electricity?
In the early days of mining coins, anybody could use their PC or laptop and run a mining program. However, as the network expanded and more and more people became interested in mining new coins, the need for a more powerful unit to support the mining algorithm became higher. The more miners are included in the process; the lower are chances that somebody will solve the equation quicker. The average time needed for solving the equation increased. This ultimately requires more robust machines that consume more energy.
What Is the Environmental Cost of Crypto Mining?
The purpose of crypto mining is the creation of new units of currency and maintaining the integrity of the blockchain ledger, which prevents illegal transactions. But, does this purpose justify the environmental cost?
According to an article published on the Digiconomist web page, a single Bitcoin transaction takes 1,544 kWh. As for comparison, this power equals 53 days of power for an average US household. In addition to that, more energy power is needed for all of the transactions happening across the world. It is believed that the summarized energy cost of crypto mining is higher than in some countries.
The NFTs’ impact on pollution is a hotly-contested topic locally and globally. The mining operations have significant environmental impacts since the energy used for the mining activities leaves greenhouse gas emissions. Furthermore, the massive impact mining has on the environment awakened the consciousness of many and emphasized the responsibility that humans have over nature. As a result, Tesla halted accepting Bitcoin as a payment, the Malaysian authorities publicly destroyed the mining rigs, and China banned mining and trading entirely.
While many companies and organizations are putting significant effort into making the mining process more environmentally friendly, other digital currencies plan to discontinue the mining process altogether.
What is the Carbon Footprint of NFTs?
Carbon footprint is an estimate of all the carbon emissions released in creating and consuming a product. All operations included in the process add value. When it comes to minting an NFT, it is difficult to estimate the exact impact since many steps of the process does not have a known carbon footprint, but also because there are just a few scientific peer-reviewed studies on this topic.
According to the estimation by the platform Digiconomist, a single Ethereum transaction’s carbon footprint is 33.4kg CO2. At the same time, artist and programmer Memo Akten estimates that an NFTs transaction has a carbon footprint of about 48kg CO2 on average. Additionally, when NFT is minted or sold, another transaction is realized. On the other hand, mailing an art print, according to Quartz, has a carbon footprint of 2.3kg CO2, or in other words, the carbon footprint of NFTs transactions is 14 times higher than mailing.
Lower-carbon NFTs?
Blockchains like Ethereum and Bitcoin operate using a system called Proof-of-Work (PoW). It is the primary reason for the massive energy intensity of 28 TWh annually for Ethereum and 72 TWh for Bitcoin. However, there are blockchain alternatives running with a different system, such as Proof-of-Stake (PoS), whose estimated annual energy consumption is 0.00006 TWh. The PoS blockchains do not rely on massive computing power and consequently use substantially less electricity.
WAX – A clean & carbon neutral blockchain
One of the ecologically responsible companies is WAX – Worldwide Asset eXchange. This certified carbon neutral company works as a PoS system, a transaction validation design that thrives towards building a sustainable future. WAX has an environmental mindset and constantly is taking action to erase its carbon footprint. Moreover, it is energy-efficient and creates offset NFTs while partnering with Climate Care.
Why WAX?
With WAX DPoS, transactions are approved by 21 energy-efficient guilds entrusted with that responsibility by WAX token holders. WAX token holders who stake their tokens are eligible to vote for their preferred guilds. Staking uses substantially fewer resources compared to mining, without the need for additional machines.
Many NFTs are minted and traded on Ethereum, and as previously mentioned, this blockchain mining or PoW requires a tremendous amount of energy to process transactions. Namely, the 75.8 kilowatt-hours of energy that Ethereum transaction consumes are 125,000 times more energy than WAX needs. Moreover, Ethereum and Bitcoin PoW chains are constantly battling for computing power dominance, which is not the case with WAX DPoS. In other words, Ethereum and Bitcoin grow in terawatts of energy each month, and on the other side, WAX blockchain energy consumption is relatively stable. If we assume that all the NFTs minted and traded to date on WAX had been created on Ethereum instead, whooping 4 million tons of carbon dioxide would have been released into Earth’s atmosphere. That enormous amount of CO2 emissions can be possibly be sequestered with growing 88.9 million tree seedlings for 10 years.