When Henry Ford put the world on wheels with the Ford Model T in 1908, he had no clue that cars would become one of the primary causes of global warming. Likewise, when the plastic drinking straw was invented, nobody predicted that they would be ingested by marine wildlife.
When you’re in the early stages of bringing an idea to life, you have to think in terms of days, not decades — especially when you’re ushering in a massive technological breakthrough. Such is the case with the NFT boom we’re witnessing now. Beneath the unbridled optimism lies a serious issue: the ecological impact of NFT transactions, most of which reside on the Ethereum blockchain.
As NFTs, and cryptocurrency itself, become more popular the issue of Ethereum’s carbon footprint becomes more pressing. We receive questions on the topic regularly, so we wanted to share this explainer. In short, we need to ensure that NFT transactions are sustainable, smart, and scalable. But let’s start by understanding the terrain.
NFT Transaction Costs in Perspective
Cryptocurrencies like Bitcoin and Ethereum, the blockchain on which most NFTs reside, burn exorbitant amounts of electricity — so much so that China’s Inner Mongolia, one of the nation’s mining hotspots, has outlawed cryptomining.
The massive energy expenditure is the result of millions of machines furiously competing to “find the hash” for the previous block, and thus get the Ethereum coin rewards for the current block. This is called Proof of Work (PoW). You can think of it like scavenging for Willy Wonka’s Golden Ticket in each block: remember the girl whose father made his factory staff search for a ticket? More people opening more Wonka Bars equates to more electricity consumed.
Every transfer of a token on the blockchain requires a specific amount of computing power. For example, an Ethereum transaction uses about 35kWk, the equivalent of three days of an average American’s electricity consumption and about 600x more than an hour of streaming Netflix.
These statistics paint a bleak picture, but is there more to the story?
A Big Problem or a Big Misunderstanding?
Proponents of PoW have made the case that the Ethereum network has a fixed energy consumption, meaning the surge in NFT transactions doesn’t make Ethereum’s carbon footprint any larger.
A common analogy is to think of the Ethereum network like a train set to cruise control: no matter how many people (cryptominers) board the train, it chugs along at the same speed.
This thought experiment is appealing, but misleading. The reality is that millions of people are on a train that’s polluting the environment. Whether you and I are on it or not, the damage is being done.
We need an alternative transportation method to the metaphorical train. Can the same ingenuity that brought us to this point get us out of it?
Paving the Path for an Eco-Friendly NFT Industry
Some NFT platforms are attempting to offset the carbon cost of transactions by donating to carbon capture projects or by investing in wind farms around the world. These initiatives are admirable, but they dance around the most logical solution: migrating to an energy-efficient blockchain.
That’s where the Binance Smart Chain (BSC) comes in: the blockchain on which the Artaku NFT platform sits. BSC is a “fork” or modification of Ethereum. Instead of relying on Proof of Work, BSC uses Proof of Stake, a system which gives mining power based on the percentage of coins held by a miner.
Remember how Proof of Work requires millions of machines (and burns gobs of electricity in the process)? Proof of Stake only uses 21 computers to validate transactions. This streamlined process results in a much smaller carbon footprint, and reduces gas fees (that can make minting an NFT unreasonably expensive) to just a few cents per transaction.
Achieving true carbon neutrality in the crypto world is an ongoing, complex conversation — at least right now. But that’s no reason to prioritize speed or profits over the long-term health of our planet. The auto industry waited decades to make eco-conscious decisions. Fortunately, we have the data and resources to leave a different legacy.