Should You Worry About the Environmental Impact of Your NFTs?
Joanie Lemercier, a French artist whose work is deeply tied to climate activism, has been working on steadily decreasing his carbon footprint by 10 percent each year. In an effort to lessen his reliance on international festivals and the planes that inevitably took him to them, he recently began to explore NFTs — non-fungible tokens based on blockchain technology — as a way to exhibit and sell art while staying at home.
But he was concerned, as many artists are, with the environmental cost of blockchains and cryptocurrency. After some quick calculations, he went ahead with it, and his NFT work quickly sold out. Then, he began a hunt to track down more accurate numbers about the carbon footprint of this hugely successful transaction, which sold more than $16,000 worth of art in a single day. Ethereum alone is responsible for 96,200,000 tons of CO2 since its inception; this is equivalent to the combined annual carbon emissions of the 84 least carbon intensive countries around the globe. But how much of that can NFTs be blamed for?
Lemercier reached out to Nifty Gateway, the NFT marketplace that he sold his pieces on, but they couldn’t, or wouldn’t, give him any answers. Then, the artist reached out to Offsetra, a business that connects companies and individuals with carbon offsets. In 2020 Offsetra, launched carbon.fyi, a user-friendly carbon accounting tool for Ethereum addresses. With its background in carbon accounting of the blockchain that NFTs are minted on, Offsetra was soon able to give Lemercier a number. The artist was crushed when he found out just how much carbon his NFT, in an edition of 53, equated to: 80 kilograms of CO2.
After two years of lowering the temperature in his studio, taking trains instead of planes, and other measures, all of his progress had been destroyed — or so he thought. “I was really, really angry because I felt like I did my best,” Lemercier said. “Four or five months after I first asked for some data, [Nifty Gateway] still hasn’t provided anything.”
Determining the environmental impact of NFTs is a DIY affair. In the absence of formal measures, Lemercier and other artists like Memo Akten have launched their own carbon audits. Based on their findings, when the musician Grimes dropped her NFTs on February 28th, it resulted in 122 tons of carbon, and her open edition of “The Bitcoin Angel” 468 tons.
Yet no peer-reviewed research has been done by academics and the methodology being used by different parties varies widely. There are conceptual questions to answer: Is the footprint associated with minting, bidding on, transferring, and selling an NFT like getting in your car and driving 50 miles, thus producing 50 miles’ worth of emissions? Or is it more like getting on a subway or a plane, which are going to get where they’re going whether or not you step on, and create pollution regardless?
NFTs most likely do not have a direct, causal relationship with CO2 emissions, because they are just making use of the underlying blockchain that Ethereum is already running. To calculate a direct relationship, one would have to calculate if NFTs have caused a shift in demand for the overall Ethereum network — the entire technology that keeps track of all Ethereum transactions. Demand for minting NFTs, as during the recent boom, might raise the price of Ethereum gas — the term for the extra computing power needed to mint — and thus encourage more miners to put more resources into mining, worsening its environmental cost, according to Nic Carter, founder of the crypto-asset venture firm Castle Islands.
“You want to measure the fraction of Ethereum transactions that are NFTs. Then you want to try to evaluate how far out of equilibrium those NFT transactions are pushing the clearing price of gas, which is then providing extra revenue to miners,” Carter said. “Then you presume that those miners plow some of that extra revenue into more hashing” — enlarging the Ethereum network and consuming more energy. But, Carter noted, “not all miner revenue is being homogeneously deployed into pure electricity consumption.”
Despite how buzzy NFTs are, they represent a very small portion of Ethereum transactions overall. Carter’s data company Coin Metrics tracked 1.2 million Ethereum transactions the day we spoke; only 30,000 of those constituted NFT transactions — “an aggressive estimate,” Carter cautioned. A specialist at Nifty Gateway told ARTnews that NFTs make up about 1 percent of the Ethereum network. For this reason, Andrew Bonneau, a carbon market advisor for Offsetra, seriously doubts the possibility that NFTs are driving much extra demand in mining. “Certainly, the speculative value of Ethereum is a bigger driver of how much mining is occurring,” Bonneau said. In other words, the rising price of Ethereum currency is more of a motivator to put resources into mining.
This leaves us with the second option: NFTs having an indirect relationship with carbon emissions. Duncan Cock Foster, who co-founded Nifty Gateway with his twin brother Griffin Cock Foster, prefers that subway analogy for Ethereum because subways “consume the same amount of energy whether or not anyone uses them,” he said. “A lot of people like to draw a direct tie to say you caused one transaction and that means that you emitted this much carbon,” he said of Ethereum “I think it is important to understand that the amount of energy doesn’t actually change based on who uses it or who doesn’t use it.”
Carbon emissions are more literally connected to the mining process than the minting process. Carbon calculators like Offsetra’s don’t measure a discreet release of CO2 for an NFT but just an estimate of how much of the total infrastructure of Ethereum a marketplace or artist might be responsible for. Bonneau clarifies this point: “We believe that as users of the [Ethereum] network, we’re all benefiting from it and therefore we should take responsibility for a portion of the emissions from that network.” This concept of taking accountability for infrastructures that we may not directly create but still benefit from is the basis of traditional carbon accounting, the same way individuals collectively benefit from agricultural systems, transportation networks, and energy utilities that all create pollution.
Offsetra’s model can assess a carbon footprint that reflects an NFT’s use of this carbon-intensive network. To do this, they first calculate the total hashing power of the Ethereum network. That calculation is then divided up proportionally to the electricity usage and energy mix (coal, solar, gas, or hydropower) of different regions. Bonneau gave the example of Europe: “If 10 percent of the total hashing power comes from Europe, then that means that we’re going to take 10 percent of Ethereum’s total electricity usage and apply it to Europe. We then multiply that energy usage by the [European] grid emissions factor, which is the carbon emissions per kilowatt hour of electricity in that electricity grid.”
Once this core calculation was done, Offsetra could attribute a footprint based on the Ethereum gas needed to mint one NFT. The total amount of emissions are divided by the total amount of gas used, then per unit of gas there emerges a certain amount of kilograms of carbon dioxide attributed to the single minting transaction. Though carbon emissions vary by marketplace, Bonneau estimates that, on average, a single NFT (edition of one) should take responsibility for about 90 kilograms of CO2 — the equivalent of an hour of international commercial jet flight.
NFT marketplaces have found ways to respond to the pushback of artists and collectors who are concerned about their environmental impact. The marketplaces Superrare and Zora have purchased offsets. Nifty Gateway is now transferring to a system that would mint many NFTs in one transaction as opposed to many separate transactions, potentially rendering their usage of the blockchain 99 percent more efficient, Cock Foster told ARTnews. With these technological advancements and carbon offsets Nifty Gateway has pledged to go carbon negative within the year.
Some NFT marketplaces brand themselves as environmentally friendly, using cryptocurrencies like Tezos. Tezos uses less onerous“proof of stake” algorithms as opposed to “proof of work” algorithms a la Bitcoin, and thus consumes much less energy overall. Bonneau cautions, however, that newer sites might not have audited for security yet and might be a risky place to do business. Currently, Ethereum is mined through proof of work but the hope is that Ethereum 2.0, based on proof of stake, will arrive within the next few years, vastly reducing the network’s energy consumption.
Advocates of NFTs are often frustrated that they are being tasked with addressing and rectifying the damage of the Ethereum network when there hasn’t been a commensurate movement targeting miners, who are responsible for more environmental impact.
The complaint is similar to the one levied by environmental activists who point out that the concept of the personal carbon footprint was in fact promoted by the oil company BP to push decarbonization on individuals and distract from the real polluters: oil companies. Analogies are tricky, and no one person is responsible for climate change, but the controversy has caused shifts in messaging and policy from NFT marketplaces — a positive outcome for the ecosystem overall. However we measure the carbon impact of an NFT, in this ambiguous economy, it’s at least clear that artists aren’t to blame for the majority of cryptocurrency’s environmental impact.
PUBLISHED BY– artnews