Let me put front and center that I believe that climate change is real and it is the single greatest threat wreaking havoc to the planet and humanity.
There are many, many causes for climate change, so why do we keep hearing about how bad NFT’s are for the environment? Are NFT’s bad for the environment?
NFT’s are tokens similar to cryptocurrencies. They are built with the same tools and run on the same technology as cryptocurrencies. We definitely see in the recent news that governments are cracking down on cryptocurrencies in general, citing crime, increased risk to financial systems and the negative impact to the environment as the main reasons for the crackdown.
Why do NFT’s consume so much energy?
The primary reason related to the environment seems to stem from the high energy consumption that occurs from the underlying technology that NFT’s (and other cryptocurrencies) run on…that is Blockchain. So what is it about blockchain that consumes so much energy? Blockchains like Bitcoin and Ethereum are characterized by being decentralized, meaning that the accounting and validation of transactions occur over a large set of computers that are not controlled by a single centralized entity. Anyone can use their computer to participate in this process called proof of work “mining”. We won’t get into the differences between proof of work vs. proof of stake mining even though there are very qualitative differences. We also won’t get into how different blockchains function differently and that too is material. I will simply stipulate that blockchain mining consumes a ton of resources. It consumes significant resources because of the hefty mathematical puzzles that must be solved in order to participate in the mining process. There are many computers participating in mining operations across the world. This still, however, begs the question…just how much energy consumption?
The University of Cambridge, estimates that just Bitcoin (meaning just the blockchain that operates Bitcoin) consumes power at an annualized rate of 144.64 TWh. That is significant. That is comparable to the energy consumption of entire countries. Egypt and the UK by comparison consumed 153 TWh and 286 TWh respectively in 2020. When you take into account the many blockchains that exist as well as their corresponding network traffic, the numbers do add up dramatically. So there is a legitimate point when one says that NFT’s are bad for the environment. What I find disingenuous about this position is that it tends to be uttered as a soundbite out of ignorance. What does that mean? Ignorant about what?
Is it just NFT’s?
Do you play xbox? Playstation? Do you use Facebook or Instagram? Do you use Google or watch Netflix? All of these services have comparable carbon footprints and energy consumption profiles.
Let’s look at just one for illustrative purposes, say Netflix. Just one single hour of streaming consumes the same amount of electricity (.08KWh) as a Tesla consumes driving more than 30Km or keeping an LED light bulb running day and night for over a month. That is just you…one person watching Netflix for one hour. Netflix has ~221 million “paid” subscribers. I say “paid” because of the current controversy over password sharing. Rough math puts this at about 75TWh to 90TWh of energy consumption per year. That is for one hour of streaming a day annualized. With password sharing and with binge watching that number jumps dramatically. We don’t hear people clamoring about how bad Netflix is for the environment. As I said earlier, this is not just a Netflix problem, the same is true of all the other streaming services. I could just as easily make the same point about how much processing power is consumed by banks. My point is that no one is asking to boycott Netflix or banks because of the harm they pose to the environment.
So, before you say that you aren’t willing to buy NFT’s because they are bad for the environment you should ask yourself the following:
- Am I prepared to stop using streaming platforms?
- Am I willing to get rid of my game console?
- Will I cancel my social media accounts?
- Will I stop eating meat?
- Am I ready to get rid of my car?
- Will I stop buying bottled water?
- Will I close my bank account?
- Am I ready to give up my phone?
Don’t get me wrong, I started out by saying that I believe that climate change is real. I think we ought to try to do everything within our power to reduce our own carbon footprint. My only beef is with disingenuous, ignorant comments that are fundamentally hypocritical. Don’t tell me you don’t like NFT’s because of the harm they pose to the environment while you are eating a ribeye and watching Netflix that you paid with your bank debit card.
Stay informed.
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