What are NFTs? and Why are they so bad for the environment?
Hey everyone, because of all the divide and misinformation I have been seeing in the art community, I wanted to write up and consolidate all the information I have been seeing regarding NFTs and their environmental impact. I personally have gained a much deeper understanding of the situation by doing this research, but I am not claiming expertise by any means. I just wanted to put a document together that is accessible to everyone, regardless of how you feel about cryptocurrencies and NFTs politically, and with conclusions I think everyone who cares about the environment can agree on.
This is just an attempt to condense the vast amount of information in an accessible way for people to understand. If you are really interested in taking a deep dive into the data, with more in-depth explanations, then you should read the articles written by Memo Akten. He is the one who actually dove into the data for this research and wrote up his findings quite clearly.
Aside from understanding what cryptocurrencies and NFTs are in the first place, here are the main takeaways:
- NFTs are particularly unsustainable in terms of the individual choices we make that contribute to our carbon footprint. This is a crucial point in the climate crisis where we cannot afford to be making such decisions.
- I am not in any way suggesting attacking artists for taking advantage of a new market without understanding the consequences.
- Most technologies are inefficient in the beginning, and improve over time, but they only improve if we are willing to engage in open discourse.
- We need to engage in discourse with the platforms we are collaborating with so that this issue can be addressed as soon as possible. The lack of transparency has huge negative consequences.
- For those of us in a position of financial privilege, we should either not join, move to a sustainable platform immediately, or wait until Ethereum 2.0 is widely adopted.
- If you are reading this and are thinking of attacking an artist who is unaware of the situation, you do not have good intentions. You should not feel like that will help the environment.
- If you actually care, and aren’t trying to feel good about putting others down, you should look into pushing systemic changes.
- If you are reading this and immediately getting defensive, think about why you’re shying away from the conversation.
What is an NFT?
If you are an artist occupying a digital space it is very likely that this term is familiar to you. They’ve exploded over the past year, and the discourse surrounding them has been unclear at best. So first — what is an NFT? Well to answer this question, it’s important to have a base level understanding of what a blockchain is and how they’re related to cryptocurrencies. My friend, twitter user @ cchprincipal outlines this below, but don’t worry too much if it doesn’t all make sense. Feel free to skip directly to Relevance to NFTs if you must, but this information will help you understand what exactly people are talking about with cryptocurrencies.
What is the blockchain?
(section written by twitter user @ cchprincipal)
To be honest, any explanation I can give cannot top this video by 3Blue1Brown. It is pretty long, but I would highly recommend you watch this if you want a good understanding of how the blockchain works. Doing so will make this discussion make a lot more sense, and I think it’s important not to treat cryptocurrency and, more generally, blockchain technology, as a completely abstract concept.
If you do not have 26 minutes to spare (13 if you can watch this at 2x speed), here is a short summary. This definitely isn’t complete but I think it *should* give you a sufficient background for this discussion.
Let’s talk about the blockchain. This is a general technology that isn’t necessarily paired to any type of currency, or really any sort of application. A blockchain is a sequence of blocks of information. And they are chained together. Now that sounds like a really unhelpful explanation because you can probably gather that from the name, but fundamentally, that is all that it is. It’s a good name.
So why does anyone care? Well, this chain of information can be widely distributed. That means that there isn’t a central authority that keeps track of everything. The information is just out there. That’s pretty strange. Normally, when we access information, we access it from a single source (unless you’re torrenting something). The natural question is how the heck does that work? How can information be reliable and consistent, while being widely distributed and not centralized?
Enter consensus algorithms. Consensus algorithms are algorithms that allow us to develop a consensus between distributed systems.
Imagine you (“user”) want to submit some information to the blockchain. To do so, you create a block of data that embodies that request/transaction, and submit it to the blockchain. This goes to a computer that has a copy of the blockchain (the current distributed ledger which contains every transaction ever made) so that it can be added. Well, a few problems arise. Now, the computer you submit to (“Miner 1”) has a different copy of the list of transactions than the computers that you haven’t submitted to (“Miner 2”). And in a real blockchain, there will be a huge amount of this information being submitted to a lot of computers (in this case, miners). So how will those other computers update their blockchain to match yours, and vice versa? There exist several algorithms that remedy this problem. The most popular one, or at least the one a lot of the most popular cryptocurrencies use (including Ethereum (on which most NFTs are minted) and Bitcoin), is called the “proof of work algorithm”.
Under the Proof of Work (PoW) algorithm, you (“user”) submit transactions to computers (miners) that hold copies of the blockchain. To actually add that transaction to the blockchain, they need to solve a really hard mathematical, very computationally intensive problem. These are extremely difficult and time consuming for machines to solve, and thus take a nontrivial amount of energy. When they have solved that problem, they can add the transaction to the blockchain. This rate limiting allows for the blockchain to not require a ridiculous amount of repeated updates and generally makes machines coming to a consensus of what’s on the blockchain a lot easier. There’s definitely more to it, but I would not do justice to the explanation (once again I refer you to this).
For the sake of completeness let’s discuss the actual consensus part. Congratulations, your information has been submitted to the miner and the miner you submitted to has computed this hash after a lot of computational work, and now adds that to its blockchain. Now, it’ll propagate that version of the blockchain with your transaction added to it, and other machines need to update their blockchain. Of course, there is a catch — there are other miners that also have an updated blockchain that want everyone to update to what they have. So how do you reconcile those differences? Well, whichever copy of the blockchain is the longest is picked. So if Miner 1 added your (“user”’s) transaction to the blockchain, but then Miner 1 got a way bigger copy of the blockchain from Miner 2, you’re out of luck; your transaction is no longer part of the blockchain, at least for now. As a matter of fact, if you still want it in the blockchain, you’ll need to recompute a solution to that hard problem (see: hashing and linking, again explanation given here), which is not efficient.
Now, you might be thinking, “okay, that doesn’t really make sense, I am going to watch that video now,” and I’d say that’s the wrong thing to think right now. You should be asking, “why would anyone mine? This seems like it’ll take a lot of energy and that energy cost (aside from having an environmental cost) is going to cost money.” This is a significantly more productive question. And, you’d be right to ask it. As a matter of fact, you need pretty specialized hardware if you want to effectively mine bitcoin, which, added to the cost of power needed to keep a miner running, is a pretty hefty investment. So what’s the basis?
Well, there is a very typical solution to this in the context of cryptocurrencies (I think there are other motives and rewards if you aren’t motivating cryptocurrencies but that’s not relevant here) — miners get rewards in the form of cryptocurrency. For every transaction (technically a block of transactions — blocks are small sets of transactions and those are the things that are mined and added to the blockchain, not necessarily just individual transactions; this also helps create less traffic and overhead in terms of miners needing to constantly update their blockchain) that is added to the blockchain, a miner gets a reward of a small amount of cryptocurrency. If your hardware is good enough, you can make your investment back, beat the power costs, and then get some profit, just off of these rewards that you get from mining. So that’s why there are so many miners out there.
There’s more to this reward, such as the fact with some currencies, like bitcoin, there is a finite amount possible to mine and thus eventually miners don’t earn a block reward. There exists a concept of transaction fees (essentially people trying to add transactions to the blockchain paying miners for a ‘ticket’ to be included on a block) to compensate miners for that very reason, but this discussion is not quite relevant to the underlying points here
What matters is that miners have a reason to do this, and the incentive is based purely on the cryptocurrency in question having ‘real world’ value.
While the concept of the blockchain is pretty cool and opens a lot of doors to innovation, the current consensus algorithm that’s most widely adopted to ensure everyone has the same copy is literally: waste resources so that less stuff is submitted concurrently, and then pick the person with the longest copy of this distributed ledger. Which is a pretty primitive way of coming to a consensus —I am pretty sure this was developed as a placeholder for a superior algorithm.
Do note that superior, more efficient algorithms do exist! That fact will be important in later discussion.
Relevance to NFTs
So how is this related to NFTs? Well, these crypto coins are fungible tokens, meaning they are indistinguishable. It’s like if you had a bunch of quarters, They’re all worth the same, regardless of which you choose to spend. An NFT is a non-fungible token. It is its own unique coin, that exists on the blockchain network that it was minted on. Because they’re unique, the valuation of every NFT is also unique. Once introduced to the market, they are bid on by individual collectors, and the NFT goes to the person who bid the most. People are minting tons of things off of NFTs, like clips off sports games, artwork, photography, animations, even tweets! And people are spending ridiculously high amounts of money on them. Some people argue that this space has the potential to be a revolutionary space for artists. Why? Well think about how art works in ‘real’ markets. Why are famous paintings like the Mona Lisa, which are owned by museums or private collectors, worth fortunes? It’s not like you can’t just google what the Mona Lisa looks like. The answer is because these paintings like the Mona Lisa are the original. Their value is purely based on that star factor. Similarly, these NFTs are seen as originals by collectors, and therefore are seen as extremely valuable. The difference between the real world and the digital world is that when you mint an original piece, you are imprinting a digital signature on it. That means that it can always be traced back to you, and most of these markets offer an additional benefit: the artist makes a commission (typically on the order of 10%!) when their work is resold. They will always profit off their work and it can always be traced back to them. This is fundamentally new. If this space persists, the argument is that it could allow artists (who typically might not be as well-off) the ability to pursue financial freedom off of their work.
Note that political arguments against the concept of digital scarcity exist, but they are outside the scope of this particular breakdown so I’ll recommend you look into this on your own if this is something you’re interested in.
There are potentially unlimited possibilities to use this space to sell a variety of artwork that doesn’t quite fit in the space provided by art museums or traditional collectors (yet). Currently the vast majority of NFTs are minted on the Ethereum blockchain, which is why the below discussion is relevant and brings up Ethereum specifically.
I will also briefly mention as an aside that this market is very very speculative. Prices and money are not guaranteed, no matter what you see people say. The market has been going crazy for now, but this does not mean it necessarily will a year from now. Just some food for thought.
The Bad
So, this all sounds great, right? What’re the downsides?
Well, it turns out that the transactions involved in NFTs have an absurdly high carbon footprint.
Remember the verification process mentioned earlier? This verification process for the current and most popular standard blockchain (Ethereum), that most NFTs exist on, is based on a Proof of Work algorithm (PoW). This algorithm is designed to be computationally intensive for reasons involving the protection of parties involved in selling and buying. Because of this, any mining activity uses significant energy. Other blockchains have begun transferring to a Proof of Stake (PoS) algorithm, which would massively reduce the energy costs associated. Ethereum 2.0, which is Ethereum moving from a PoW algorithm to a PoS algorithm, is supposed to release within the next year or so, but this has been said for a while, without significant change. Basically, there’s no telling when it will actually become the norm. So, for now, a basic ethereum transaction has a very high footprint. Here is Memo’s breakdown:
So if you were wondering if your ethereum transaction is comparable to your other daily activites, it is not. Your footprint from tweeting, sending an email, or watching Netflix is not even on the same scale as an Ethereum transaction.
But how does this have anything to do with NFTs? Well, an average NFT typically uses several Ethereum transactions, driving up its footprint significantly. This has significant implications for the artists involved in these transactions as well.
I think before going on, it is first worth understanding what a carbon footprint is.
A carbon footprint is a way for people to understand the environmental impact of their decisions. A good breakdown is here, and another good piece to read is here. By reducing your own carbon footprint, you are doing the only thing within your individual power to combat climate change. Everyone needs to reduce their carbon footprint in order to avoid the two degree Celsius rise in global temperatures. People have often argued that this puts the blame on the individual rather than the large corporations that are causing the most damage. I disagree with this idea. The industry’s carbon footprint is only there because we choose to participate in these industries. We can all band together and put societal pressure on the biggest offenders, and doing so is directly tied to the idea that we should try and minimize our own carbon footprint. In other words, we can and should do both — they are very intricately related. It may be worth looking into the concept of shared responsibility and carbon footprints, but this is outside the scope of this piece. Carbon footprints are generally agreed on as a good metric for understanding personal responsibility.
A common fallacy here with considering carbon footprints is an argument of the following nature: ‘My weight when compared to the weight of a train is trivial with regard to the train’s fuel consumption, therefore my decision to ride the train has no impact on the environment.’
This is a deflection of responsibility, if there were not people choosing to ride or send goods through trains, then trains would not run, and that is why it is said your seat has an associated carbon footprint.
How does this argument hold for Ethereum? Many have argued (including SuperRare) that the metaphorical train would run anyway, because of the intrinsic reward associated with mining. This is a misleading argument. This argument is akin to saying if all transactions with Ethereum stopped, miners would still mine. Well think about it, why would all transactions cease? Realistically, because it means the value of Ethereum tanked, meaning nobody wants to trade with it or buy it anymore. This implies that if transactions ceased, Ethereum would have ceased to become valuable, meaning it would longer making sense for miners to expend energy continue mining. If all transactions ceased, they would no longer even be able to trade in their block rewards, Ethereum coins, for real currency! So there would be no justification for them to continue mining. In fact, the entire ecosystem of crypto (and associated speculated value) is derived from getting more and more people to join this network. The people participating in this system is where the value of an Ethereum coin is derived from. In short: the metaphorical train would not run regardless of passengers, and therefore it is more than fair to say your Ethereum transaction has a carbon footprint associated with it.
This means that this argument is not only targeting NFTs! This applies to the entire Ethereum (or any PoW) network as a whole. The reason NFTs are the main part of this discussion is because they have a particularly high footprint, which is simply due to the complexity and number of transactions involved, and that they are specific to our community.
Artists participating in these transactions are often not minting only one NFT, and tracking the average number of transactions involved yields results showing that artists often have much higher footprints than they would ordinarily. This is why the carbon footprint method is important to understand. You may have seen values about individual NFTs, but as the carbon footprint point is about understanding your own impact, I thought it best to reiterate the footprint an average artist participating in this system is responsible for.
This can range significantly. As an example: A single artist has increased their individual footprint by the amount below with the sale of just two editions:
According to Memo’s data, the total carbon footprint of all the NFTs he analyzed (which are by no means the total number of NFTs) have the following footprint:
We collectively as a community are responsible for this footprint.
AND Memo’s numbers are lower-bounded estimates. Not only are his methods transparent and open to critique, there so far has been no data driven reason to doubt the numbers.
Let me clear up a potential misconception here. This is not saying that you choosing to mint an NFT turns on some super machine that uses a certain amount of electricity. Carbon footprints are indirect costs meant to give an understanding of the environmental impact of your choices.
Because very few people are going to intrinsically understand what the unit of kgCO2 means, you have to compare it to other actions in the real world. The best way to do this, is to look at things we are all familiar with, and calculate the emissions associated with them. For example, someone driving a car a set amount of distance is responsible for a certain amount of emissions for doing so. This is why you see footprint comparisons to electricity consumption, driving a car, or flying a plane. It’s meant to give you an understanding of personal responsibility.
Now obviously these numbers seem insane. And because no artist wants to feel as though they are participating in something they would ordinarily view as unethical, there are many misleading arguments circling around in order for people to avoid or deflect this responsibility.
The first is the above example that SuperRare used in their article, that ‘the train would run itself,’ so to speak.
I, (and many others) have already explained why this is a fallacious argument.
The second and more consistent argument is that “well this is nothing compared to other industries, therefore my individual choices do not matter.’
Are we really arguing the sins of other industries absolve us of our own?
As an example, I continually see arguments that since Amazon pollutes the most, our footprints don’t matter. Therefore our unsustainable individual decisions are justified because they aren’t ‘statistically significant’.
This is not an honest way to look at it, and as someone who cares about the environment, I think we should avoid these arguments. Reading more about carbon footprints should also convince you of this. Individual action must also be taken in addition to pressuring unsustainable industries to move towards sustainability.
To put it in a blunt analogy, if Amazon shoots 100 people every day, and NFTs shoot one person a day, would you argue that the NFTs doing so is okay, just because it is statistically small compared to a larger industry? What if you reframe your view, and see that you shooting one person is part of the fact that the entire crypto-industry shoots 100 people? (these numbers are not to scale, they’re only meant to illustrate a point).
Does this seem right? Especially when we as a community can push towards this not happening?
This argument takes many forms. Someone even wrote a viral blog post off of this, purposefully obfuscating the carbon cost of NFTs by comparing it to a dollar per kgCO2 analysis, knowing full well that the emissions of an NFT are not directly tied to the dollar cost of the NFT.
This is the chart he used to suggest that NFTs aren’t that bad (note that his figures for food items are based on 1kg of the food, not on an individual serving):
At first glance, this seems like a good argument. “If I sold as many T-Shirts as I needed to make the money I did off an NFT I would have a higher carbon footprint, therefore my actions are okay.” (I will also point out as an aside that if you read the article making the per dollar comparison, where he gets the figure for a T-Shirt is not quite clear. The source doesn’t lead to a clear breakdown of the carbon cost of selling a T-Shirt. But let’s assume that this, and all his other values, are correct.)
To get why this is flawed, it is better to convert this to a per item scale. After all, an NFT is a single item, and is not directly tied to a dollar amount. I converted it here.
Maybe now you can see how the original comparison is a bit misleading.
It’s important to note here that these calculations are all average values. NFTs can range a huge amount, and the only reason I can’t add the footprint of the highest carbon costing NFT on this graph is because I don’t have the data to figure out what say the highest costing kg of beef is. So it’s not honest for me to show the range of the NFT can take (which would extend >25x the length of this chart) without showing the range that coffee, or beef, or T-Shirts could potentially take. (However, I have my doubts that they would range to the same extent an NFT would).
So bottom line: this number could be even more skewed than shown here.
This means that your individual choice to mint an NFT increases your own carbon footprint by a significantly greater amount than your other decisions.
The point he tries to make is that an NFT is the ‘most ethical way’ to make the amount of money that you would make, because if you sold enough T-Shirts to make the same amount, you would be responsible for a larger carbon footprint. This point completely ignores that a large majority of artists do not sell enough T-Shirts to justify the comparison, nor do most artists even sell T-Shirts. Most artists (within my sphere at least) sell prints or books. For the sake of this argument I will say both have roughly the same carbon footprint (though I suspect that a print would have a smaller footprint than a book). Simple math shows that you would have to sell 176 photo books to have the same footprint as an average NFT. Using the costs given in his spreadsheet, with the number of books you’d have to sell to have the same footprint as an average NFT, you would make $5280. Considering the cheapest NFTs are priced at ~$300, is this really the “best bang for your buck?” So I argue that that particular argument is flawed in many ways and ignores nuances in order to make a point.
To address another point: yes, artists don’t usually sell that many books, and so this is a particularly unique opportunity to make significantly more money than they would ordinarily, I won’t deny that. My point is that this is particularly unsustainable, and is in fact comparably worse to our other unsustainable choices; therefore, we should try and make it sustainable so artists can get the money they deserve ethically.
Before I conclude, I want to address a couple things about myself personally, because I have received many common attacks for talking about this. I have no bias with regards to my reporting of information. I am not trying to spread negativity, nor am I trying to advocate for a boycott of the new space that has been coming up. Nor am I shaming poor artists for making decisions that are financially motivated; I understand people need to pay their bills, and that I speak from a standpoint where I don’t need the money from NFTs to survive. So this is not an attempt at moral posturing, or to shame artists, or to try to destroy the new space. I am simply trying to understand the situation as best as I can, and share it to my community in a way that is accessible, because I believe we all want to make well-informed decisions.
People tend to take this particular environmental issue as a personal attack, and I want to assure you it is not intended to do so. So please don’t feel insecure about this and respond aggressively — we’re all trying to learn and do the best we can. No agenda here, I promise.
Conclusions
So if I am not trying to destroy the new space or attack artists, why am I even talking about it? Because contrary to what people have been saying, talking about NFTs having a negative environmental impact is not a popular opinion. Very few artists with large platforms have been speaking about this issue in a clear way, instead quite a lot have been spreading the information that has been written in a deceptive manner (I do not think this is purposeful or ill-intended) rather than share the actual environmental impacts. These artists have the ability to influence others to join this space that may not need to join this space. Therefore I think those with larger platforms should use them ethically, and inform their audience about the entire picture. I also think there exist plenty of artists who do not need this money, and don’t care about their footprints. Pay careful attention to those who are only sharing one side or the other, and pay attention to the motivations behind doing so.
I think we as an art community often care about social issues like this more than other communities, so it makes sense for us to talk about this. We should put pressures on these large platforms to switch to sustainable PoS blockchains. SuperRare said that they are considering this. In their last statement, they said they intend to donate to Ethereum 2.0 development, carbon offsets, and want to explore other scaling solutions (like Polygon) as well as potentially switching to Polkadot. But, they proceeded to perpetuate the misunderstanding of carbon footprint I discussed earlier. Clearly we need to put more pressure on these platforms in order for them to actually take accountability, but the fact they even spoke on this should show us that putting pressure on platforms like this can and does work, and is exactly what we as a community should strive for. If we can pressure all the large marketplaces to switch to these other solutions as soon as possible, it would absolve us of the carbon footprint issue, and simultaneously continue to support the NFT market. If the collectors genuinely care about the art, then our movements would influence them to join us on our more sustainable markets. For those who love this space, isn’t this the best possible outcome?
So let us put pressure on these platforms to be transparent and open (like we barely saw with SuperRare), and let’s as a community push for sustainability. The world is already in trouble, let’s not let our community’s footprint exacerbate the issue.
In the meantime, you personally can choose to minimize your own carbon footprint. If you don’t need the money, then don’t mint on unsustainable platforms. If you do need the money, maybe try and minimize how you do so. Don’t release multiple editions (which can exponentially increase your carbon footprint), maybe release a few single editions sporadically. We can all help. (Once again, not shaming any artist here, so I am speaking to those who can afford to do the things I am mentioning).
We will also mention the issue of carbon offsets. It’s tempting to throw money at them, and feel as though we are no longer responsible for our own footprint. We’ll point out that while donating to carbon offsets is certainly admirable and better than nothing, it does nothing to erase your own impact. Carbon offsets usually take years to make a difference, so no, you generally can’t just donate money and have your carbon footprint erased immediately. There are no guarantees that carbon offsets will even function the way that they are intended. To put it another way: not reducing your own footprint but donating to carbon offsets is like killing a panda bear and then donating to the WWF.
The bottom line: I am not suggesting inaction. Most technologies are inefficient in the beginning, and improve over time, but they only improve if we are willing to engage in open discourse. Those with bigger platforms must be vocal about this if this is something they care about.
I am suggesting we engage with the platforms we are collaborating with so that this issue can be addressed as soon as possible. If we are in a position of financial privilege, we should move to a sustainable platform immediately, or wait until Ethereum 2.0 is widely adopted before joining. If this is really a revolution, it’ll still be around then.
If you are reading this and are thinking of attacking an artist, you misunderstood the point. If you actually care, and aren’t trying to feel good about putting others down, redirect that energy into holding platforms accountable and pushing for systemic changes.
This is an accessible entry point to learn about the bigger issues at play here; use this period of time to make informed decisions.
I personally don’t have a big platform, so I am writing this in the hopes that bigger platforms can speak on this issue. I am still greatly improving on my own understanding, so any questions or comments are welcome.
Just as a final aside, I want to note there are also political arguments against the rise of NFTs and cryptocurrency. I think these arguments are worth considering, but as I don’t believe they will help contribute to more sustainability among those who aren’t particularly left leaning, I chose to focus purely on the ecological argument here. My personal opinions on cryptocurrencies and NFTs aren’t related to this discussion, because it doesn’t look like these are going to go away anytime soon.
Sources and Further Reading:
Authors/Contributors:
Twitter users:
@ dontpunchansh
@ cchprincipal
@ itsoksami
Sources:
http://cryptoart.wtf/#list=nfts
https://memoakten.medium.com/ (read through all his articles if you want a technical understanding, I personally went through his entire analysis in detail and considering my own research is based on data analysis I hope this gives me at least a shred of credibility)
https://sterlingcrispin.blogspot.com/2021/02/crypto-art-sky-is-not-falling.html (This is the article we saw going around where the author makes the per dollar analysis. We also note that he talks about carbon offsets still being good, and while I don’t disagree with this, as I mentioned it doesn’t erase a footprint immediately.)
https://medium.com/superrare/no-cryptoartists-arent-harming-the-planet-43182f72fc61 (SuperRare’s statement)
Reading:
https://flash---art.com/2021/02/episode-v-towards-a-new-ecology-of-crypto-art/
If you are looking for sustainable platforms now this page has more information (but there are some drawbacks at the moment): https://github.com/memo/eco-nft
Interesting political evaluation of cryptos and NFTs in general: https://medium.com/@everestpipkin/but-the-environmental-issues-with-cryptoart-1128ef72e6a3
Some carbon footprint information: https://www.vox.com/22291568/climate-change-carbon-footprint-greta-thunberg-un-emissions-gap-report
