Understanding the environmental impact of digital collectibles

Understanding the environmental impact of digital collectibles

Over the past year, NFTs have taken pop culture by storm. Almost every day, a new celebrity announces their interest in emerging technologies—often ditching NFT collections. From Quentin Tarantino’s Pulp Fiction NFT to Snoop Dogg’s NFT music label, many big names are starting to realize the creative value that NFTs offer. While celebrity participation has played a key role in raising mainstream awareness of NFT use cases and investment potential, it has also drawn the ire of some fans.

Amid the hype surrounding the NFT phenomenon, concerns have grown about the technology’s environmental impact. In one notable example, popular South Korean boy band BTS faced huge headwinds a few months ago as they planned to launch their own NFT series. The backlash experienced by BTS is one of many similar situations that has led some artists to be cautious about exploring the NFT trend on their own.

What many fans miss is that NFTs can be created without sacrificing the environment. In fact, many NFT platforms have adopted greener minting methods by integrating energy-efficient blockchains such as Tezos, Flow, Polygon, and Solana. These blockchains operate using a consensus mechanism called Proof of Stake (PoS) to verify transactions on the blockchain, such as minting NFTs. This type of consensus mechanism requires much less energy than Proof of Work (PoW), which was previously the primary way of verifying transactions, which we will explain later.

But given the amount of technical jargon and misinformation surrounding NFTs, the barriers to entry can feel overwhelming when doing due diligence. Before any artist enters the NFT space, there are four key factors to consider to maximize eco-friendliness: PoW, PoS, sidechains, and carbon neutrality.


Related: How Blockchain Technology Can Transform Climate Action

Proof of employment

The environmental issues surrounding NFTs stem primarily from a consensus mechanism called proof-of-work. Essentially, PoW acts as a security detail for cryptocurrency transactions. To ensure that transactions are safe and legal, computers must solve arbitrary mathematical puzzles as verification. The computers involved in this process require a lot of power, so some celebrities have faced backlash from the community after launching NFTs on PoW chains.

Related: Green Bitcoin: The Impact and Importance of Energy Use on PoW

Proof of Stake

Fortunately, not all blockchains require PoW, and – contrary to popular misconceptions – NFTs can be minted in an environmentally friendly way. This is where Proof of Stake offers a compelling solution. In contrast to energy-intensive computers solving puzzles to verify transactions, PoS simply requires individuals to stake their cryptocurrency to participate in verifying transactions for rewards.

As mentioned, some popular PoS blockchains include Tezos, Flow, Solana, and Polygon. Tezos in particular has drawn attention for its low energy consumption – for the sake of comparison, 50 million transactions on Tezos only generate the carbon emissions of 17 global citizens.

Related: Proof of Stake or Proof of Work, Here’s the Problem

Additionally, one of the leading blockchains in the NFT ecosystem – Ethereum – will soon transition from PoW to PoS system. According to the Ethereum Foundation, the network is about to switch from PoW to PoS, rumored to be coming this fall, which will make it roughly 2,000 times more energy efficient and reduce overall energy usage by 99.95%.

Sidechains and Layer 2 Solutions

Another alternative to circumvent the excessive energy consumption of PoW is sidechains, which are independent blockchains that run parallel to main chains such as Ethereum. This independence allows sidechains to set their own rules around transactions, security, and governance. Since sidechains do not have to rely on a distributed network of computers to verify transactions, their carbon footprint is greatly reduced.

A good example of a popular sidechain in the NFT space is Polygon. Notably, Polygon is also a layer 2 solution, or third-party protocol, which supports the Ethereum main chain by increasing transaction speed and gas efficiency. The community-managed nature offered by many of these sidechains is particularly consistent with creators and developers seeking to build a mutually beneficial economy with fans, making sidechains a compelling option for those entering the crypto space.

carbon neutral

Whether projects use PoW, PoS or sidechains, it is important that they acknowledge and maintain responsibility for their carbon footprint.

Projects can work towards carbon neutrality in a number of ways, such as implementing carbon offsets through integration with carbon removal projects. Take Rarible’s integration with the popular carbon removal marketplace Nori earlier this year, which allows anyone to offset the carbon footprint of most Ethereum NFTs listed on Rarible.

With these factors in mind, it is important for artists to do their due diligence to ensure they choose to mint in the NFT marketplace and projects that uphold their values.

Related:​​​Green Finance Requires Effective Voluntary Carbon Markets

While some people use NFTs as a cash grab without regard for context, this characterization misrepresents the community-centric intent of the Web3 futurists and innovators behind the technology. By adopting eco-friendly, utility-driven NFTs, artists can open up a new realm of possibilities to connect and share value with their fans.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.

The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Alex Salnikov is the co-founder and chief strategy officer of Rarible, a community-focused NFT marketplace. A blockchain trailblazer and active developer in the crypto space since 2012, Alex served as the CTO of CoinOffering, the first company to issue shares in the form of a blockchain asset. Alex holds a BS in Computer Science and a MS in Data Science, with expertise in a variety of areas, including market analysis, decentralized finance, NFTs, and token economics.

Source link


Be the first to comment

Leave a Reply

Your email address will not be published.