You’ve probably heard a lot about NFTs in the last month or so, but it’s difficult to understand what an NFT actually is. Are they, as some say, a novel way to support artists while making bank on cryptocurrency? Or, as others say, a significant contributing factor to carbon emissions? Bear with me and I’ll try to explain.
First things first, what does NFT mean? NFT stands for non-fungible token. Fungible is an uncommon word, but in the case of NFTs it essentially means replaceable. Trading cards or even normal currencies are considered fungible: one quarter is the same as every other and there are thousands of the same Pokémon cards in print. NFTs, though, are non-fungible, which means they’re one of a kind.
So, what actually is an NFT? Well, basically anything. Any existing media can be an NFT, from a tweet to a highlight from an NBA game. These pieces of media are sold by the owner through a blockchain supported by the cryptocurrency Ethereum. Blockchains are a subject for a different article, but Ethereum is incredibly important in understanding why NFTs are so bad.
Why would someone buy a tweet from someone if anyone can just screenshot the tweet themselves? There are a number of reasons, but basically for the same reason anyone collects art: there may be hundreds of replicas, but only one person owns the original.
Usually the creator of the NFT retains rights, especially when it’s something like an album or other artwork, but the buyer is also given the rights to it. That means if you buy someone else’s image you’re allowed to use it in published material or as a profile picture. Another benefit for buyers is that some NFTs offer a portion of every sale or change of hands to the original buyer.
To get an idea of the scale of these transactions, artist Beeple recently sold an NFT consisting of digital art for $69 million through an online auction.
There are some who believe their NFT’s will increase in value like physical art but that remains to be seen.
Why are NTFs bad for the environment? The cryptocurrency they’re based on, Ethereum, must be mined like any other crypto which requires an unreasonable amount of electricity. The average individual NFT transaction uses the same amount of electricity as the average American family uses in 2.6 days and creates as much carbon dioxide as 78,000 visa transactions, or watching over 6,000 hours of YouTube.
The explanation for this outrageous level of energy consumption gets a little technical. Ethereum, like other cryptocurrencies, is based on something called a “proof of work” system. According to an explanation from Wired, proof of work systems require that participants use computers to solve difficult but ultimately arbitrary puzzles. Having the answer to one of these puzzles shows that the owner has gone through the process of solving it and “earned” their Ethereum token or Bitcoin. The upshot is that crypto “miners” around the world run energy-intense computers 24/7 trying to solve arbitrary puzzles to produce online money. To date Ethereum mining has consumed as much electricity as Bulgaria and produced a carbon footprint comparable to that of Estonia.
Some people involved in the NFT industry have attempted to mitigate their environmental impact in a number of ways, from using clean energy to planting trees to offset their carbon footprint. These attempts to reduce the environmental impacts of NFTs is a step in the right direction, but far too few Ethereum miners are on board so far.
There’s nothing inherently wrong about selling a GIF of a cat for thousands of dollars, but, as long as NFTs derive their value from Ethereum, computer farms across the globe will continue chugging along trying to prove that their owner “earned” their tokens. Ultimately, the problem has little to do with NFTs and everything to do with the environmental crisis cryptocurrencies contribute to; NFTs just bring more attention to an industry that’s already doing so much damage.