The crypto fad might not burn out — but our planet could

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A piece of art sold for $69 million last week, but you won’t be able to see it in a museum any time soon. The piece, sold by Christie’s auction house, wasn’t a painting or a sculpture — it was a digital JPG file.

As things stand, the positive economic benefits do not outweigh the drastic long-term environmental damages.

When opened, the file contains a collage created by Mike Winkelmann, a digital artist who goes by the moniker Beeple. What separates this piece of art from the JPG saved to your computer’s desktop is that this artwork, titled “Everydays — The First 5000 Days,” was created as a nonfungible token, also known as an NFT.

In the simplest terms, NFTs are electronic tokens that represent assets. In the case of Beeple’s collage, the buyer paid $69 million at auction for the NFT representing the ownership of the piece of art. NFTs are encoded using the blockchain — the same sort of technological foundation that powers cryptocurrencies like Bitcoin — allowing it to serve as a receipt, certificate of ownership and provenance of the piece’s past owners all in one. NFTs have taken the art world by storm and excited the interest of cryptocurrency enthusiasts around the world.

But the NFT market, and the crypto boom in general, do more harm than their supposed good. While NFTs may seem fun — and potentially profitable — they rely on a technology that has proven to be dangerous, if not disastrous, for our environment.

Part of the hype about blockchains is that they serve as a public ledger, a fixed record of data “blocks.” Each block of data can represent anything — from a purchase of Bitcoin to a transfer of NFT-backed art. Blocks are added to the chain through a process known as crypto mining, where high-powered computers solve intricate mathematical puzzles.

A study estimates that bitcoin’s carbon emissions are on track to equal that of the entire city of London.

It’s a fascinating technology, but unfortunately it takes a tremendous amount of energy to power these computers at the scale currently needed to sustain and grow crypto markets. A new study from Cambridge University found that mining bitcoin, perhaps the best known blockchain-backed digital currency, now consumes more energy per year than the entire nation of Argentina. Another study estimates that bitcoin’s carbon emissions are on track to equal that of the entire city of London. Scholars also argue that bitcoin emissions alone could raise the Earth’s temperature by two degrees. Surely this is not a sustainable technology, especially given our current, ever-worsening climate crisis.

That’s not to say that blockchain technology is inherently bad; there are some theoretical applications of blockchain technology that may actually help the environment. A 2018 World Economic Forum report identified a number of ways that blockchain technology could power solutions to mitigate the climate crisis, including managing transparent supply chains. However, these and other proposed solutions do not directly address the incredibly high energy costs of crypto mining.

Scholars argue that bitcoin emissions alone could raise the Earth’s temperature by two degrees.

There have also been some suggestions for partial fixes to the energy drain. Many NFTs exist on the Ethereum blockchain, one of the largest crypto platforms currently in existence. The platform has promised to shift to a less energy-intensive standard for validating transactions, moving from a “proof of work” standard to a “proof of stake” standard.

Unlike the current “proof of work” standard, which relies on computers racing to solve complex puzzles as “proof” to verify transactions and add blocks to the chain, a “proof of stake” standard would instead require a selection of users to “prove their stake” (show ownership of the currency) in order for any user to add blocks to the chain. This would, at least theoretically, lower the amount of energy needed for each transaction. At least one NFT market, NBA’s TopShot, a platform for trading NBA highlight clips as NFTs, already runs on a “proof of stake” system.

There may be a potentially less planet-destroying path forward for NFTs, and for blockchain generally, but as things stand, the positive economic benefits do not outweigh the drastic long-term environmental damages. As such, the major players need to radically change the way the crypto community operates. In lieu of a massive sea change in private regulation (which is frankly unlikely to ever happen), government regulators around the world must take greater notice of blockchain technologies and crypto markets.

Congress should hold hearings on blockchain’s environmental impact as soon as possible, and grill large platforms to account for how they plan to mitigate the environmental harm caused by crypto mining.

Policymakers like Rep. Alexandria Ocasio-Cortez, D-N.Y., who is vocal about meaningful action to solve climate change, should shine a spotlight on blockchain while there is still time. Legislative solutions could range from requiring environmental impact assessments of companies operating blockchain to climate taxes on transactions.

President Joe Biden has promised that his administration will focus on environmental justice, and the administration is already on track to undo some of Trump’s worst climate actions. With a newly invigorated EPA, Office of Science and Technology Policy, and Department of Energy, Biden could make the United States the world leader in both blockchain technology and in blockchain sustainability, creating a model for the international community.

Blockchain technology is theoretically interesting, at its core holding promise for a decentralized future. It’s a future where individuals are able to create new currencies, new markets and new forms of communication and art, all without the interference or oversight of governments. But that future — or any future — first demands that we solve the environmental problems of blockchain before it’s too late.

The NFT trend may continue to shake up the art market, or it may simply fade away, as many trends in the art world do. Regardless, blockchain technology can’t be un-invented. That’s why it’s important that we fix these environmental concerns with both technical and policy solutions before we invest even more resources into NFTs, cryptocurrencies and blockchain tech.

The crypto fad might not burn out — but our planet could.

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