The first I ever heard about NFTs was during an architecture studio class about a year ago. My professor was telling us this crazy story of how a really crappy virtual environment of a “Mars Home” sold as an NFT for $512,000 worth of Ether. I was dumbfounded when I saw the project. It looked simple, and low in quality in comparison to some of the work my fellow architecture classmates were rendering at the time, but it was the first of its kind. The value of this piece of blockchain took my attention. It was amazing that you could take a piece of digital art, and sell it over the internet as an intangible good for so much money.
As a minority woman, it is pivotal for me to establish myself in the fields of art and technology. This was thus a perfect opportunity for me to penetrate the crypto market with my art as one of the first few people my age. Despite the time consuming schedule which I had in college, I managed to create a piece of 3D art on Cinema 4D which I then listed on OpenSea for sale. The piece still hasn’t sold yet and was aired only as an experiment, however, it kickstarted my vision for Studio Gulban: creating 3D assets and virtual interactive NFTs as art with a cause. However, when I learned about the conflicting facts about NFTs' impact on climate change, I knew I had to do more research.
As I began getting more invested into the NFT realm and gathering data trying to understand NFTs more thoroughly, I came across interesting information that could help others who have confusion about NFTs or have been looking to do research on this landscape but simply do not know where to start:
Firstly, what are NFTs?
According to ethereum.org an NFT (Non-Fungible Token) is a token that we can use to represent ownership of unique items. The term non-fungible means that this specific token has unique attributes, such as a one-of-a-kind art piece, as opposed to for example a crypto token such as a Bitcoin which is identical and interchangeable with another bitcoin. What sets NFTs apart is that in addition to being on the crypto blockchain, they are unique creations thanks to the characteristics given to them by their creators. Because NFTs are secured on crypto blockchains such as ethereum, the original data is protected from being copied and redistributed online. This allows digital content creators to protect the authenticity and value of their intellectual property such as art and music online. It also opens the door for artists to distribute their creations online in exchange for cryptocurrency compensation.
How do they operate?
The way an NFT operates depends solely on the type of cryptocurrency that the NFT is ‘minted’ on. According to coinbase.com, cryptocurrencies generally use a consensus mechanism in order to verify a transaction, and consequently add it to the blockchain to create a new token. Because cryptocurrency is decentralized, this step is important as it helps ensure that each transaction goes through only once, without the help of a regulating entity such as Visa and PayPal.
There are two main types of consensus mechanism used by cryptocurrencies: Proof of Work and Proof of Stake.
Proof of Work is the older of the two and is used by cryptocurrencies such as Bitcoin and Ethereum 1. How this system works is that servers around the world race to solve a mathematical problem to secure transactions on the blockchain. Whoever succeeds in solving the mathematical problem is in charge of updating the blockchain with the new transactional information. The entity is then rewarded with a fixed amount of crypto for completing this process.
One of the main disadvantages with this type of consensus mechanism is that it is slow, and takes a large sum of processing power which results in the greatest issue with this approach: its impact on the environment.
To put this impact into perspective, “the carbon footprint of an average single-edition NFT minted on the Ethereum blockchain is equivalent to driving a car for 1,000 kilometers, and for higher editions, the figures are equivalent to dozens of transatlantic flights.” This is based on research done by Memo Atken, artist and creative technologist. For the sake of additional context: it takes $5,000 to offset the carbon emissions from a single collection released by ‘the First 5000 Days’ artist, Mike Winkelmann, more popularly known as Beeple.
A Faster, More environmentally conscious approach to NFTs
Proof of Stake is a newer form of consensus mechanism (used in Polygon, Solano and etc.) which relies on a process in which the owner of a cryptocurrency can stake their coins and create their own personal validator nodes. When a person stakes a transaction, they are lending their coins to be used to verify transactions. During this process, the coin is locked up for the duration of validation in which the transactions are checked for accuracy. If the transaction is accurate, the stakeholder adds the block to the blockchain and they get compensated with cryptocurrency. On the other hand, if a block with inaccurate information is presented by the validator, they lose their stake tokens as penalty.
Since the proof of stake method does not need intensive processing power in order to solve mathematical problems like the Proof of Work method of operation, it uses a lot less energy in the validation process. electricity is not needed to solve problems as the only process involved is picking stakeholders to verify the transactions. As a result, this type of consensus mechanism is extremely eco-friendly. in addition to that, because no time is spent solving equations, the proof of stake is also more efficient in verifying transactions and giving out NFTs. As a result, publishing an NFT on a Proof of Stake blockchain is definitely more efficient and less impactful on the environment.
As a result, it still is possible to to engage in the 'NFT craze' both as a collector and a creator, without having to contribute to the ongoing environmental crisis. All it takes is taking a mindful approach to the choices you make and the Coins you invest in.
Reach out if you have any other questions or concerns. I'll be happy to help!
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