Are Non-Fungible Tokens A Threat To Nature?

NFT


NFTS: You may have heard about the incredible energy cost of cryptocurrencies and NFTs, and it’s partly true. But things are changing. Fast.

This is an excerpt from Be[In]Crypto’s new free downloadable eBook, called Sustainability and Cryptocurrencies: An Analysis. Download it here.

You may have heard about the crazy energy cost of cryptocurrencies and NFTs, and it’s partially true. Digiconomist.net estimates that a single Ethereal The transaction requires around 120kWh of power, just over four days of power for an average American home.

Since most NFT sales are based on the Ethereum blockchain and there are thousands of sales every day, the energy usage is significant.

Unlike regular tokens which are mostly Ethereum ERC-20 smart contracts, NFTs are ERC-721 or ERC-1155 smart contracts. Consequently, minting an NFT means creating a smart contract that is stored on a blockchain network.

Because smart contracts can tokenize a wide range of human activities, the use of NFTs is also wide in scope.

NFTs can be:

– Works of art, either stand-alone or in blockchain games/cards.

– Tickets for sports and events, which can also serve as memorabilia.

– Video and music.

– Virtual merchandise on metaverse platforms for avatar characters.

– Domain names and documents.

– Real-world assets, such as real estate (CityDA0 in Wyoming).

Therefore, because NFTs are smart contracts, they use smart contract platforms with Bitcoin not be one of them. Consequently, NFT trading consumes as much power as can be expected from PoS blockchains. In its non-updated state, Ethereum is the largest smart contract platform using 238.22 kWh per transaction, according to Statista.

NFTs and Ethereum

However, Ethereum is also in the process of moving from a work test model to a proof of stake model. This has been a long-term project for the Ethereum Foundation and can reduce the energy per transaction to as little as 35 Wh, as there will no longer be countless computers competing to finish each task, replaced by validators with their funds staked.

If it works, it’s a reduction in annual energy use similar to that of some midsize countries to that of a small US city. Since these transactions would use some energy anyway, this move is a good step to make. cryptocurrencies and non-expendable much better chips for the environment.

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If the Ethereum merger is completed on schedule, it would fall in line with other PoS blockchains in terms of energy expenditure. We can then compare previous Visa power usage to the broader PoS ecosystem of blockchains that Ethereum will enter.

This is a good metric to see the energy consumption of the NFT market. To take it to a more granular and illustrative level, Visa’s energy consumption is equivalent to around 20,000 US homes for 2019, according to Digiconomist.

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Current market

In 2021, the size of the NFT market grew to $41 billion with weekly sales between 15,000 and 50,000 NFTs. With the upper range chosen as a baseline and multiplied by the average PoS energy spend of 20 Wh per transaction, this leaves the NFT market with an energy consumption of 1000 kWh per week.

Annually, this translates to 0.052 GWh. According to the US Energy Information Administration (EIA), the average annual electricity use for a US residential utility customer was 10,715 kilowatt hours (kWh) in 2020.

Comparatively, this means:

• 0.0107 GWh per US household per year.

• 0.052 GWh for the entire NFT market in the upper range of activity (50k weekly sales), per year.

From this, we can conclude that PoS blockchains are inherently aligned with green requirements compared to PoW networks.

This is an excerpt from Be[In]Crypto’s new free downloadable eBook, called Sustainability and Cryptocurrencies: An Analysis. Download it here.

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