Since last month, the artist Beeple sold his work “Everydays: The First 5000 Days” for 69 million dollars at Christie’s auction house, the business of NFTs and cryptocurrencies are on everyone’s lips. There is nothing strange about a painter selling his paintings, but what do you say if that painting is a digital file that everyone can see? Welcome to the NFT world.
Non Fungible Tokens are unique intangible assets that cannot be traded but can be collected or auctioned. To understand it more easily, imagine that your favorite singer comes out with a new single. A single person through an auction will be able to buy the original .mp3 file of the song, therefore obtaining a certificate that proves it. Even so, that song will be public, and the musical rights will remain with the singer.
NFTs are being used to collect or sell art and can be compared to the cryptocurrency Bitcoin. It is a digital element that is worth money, but we cannot touch it.
Though what concerns us today is understanding that these cryptocurrencies pollute. Much more than it seems.
Being a digital element, it does not seem to be polluting. It is not a physical currency, so it does not need paper or ink, and therefore the forests are not harmed. Ok…
But, according to Digiconomist ( the portal of technological analysis in digital currencies), it is estimated that the annual electricity expenditure on bitcoin mining (as the production of the cryptocurrency is called) exceeds the consumption of countries such as Denmark, Bulgaria, and Belarus. It also represents more than 25% of the energy consumption of the Netherlands, 15% from Australia, or 10% from the UK.
For bitcoin mining, powerful computers with specific software are needed to create a block of cryptocurrencies (blockchain) that use a very high amount of energy. This very same energy is produced through fossil fuels such as coal, oil, and gas.
Still, if you have to compare, according to data from a Cambridge University study, Bitcoin produces 506.33 kgCO2, while Ethereum (NFT’s production chain) produces 35.94 kgCO2.
According to the Cambridge estimate, 70% of mining farms are located in China. Another 6% are in Russia, with Kazakhstan and Malaysia adding another 4% each. It is impossible to know what kind of equipment is used in those facilities or how “energy efficient” they are. “Little data is available on the exact market share of mining hardware, and miners often reconnect old, less efficient machines when rewards for blocks rise in value,” the university explains.
The amount of renewable energy they use is also anyone’s guess. Cambridge’s latest estimate, from 2018, is that it is around 20%. Another somewhat more recent study places it above 70%. The problem with this latest report is that it is funded by CoinShare, an asset management firm specializing in cryptocurrencies. Its interest in the sector – the crypto assets they manage exceed $ 5 billion – and has caused several sources to question its credibility.
We know the future is eminently digital, but bear in mind that not seeing something does not mean it does not contaminate. More extensive environmental awareness and more technology are possible, but we need to find the point where both can coexist.