NFTs and the Environment: Worth the $69 Million Hype?
Insight written by Derek Bobbitt, originally published on April 13th, 2021.
Non-fungible tokens, or NFTs, have already made it to the mainstream media with headlines such as “Beeple sold an NFT for $69 million”. Just last week, Dapper Labs, the creator of NBA Top Shot, announced fresh funding bringing their blockchain company’s valuation to $2.6 Billion. So what’s the hype about? An NFT is a crypto asset that represents a digital collection of data such as a piece of art, videos, or even items in video games. NFTs are not the same as cryptocurrencies such as Bitcoin as they are not interchangeable with other NFTs. “Non-fungible” means that the asset is unique and encoded onto the blockchain with metadata that makes it different from every other token, basically giving the NFT its own digital signature. Since they are built onto the blockchains, a P2P public electronic ledger that creates an unchangeable record of transactions, it is very easy to verify the ownership of the NFTs and to determine the legitimacy of an item.
NFTs are a great way to sell digital assets securely which has led to its implementation into virtual trading forums such as NBA Top Shot, an online forum for trading virtual basketball cards where fans can buy and sell video clips of their favorite players. It also took off in the art world as artists became millionaires overnight by putting their digital art NFTs up for bidding. One such story that has gone viral is Beeple’s sale of his digital art NFT for $69 million (it is shown here). This technology has captured a lot of attention over the past 2 months due to these ridiculously priced sales, with the google search trend for “NFT” skyrocketing to record highs in late March (See the original data here). But there’s a catch…
NFTs have also brought on a lot of criticism, especially from the climate activist community, since they consume an insane amount of energy. Joanie Lemercier, a famous French artist and environmentalist, realized this when he sold his first NFT. The sale of the item, which lasted about 10 seconds, consumed 8.7 megawatt-hours of energy, which is the equivalent of two-years of energy use in his entire art studio. This effect occurs with every resale as well, so you can see where in a trading marketplace like NBA Top Shot where resales and trading is common, it can become a serious energy consumption concern.
Many artists have begun to boycott and speak out against companies that announce NFT releases such as ArtStation, which caved to criticism from their users after announcing a series of NFT drops from notable artists on the platform. Lemercier does not think the possible rewards of NFT trading are worth the harm to the environment and cancelled two scheduled drops, which had been projected to be worth around $200,000. However, he also stated that he understands why many are carrying it on as “they could be set for life” after a single sale. Although many see a greener future for NFTs with crypto projects such as Ethereum 2.0, which aims to make the blockchain more sustainable, many are left wondering if the get-rich-quick NFT marketplace is really worth the environmental impact.
Sources:
https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million
https://www.wired.com/story/nfts-hot-effect-earth-climate/
https://www.axios.com/nba-top-shots-nfts-11e23a5c-b90d-417e-91a5-fd62935738ca.html
https://cointelegraph.com/news/ecological-nightmare-backlash-forces-artstation-to-drop-nft-plans
Derek Bobbitt is a freshman from Nashua, NH who is pursuing a major in Business Administration with dual options in Finance and Information Systems & Business Analytics from UNH. He hopes to launch his first venture before he graduates college and is already taking steps with his involvement on campus in the Entrepreneurship Club, Idea & Innovation Society, Changemaker Fellowship, and Marketing & Advertising Club.
