July 6, 2022
By Anjali Kochhar
There has always been an environmental impact controversy swirling around NFTs (non-fungible tokens) as the minting of these digital innovations is a highly energy-intensive process. At the same time, many in the industry are talking about moving to green NFTs or making the future of digital assets sustainable. But many questions are still unanswered. How far are we from a sustainable future? Are green NFTs really green? Can both types of NFTs coexist?
Before moving to the above-mentioned questions, let’s understand the difference between normal NFTs and green NFTs.
By definition, NFTs are digital assets on a blockchain with unique identification codes that distinguish them from each other. NFTs have taken a form beyond art as brands are utilizing these digital assets to provide customers with unique experiences. These unique digital assets have gained immense popularity in the recent overs at a global level.
Most NFTs are minted on proof-of-work (PoW) blockchains which require tremendous amounts of computing power for their mining process. One such example is NFTs built on the Ethereum blockchain.
As per the data provided by the Ethereum Energy Consumption Index, every NFT created on the Ethereum blockchain consumes 223.85 kilowatt-hours of electricity.
Studies have also indicated that a single NFT transaction on the PoW Ethereum blockchain releases 124.86 kg of carbon dioxide.
On the other hand, impact or green NFTs are minted on a proof of stake (PoS) blockchain or by using a negligible carbon minting process. This ensures that a token is environmentally considerate and may even be climate positive.
The proof-of-stake blockchains do not require miners to devote immense amounts of computing power. Instead, miners are required to pledge cryptocurrency to the network to qualify as transaction validators.
It is known that Ethereum is also about to shift to a proof of stake mechanism in its Ethereum 2.0 update. However, the date of the update is not fixed yet.
An impact NFT is also different to a regular NFT in that it is designed to fund positive social or environmental impact, acting as a digital asset for impact investing.
Companies like Project Ark, Coral Tribe NFTs, MetaTrees, PhenomXHealth, and Woodies, are working on the same mission of having a social and environmental impact through NFTs.
The impact of Impact NFTs
While there are still questions raised on the actual impact of green NFTs on the environment, experts largely are optimistic about the future of these sustainable digital assets.
Arijit Mukherjee, the founder of NFT marketplace Yunometa, said, “While the crypto industry reduces its carbon footprint overall going forward, Impact NFTs’ role as a catalyst will become even more prominent in the days to come.”
Mukherjee believes that Impact NFTs will create awareness and understanding of new technologies such as lazy minting and NFT bridging to a larger subset of the audience over time.
While lazy minting works by not minting the NFT until it is first purchased, NFT bridging works on making the digital assets inter-operable between different blockchains for increased efficiency as well as to move from environmentally-harmful blockchains to the ones fighting climate change.
Mohit Kumar, the founder of BitcoinWorld.co.in, said, “ Impact NFTs can help mitigate environmental pollution and it could even push adoption of NFTs when users are incentivized for using such NFTs. In this way, not only they can improve the future environmental sustainability standpoint but also drive penetration deeper.”
While some believe that impact NFTs can help fight climate change, others are still sceptical if it is even possible for digital assets to do so.
Sharat Chandra, Vice President, research and strategy at Earth ID, believes that Layer 2 solutions like Polygon, which account for a majority of NFT and NFT-based gaming projects, can go a long way in mitigating risks of climate change without jeopardizing innovation at scale.
Rica Amaral, head of marketing and creative strategy at Project Ark, said that NFTs can help fight climate change by changing the incentive system.
“The decentralisation, transparency and ownership provided by web3 can create new ways for people to see money value in preserving and regenerating the environment, at the same time organisation and projects can diversify their support channels and be accountable for the impact they are bringing,” he said.
On the other hand, Hitesh Malviya, founder of IBC Capital, said that green NFTs have nothing to do with fighting climate change directly.
How far are we from the future of sustainable NFTs?
While a majority knows about NFTs, not many in the space are still familiar with Impact NFTs. Amaral believes that there are a lot of projects in the space that many have not heard given they are not “very high-tech.”
He believes that the mass adoption of Impact NFTs will take some two to three years considering that people still have a lot of doubts or questions about NFTs.
Mukherjee, on the other hand, said that the shift towards impact and environmentally-friendly NFTs is already underway noting that already world’s highest-selling NFT creator Beeple have pledged publicly to make their upcoming NFTs sustainable.
Can both types of NFTs coexist?
On the whole, experts believe that both types of NFTs will continue to co-exist in the future.
“NFTs have a much larger canvas and just as fossil fuel, as well as EV cars, are currently sold, both types of NFTs will co-exist for the foreseeable future,” Mukherjee said.
Chandra said that the future of tokenization will have an “equal mix” of all types of NFTs, including Impact NFTs.
Kumar also believes that both types of NFTs will coexist as both have different purposes to solve.
Malviya said: “Yes definitely. the ether 2.0 merge, ether POW to POS proof of staking, as I said is one of the examples.”
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects