The big problem with NFTs: Energy Consumption
The massive problem with NFTs that scare people away from entering the scene is the huge amount of energy consumption used when creating an NFT. Let's talk about it.
*This article will be very long, so make sure to take all the information in. These are my words as a curator and investor in the space.
This is a problem that isn’t as transparent in the space, brought up by a writer a few months ago and it is still something that is not talked about enough. I want you to make your own mind up as you read and create a friendly discussion for solutions.
The problem is that an Ethereum transaction's footprint is 48.14 kWh. This is equivalent to the power consumption of an average U.S. household over 1.63 days. Most of the top Crypto Art platforms and NFT projects use the Ethereum blockchain, submitting thousands of transactions daily. This increases with the number of people who use these sites to mint or sell their digital pieces.
Why does an Ethereum transaction use this much energy?
So the Ethereum blockchain currently uses Proof-of-work (PoW), which allows the Ethereum network nodes to agree on the state of information recorded on the blockchain, preventing certain kinds of economic attacks; most notably the double-spend problem. Proof-of-work is a viable solution to prevent double-spending on the blockchain, and this protocol requires miners to compete in a race to solve blocks on the chain. To solve a block, a miner needs to hash all the transactions inside a block with a random, nonsensical number (aptly named nonce) to solve a mathematical problem that can only be solved through trial and error. When Miners race to create a block, they will repeatedly use datasets that you can only get from downloading and running the full chain through a function.
For finishing a block, miners are rewarded with 2 ETH and all the transaction fees within the block. A miner may also get 1.75 ETH for an uncle block — see here. This provides an incentive for miners to mine on the Ethereum network resulting in many machines fighting to solve a new block. The problem is that although potentially millions of miners may compete to solve a block, there is only one winner. The computation and energy consumption used by the rest of the miners who did not solve the block is essentially wasted.
So, keep in mind NFTs are a small percentage of what happens on the Ethereum blockchain currently. On average, an Ethereum block takes 12 seconds to be mined & verified.
This means that even if you avoid creating NFTs, energy will still be consumed, and you would be one small star in the universe. Does it help enough for you to ignore the benefits it could bring you?
The tremendous energy consumption is not related to NFTs or Crypto-Art but rather the Proof-of-Work algorithm used by the Ethereum blockchain.
Here is a good thread to read:
Ethereum Transaction vs T-Shirt
It takes about 494 kWh or the equivalent of boiling 2,700 litres of water to make just one cotton t-shirt, not calculating the energy required to wash or dry it. This might surprise you! Here is the source for how creating a t-shirt uses this much energy. The energy consumed is more than the energy used in 10 transactions on the Ethereum blockchain. On average, it takes about 4 tx to mint and sell an artwork, ignoring bids.
This means if an artist decided to release clothing for their brand rather than NFTs and sold around ~200 t-shirts, it would use 98,800 kWh. This is comparable to the energy consumption of an average American home in ~8 YEARS!
…or the equivalent of 2058 Ethereum transactions.
So how do we avoid this?
Proof of Stake
So, the ETH blockchain currently uses PoW but is in the midst of transitioning into PoS (proof-of-stake), which is expected to cut down the energy consumption by 99% — source.
Proof of stake is an alternative mechanism where a random person who has a stake in the network is picked to solve one block, instead of having thousands of nodes compete to solve blocks. The participants are called validators instead of miners, and they require you to stake 32 ether each, so everyone is honest. According to Vitalik, moving to PoS cuts the energy consumption by close to a hundredfold. Consequently, Ethereum gas fees will be reduced a lot due to this, so stay tuned if you are waiting for low gas.
“The PoW part is the one that’s consuming these huge amounts of electricity. The blockchain transactions themselves are not super computationally intensive. It’s just verifying digital signatures. It’s not some kind of heavy 3D-matrix map or machine learning on gigabytes of data,” — Vitalik Butherin
ETH 2.0 has already begun its first phases, and we can expect to move over to PoS by late 2021 to early 2022. This may not be ideal, but this means we have a viable solution already ahead of us; time is the one barrier.
To remind everyone, the drastic energy consumption, is all due to the Ethereum blockchain being on PoW. However — NFTs and Crypto Art do not have to be on the Ethereum blockchain.
We have sidechains like Matic and xDai, which are slowly being implemented into OpenSea, helping reduce the number of transactions and gas use. You can mint on sidechains for free, and it won’t use gas, resulting in less energy, but it will still be classified as an NFT as you can transfer to the Ethereum blockchain using bridges.
You do NOT have to stop creating NFTs and Crypto Art due to the energy requirements of the Ethereum blockchain, but you can transition to another side-chain, and then when Proof-of-stake is introduced, transition back.
It is simply impossible for the whole community to transport everything over and many will choose not to do this… but if you believe the energy consumed is too much for you, you can take responsibility and do your part.
If we take WAX as an example, it is DPOS — Delegated Proof of Stake based on EOS. Many artists already use WAX and drop artworks or collectibles on here.
Offsetting your Carbon Footprint
This artwork has “used” the equivalent to an EU resident’ electricity consumption for 3.5 weeks — around 252 kWh. Data took from cryptoart.wtf ~
I accepted the offer of 1.2 ETH for this, which is currently worth about $2,350. So if we tackled it by offsetting our carbon footprint of 252 kWh or 58.751 tonnes of CO2e, it would cost around an average of ~$500.
If an artist has to create NFTs on the Ethereum blockchain, you can still offset it depending on how much you receive for selling that specific NFT. Many websites help offset your carbon footprint by donating $$$.
Here is a helpful website to check how much energy your transaction has consumed to understand how much you should offset — http://cryptoart.wtf/
These are some solutions that I recommend, but we can also reduce the number of transactions that we take while doing these things listed above. This is to introduce features such as gasless minting, which requires fewer transactions per NFT. We can also allow collectors to off-set how many kWh are used when purchasing an NFT through the UI.
Whether donating to a wallet that donates to offset all the kWh used in the platform every month or a % of sales will be automatically sent to plant trees.
This can help offset all kWh a platform has spent, especially if you consider the volume you’ve generated compared to how many tx you’ve sent. Artists or collectors can take this initiative too if they *want by checking etherscan and calculating how many tx they’ve ever sent & start offputting that weekly/monthly.
Is it worth it?
So, I’ve talked about how much energy is consumed while listing possible solutions and benefits — which I believe are fair to talk about. However, I see many artists being blamed for this, but NFTs have helped many people this past year, too, especially with the current global pandemic.
Artists can generate enough funds to pay their bills, and the same for collectors. It allows them to not slave away on commissions for companies but rather use their talent to create art they like and get paid enough for it. Do they have to fight against the system using hundreds of thousands of kWh anyways when they aren’t affiliated with it to stop making NFTs and selling Crypto-Art?
The ratio of one artist against the whole Ethereum blockchain right now is significant, and I made this article to elucidate this issue. It shouldn’t be hidden from people that may not know what is happening behind the scenes.