Did you know that non-fungible tokens (NFTs) can have an effect on the environment, even though NFTs don’t cause pollution? The way they are produced indirectly impacts our climate.
NFTs can use quite a lot of energy during their creation process. However, since Ethereum has made the switch to proof-of-stake, most NFTs are minted on blockchains that don’t require immense amounts of power like those run by proof-of-work. Any crypto or non-crypto blockchain that consumes lots of energy from nonrenewable sources for its operation leaves behind a larger carbon footprint..
NFT production consumes a lot of energy, but developers are taking steps to make them more eco-friendly.
The environmental effect of NFTs depends on how they are minted. Here’s a look:
NFT is minted on a digital marketplace (usually): NFT creators can use a marketplace’s platform to upload information about their NFT, which is then tokenized and stored in the blockchain. Tokenization is the process of generating keys for an asset, and through this process, NFTs are “minted”.
NFT is listed: After an NFT is minted, the creator can list it in a marketplace. The NFT’s listing price can be locked at a certain value or put up for auction.
NFT is purchased: After an NFT is bought, a blockchain transaction starts. The blockchain network checks the transaction and then shifts ownership of the NFT to the new owner.
Various blockchains will confirm a transaction depending on their programming. Here’s an overview of the two most popular consensus algorithms, proof-of-work and proof-of-stake, as well as how an NFT is processed in each case.
When an NFT is purchased, a transaction occurs. On a proof-of-work blockchain, this means that the network of miners must compete to validate the transaction so they can receive the blockchain reward. The process works like this:
- The system queues the transaction and broadcasts it to the network.
- Once the network is chosen for work, the mining process begins.
- Mining an NFT essentially entails hash functions, such as SHA-256, to create another hexadecimal number that is inferior to the block header’s hash associated with the NFT. To start off, miners add a random number to the original hexadecimal figure; thereafter, each following try incorporates incremental values of 1 added to the preceding random number. For example’s sake, if the initialrandom number was 21, then 22 would be used for next attempt followed by 23 and so on.
- The mining process is a race to generate the correct number, completed by powerful computers. The odds of correctly guessing the hexadecimal number is 1 in 115 quattuorvigintillion (115 followed by 75 zeros). To be the first person to generate a number less than that of the block header, it can take trillions of attempts.
- After a hash function creates a number, the block verifies it, andthe transaction completes. The network then starts working to solve the next hash. To do this, miners send numbers through a hash function–this process is called “hashing.” A miner can make millions of hashes per second. For perspective: every single day, Bitcoin hashes at about 228 exahashes per second (228 followed by 18 zeros). Usually, the network only works on one block at once; however, it averages 10 minutes for each completed blocks.
The high energy requirement is due to the fact that the vast proof-of-work network can only work on one block at a time. All miners are attempting to generate a lower number, which requires more energy.
The NFT process on a proof-of-sale blockchain like Ethereum is similar to other marketplaces until the transaction starts:
- The transaction is waiting in line to be processed.
- A validator, chosen at random from those who have staked 32 ETH, is assigned to validate the transaction.
- Under the proof-of-work consensus, multiple validators compete to validate blocks and generate new tokens. Ethereum now uses a single validator under the new Proof-of-Stake consensus, so energy consumption is significantly lower. According to Ethereum, they now use 99.95% less energy than before.
- After the validator verifies the transaction, it broadcasts the information to other members of its group. These people then vote on whether or not to confirm both the block and transaction.
- This process uses less than 30 watt hours of energy, or around six 9v batteries.