NFTs first boomed in 2020, and they are not going away. Ranging from unique avatars to tokenization of real world assets, non-fungible tokens have taken blockchain by storm. One 2022 analysis predicts a market increase from $3 billion to $13.6 billion by 2027. That’s a 35.0% CAGR over five years.
This prediction is based on non-fungible tokens' continued success in the online gaming industry and sports collectibles. Not to mention NFTs’ multiplying real-world uses, like tokenizing physical homes for web3-based real estate.
NFTs biggest criticisms have centered on high energy consumption and the effect on climate change. Doesn’t the process of minting, selling, and trading NFTs emit a huge amount of carbon? How much energy do NFTs use? In this article, we’ll look into how much NFTs have historically used, and what their energy consumption looks like now.
Do NFTs use a lot of energy?
The short answer is: They use less than they once did. First, it’s worth mentioning that the Ethereum network platform is the “home base” blockchain for NFT minting and transactions. Ethereum is a prime place to develop NFT marketplaces because it’s the world’s largest smart contracts platform. The first NFT auction marketplace, OpenSea, launched on Ethereum before expanding to other networks. And many of the most successful NFTs, like Bored Ape Yacht Club and Cryptopunks, launched on the Ethereum blockchain.
Second, it’s important to realize that NFTs are not especially pollutive or energy intensive. At least, not any more than other types of crypto exchanges on the blockchain. Energy consumption for blockchain doesn’t come from individual NFT transactions, but from the validation of new blocks.
Think of data storage blocks in terms of an airplane. Whether it carries one or 100 passengers, the plane will take off and emit a certain amount of CO2. Each data transaction, whether it’s minting, bidding, or transferring ownership, is like a seat on the plane.
The price of the ticket, or the cost of data storage, are “gas fees.” It could be that it’s a very full plane, so ticket prices soar. We might see this when gas fees balloon while many people vie to bid on a particular NFT auction. That is not related to energy consumption, however.
It doesn’t matter how much an NFT ultimately sells for, either. One $2 million sale takes up the same amount of data storage as a $2 sale. They’re both just seats on the plane. NFT creators’ environmental impact can increase depending on their tactic for selling digital art. Because five $500 artworks use less data space than 100 $5 artworks, artists could limit the energy their NFT consumes. If they opt for high prices and low numbers of pieces, that is.
It’s difficult to estimate the carbon efficiency of individual NFT transactions. According to the University of Cambridge Electricity Consumption Index, the throughput (the amount of transactions a system can process) is independent of the electricity consumption. In other words, the number of seats on the plane doesn’t actually correlate with the carbon footprint of the flight.
The important thing is that the plane will inevitably take off. The data block, empty or full, will be validated. For Ethereum, this happens about every 10-20 seconds. This is the energy intensive process that environmentalists have a bone to pick with.
How much energy do NFTs use? An artist's estimate.
Computational artist and engineer Memo Akten gave one estimation of the carbon costs of average NFT transactions using PoW. He found that to mint a single NFT cost roughly 142 kWh, an equivalent of 83 kgCO2. For a single transaction, like the eventual NFT sale, he calculated the energy cost of 87 kWh, or 51 kgCO2. That’s enough power to last an average household more than two days’ electrical supply.
The Ethereum “Merge” that took place in September 2022 totally changed NFTs’ environmental impact. Now, NFTs are drastically more energy efficient.
Changing from Proof of Work (PoW) to Proof of Stake (PoS) as a consensus algorithm dramatically reduced the carbon emissions related to Ethereum activity.
A far cry from the global computing arms-race that Bitcoin propagates, PoS limits data authentication to one computer. It limits new code’s validation to one algorithmically assigned validator, instead of a global free-for-all that overturns every few minutes.
Before the switch, Ethereum’s average energy use was 78 terawatt hours per year, comparable to the energy use of Uzbekistan. Today, it is 30,000 times smaller. In under half a year, switching to PoS brought Ethereum from emitting roughly 11 million tons of CO2 a year down to 870 tons per year. That’s a 99.992% reduction in CO2 emissions, a very significant amount.
What kind of energy do NFTs use?
Bitcoin’s annual energy consumption for 2021 was 104.89 terawatt hours, exceeding the 2019 energy usage for Latvia and Iceland, combined. But blockchain mining in PoW systems like Bitcoin could still become more environmentally friendly.
Mining companies have amassed huge warehouses of computing hardware around the world for blockchain mining. To win the reward for authenticating a block, you have to be the first to finish it. Which takes lots of computer power and lots of electricity.
Crypto mining farms go where energy is cheap and accessible. In 2020, over 75% of data mining occurred in China, where 40% of the energy is coal-fueled. In good news for greenhouse gas emissions, China banned crypto mining farms in 2021 because of energy concerns. Many of these farms relocated to other countries, including the United States, where greener energy is available.
When crypto mining finds a plentiful and affordable renewable energy source, it could be a win-win for miners and environmentalists. One example is the massive hydropower source in Missoula, Montana, which has drawn several mining farms to the region.
But in 2021, almost 80% of energy in the U.S. was non-renewable. And by 2023, it’s anticipated that 40% of the computing power used for blockchain mining will come from the U.S. So, although PoW systems can use renewable energy for greater sustainability, that green energy needs to be accessible and affordable to motivate miners to use it.
NFT marketplaces’ energy costs can be reduced by using a more sustainable mining process and a better power algorithm. Thus, digital assets like NFTs have the capacity to use less energy and reduce any related carbon dioxide emissions. But it depends on how the energy supporting the mining is sourced, as well as national and international regulations.
Minimizing energy use for NFTs
All told, most NFTs are no longer the environmental issue they were once thought to be. And even in the energy-consumptive PoW systems, there is hope.
Beyond Bitcoin and Ethereum, there are also many other distributed ledger technologies and NFT platforms that are environmentally focused. Polygon is a digital platform that has committed to becoming carbon negative. Tezos, another NFT-focused blockchain, encourages environmental artists to mint their work and has a lower energy use than Ethereum 2.0.
At Hedera, we process consumers' needs in the NFT space. We offer fast transactions, predictable gas fees and stable minting costs, all while staying carbon negative. Based on the Hedera network’s throughput of over 2,500,000 transactions per day, each transaction consumes 0.00017 kWh on average. (This is estimated to equal less than .00003 kgCO2). Explore the wallets, marketplaces, and NFT projects available for use today on the open-source, public Hedera network.
Hedera is one of the fastest, cheapest, most secure, and most environmentally friendly blockchains to-date. If you are an environmentally conscious NFT minter or collector, explore our community.