By Nick Coronges, EVP Global Chief Technology Officer at R/GA
Non-fungible tokens (NFTs) are the latest cryptocurrency phenomenon that has gone mainstream. After we saw the first-ever NFT artwork by digital artist Beeple sold for $69.3 million in March, Non-fungible tokens have captured attention throughout the world. The emergence of non-fungible tokens has been exciting because it validates the work underway in the crypto space and brings a ton of innovation and investment. On the flip side, gold has fulfilled that role for a thousand years and looks to be on the verge of being disrupted as an alternative store of value. But as we look ahead, NFT’s will not only change the way we take in events, and culture for that matter. They offer a way for people to use technology to enhance and think differently about an experience.
Let us break down what we know about Non-fungible tokens (NFTs) and the speculation surrounding digital art assets. We know NFTs draw upon the same blockchain technology as digital currencies such as Bitcoin and Ethereum. While NFT’s have shaken up the art world, we have seen speculation about the environmental impact of NFTs. To give a better perspective, the environmental impact of NFTs is almost equivalent to its use of energy-intensive computer transactions to authenticate and sell the art. What we need to understand and why we should care about the environmental effects of NFTs is that most NFTs’ source is Ethereum which maintains a secure record of cryptocurrency and NFT transactions through mining. The process, known as mining, involves a tremendous amount of energy as ethereum consumes about 26.5 terawatt-hours of electricity a year. This is enough energy to power a small country.
Although the emergence of NFTS has made a splash, we know for sure that this is not sustainable technology, given the current climate conditions. We have already seen a pushback against the environmental concerns. NFT platforms have already made statements to invest in carbon offsets. Businesses and shareholders need to be aware and be held accountable for the risks of such new technologies and make sure they are well aware of the environmental concerns before they continue to invest even more resources into the NFT space.
We would love to see NFTs being used for good and not just as another vehicle for speculation. This has been a barrier that blockchain has struggled to hurdle, and for us, it’s a critical point of distinction. This will be the big question for NFTs in 2021, and it will be keen to see how the development of an efficient process to cut down on the technology’s energy consumption. The digital carbon footprint is becoming increasingly difficult to control. Cryptocurrency platforms need to develop innovative ways to make blockchain technologies more environmentally sustainable. We need to work together to regulate policies to allow new technologies to consume less. NFTs will continue to revolutionize how we see and take in art and other user-centric experiences, and this shouldn’t come at the cost of epic environmental safety concerns.