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NFTs, Simplified

simply put, Non-fungible tokens (NFTs) are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.

Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency.

This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can serve as a medium for commercial transactions.

Environmental Impact of NFTs

the Environmental Impact of NFTs
the Environmental Impact of NFTs

Just like cryptocurrencies, NFTs have the stigma of being bad for the environment. Bitcoin ‘mining’ already generates 38 million tons of CO2 per year, more than the carbon footprint of Slovakia. And a 2018 study published in Nature Climate Change found Bitcoin emissions alone could raise Earth’s temperature by two degrees.

This is because the Ethereum network, which currently uses a proof of work (PoW) consensus mechanism, mints the majority of NFTs. As a result, minting a single NFT necessitates enormous amounts of electricity. Then there are the transactions, marketplace listings, sales, purchases, transfers between users or wallets, and so on… Each of these actions necessitates the computation and recording of a separate transaction on the Ethereum network’s blockchain.


As an example, Digiconomist’s ongoing study of Ethereum’s energy consumption shows a massive increase in power consumption since the start of 2021. This strangely corresponds to the growing popularity of the NFT and Defi markets.

Ethereum energy consumption

“Bitcoin is a proof-of-work blockchain, which means it secures the blockchain and verifies transactions using proof-of-work (PoW) consensus mechanisms. According to Susanne Köhler, a Ph.D. fellow and sustainable blockchain technology researcher at Aalborg University in Denmark, “PoW means that miners compete against each other to mine a block.” “To win in these competitions, specialized computers generate trillions of guesses per second.” It’s what you’d call a “brute-force” approach. This is what necessitates a significant amount of electricity.”

Environmental Impact of bitcoin

“To create NFTs, to bid, to pay for the NFT after winning the bid, or to transfer ownership,” Köhler says, “transactions on a blockchain are required.” “So you could link the number of transactions NFTs require to the amount of electricity they consume, as well as their environmental footprint.” The associated impact of NFTs grows as interest in them grows and more people buy and sell them.”

Miners are generally incentivized to use cheap electricity to maximize profits, according to Köhler, so the energy used for these transactions is also a problem (like fossil fuels). There’s also the issue of the technology used: “Hardware production and recycling only account for a small percentage,” she adds. “However, using specialized computers for mining, which can become unprofitable in a matter of years, generates a lot of e-waste.”

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