An easy critique of non-fungible tokens (NFTs) has always been that they consume a lot of energy to mint, in addition to the energy needed to continuously run the underlying decentralized finance (DeFi) blockchains. Supposedly, all this means bad news for the environment.
However, in the few years NFTs have been mainstream in the public consciousness, much has already been done to address sustainability concerns.
The speed at which these criticisms have been addressed is no surprise when you see that Millennials and Gen-Z are the most sustainability-orientated generations, and also the biggest crypto and NFTs investors.
Younger generations’ interest in the digital sphere combined with increased awareness about the impact of climate change means brands are feeling consumer pressure to be environmentally conscious as they make their way into the metaverse. At the same time, the high energy demand from blockchain transactions is equally incentivizing cheaper and cleaner renewable energy.
Whoever said NFTs are bad for the environment hasn’t considered the long-term benefits.
The future is bright; the future is blockchain. From eco-friendly crypto to NFT impact funds, let's find out how DeFi can support climate change action!
A DeFi attitude
NFTs have been made possible by developments in DeFi, which uses blockchain and cryptocurrency technology to democratize financial transactions. Theoretically, it makes banking accessible to anyone with an internet connection. DeFi’s startup approach is to go against the grain of outdated and traditional institutions and find new solutions to existing problems. By its very nature, DeFi is there to disrupt the system.
This almost renegade attitude from decentralization makes a perfect companion for the NFT world and the fight against climate change. DeFi is making the blockchain revolution possible, and also teaching us lessons.
The World Wildlife Fund (WWF) is one conservation organization that faced serious backlash over its initial “tokens for nature” NFT project for using a high-energy consuming blockchain Ethereum (ETH). However, rather than give up, the WWF responded to criticisms and relaunched with a Non-Fungible Animals collection on low energy consuming, environmentally friendly blockchain Polygon instead.
Whose energy is it anyway?
The art world has always been considered an industry with high environmental impact. Art fairs and other art world activities are estimated to emit roughly 77 million tons of CO2 every year, more than the entire country of Austria.
With the introduction of carbon-neutral blockchains such as Solana and a move to proof-of-stake models that require 99% less energy per transaction, more is arguably being done in the NFT space to address the same sustainability criticisms the art world has yet to respond to effectively.
Likewise, while blockchain transactions may require significant energy, traditional brick-and-mortar banks require equally large amounts. Power is needed to build, maintain, and staff a high-street bank. In addition to the energy consumed by staff and customers in traveling to and from the bank, and electricity required to power the computers and keep lights on.
However, higher energy demand means pushing for cheaper and more accessible renewable energy is possible. In fact, 73% of bitcoin miners are already estimated to use some kind of renewable energy.
Rather than simply detract from the environment, NFTs can be seen as fostering as space where conversation about climate change and its effects can happen. In fact, NFTs growing popularity opens the dialogue to new audiences as it simultaneously address its issues.
One example of an NFT project working to offset its environmental ramifications from the beginning is grassroots marine conservation community the Crypto Coral Tribe. The project has been designed from the start with a dedicated impact fund made from 50% of all primary and secondary sales.
Community led treasuries, such as the Crypto Coral Tribe, then uses an alternative decentralized autonomous organization (DAO) governance structure to vote on how the collected funds are to be used. The success of such projects further illustrates the wide-ranging possibilities of DeFi to implement change.
The customer knows best
As Millennials continue to exercise their buying power and Gen-Z come of age, consumer pressure is equally on brands to be low impact and environmentally conscious as they make their mark in the metaverse.
Gen-Z is increasingly reported as wanting to shop green, work green, and even vote green as they site the climate crises and sustainability issues at the top of their priorities. Growing awareness of the effects of climate change reached a turning point in 2020 when brands reported noticing an increasing demand from customers for a commitment to environmental sustainability.
Making a difference can be easy for brands looking to start NFT minting. The Balmain x Barbie collaboration is an excellent example of how luxury brands can release collectible items with a low impact on the environment. Rather than launch an IRL material product, Balmain x Barbie released three digital Barbie versions that used an environmentally friendly blockchain and took less than 1 kWh of energy to produce.
Despite criticism, so much is already being done in the NFT space to support action against climate change that it’s hard to see claims as entirely valid. For any individual exploring NFTs, doing your research and choosing environmentally friendly options (as much as possible) is how to keep consumer pressure on.
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