NFTs cost more than they’re worth – Technique

Non-fungible tokens (NFTs) have received considerable buzz over the past few years, like the rise of decentralized digital currencies such as Bitcoin, Ethereum and DogeCoin. 

NFTs and these cryptocurrencies (crypto for short) both live on the blockchain, consisting of a list of records called blocks that contain a unique hash to ensure that data cannot be altered in any one block without altering others. 

This ensures — in terms of NFTs — that the digital assets made, bought and sold online cannot be copied with the same value of the original. 

Though arguments can be made as to the true worth of this media considering how bloated the market has become from lower quality assets made, there can be no denial in the fact that NFTs have a negative impact on the environment.

The energy usage in the creation and maintenance of NFTs is detrimental to the goal of zero-emissions in the fight against climate change and as such, should be looked into how to improve its carbon footprint.

NFTs are created by a process called proof-of-work (PoW) operating method, which requires a large amount of electricity. 

Most of these NFTs are also stored on the blockchain of the Ethereum cryptocurrency, which also has a high carbon footprint. 

Essentially, electricity produced from fossil fuel power plants are being used to create digital currencies and artwork — an almost direct system of earning money from pollution. 

The process of creating NFTs is also very inefficient, with a 2018 paper stating that extracting gold or copper from mines is less energy intensive per dollar than crypto mining. 

This sort of poor input to output ratio has led to a usage of nearly 26 terawatt–hours of electricity a year for these digital goods, which is comparable to the energy usage of the entire population of Ireland.

 The way that NFTs are linked to cryptocurrencies is by means of tokenizing the digital art on the block chain. 

Artists must pay a fee to these Ethereum miners to compute the calculations needed to add their art onto the blockchain. 

This is to ensure that the digital ID given to the artwork cannot be tampered within essentially a digital ledger. 

Due to the decentralized nature of these currencies, those with faster computer setups can add to the blockchain faster than others. 

It boils down to a race between many different computer systems, each trying to be faster than the others, and drawing more power with each new wave of NFT and crypto mania.  

On the cryptocurrency side of this, replacing the PoW mechanism would be the most important, considering how much energy this process takes. 

But since it is so essential to how these systems work, then an alternative mechanism would have to be just as robust and secure. 

A solution that Ethereum themselves have pushed is the proof of stake mechanism, which does away with the cryptographic puzzles and miners. 

Instead, “validators” compete to add to the block chain by placing an ante as collateral. 

This is a less energy-intensive way of mining, but as of now, Ethereum has yet to switch to this process.

The question remains then, what should digital artists do to curb this negative outcome from  their works? While it would be inconvenient for all of these artists to place a solar panel over their home, it makes sense for them to lobby their government representatives to address such issues. 

Right now, legislation surrounding NFTs and crypto is sorely lacking, much like the early days of the internet. 

The idea of a currency untethered to a central bank or government is an appealing one, but if we are to ensure that the way the digital market is setup will change instead of contributing to the climate crisis, then we must be the custodians of our system.

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Author: Traciwininger

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