by, Melissa Klimek April 26, 2021
Over the past 2 months I have been researching NFTs and have had many starts and stops getting into the market. There have been delays with picking the right exchange, buying cryptocurrency, and bank connectivity to name a few. Just as I was about to load up my first NFT, a conversation with my son had me press pause. “Mom, did you know Ethereum is horrible for the environment?”, he threw out casually. Ethereum is the cryptocurrency and block chain tied to the NFT exchange I planned to use. So I paused my upload and began to do some more research. Although I already knew the mining, or processing, required to create transactions, like coins and NFTs, on block chains uses a lot of energy. But, I didn’t realize how much, or that each block chain processes differently and has differing energy usage. Also some of them have the majority of their processing happening in places that use very little clean energy like China. In fact, the amount of energy used to run block chains rivals that of a small country. Bitcoin is the worst using 707 Kilowatt hours (KWh) to process one transaction. Ethereum is the second most energy intensive, using 62.56 KWh per transaction. Those using the least amount are Dogecoin (.12 KWh) and XRP (.0079KWh). So how and why is the processing power for these so different? In order to create individual transactions on a distributed network, there is a unique processing protocol used. The code and logic behind these protocols vary and some require more energy. Bitcoin, being the original block chain and cryptocurrency uses the “Proof of Work” protocol which allows for unique, distributed, and secure transactions to be created. Unfortunately the algorithms and logic to create the transactions was not developed with energy efficiency in mind. Newer protocols or coding algorithms usings “Proof of Storage”, “Proof of Stake, or block lattice use far less energy and allow for multiple transactions to process simultaneously while still being secure. Cryptos & blockchains like Cardano, Polkadot, and Algorand, use these more sustainable protocols. Generally speaking, crypto currencies and blockchains have the potential to make great progress against many sustainable development goals. They are a virtual currency and so in theory can provide access to money anywhere. They bring a level of security & transparency, and can provide access to capital without bureaucracy, administrative infrastructure & fees. With all of their potential to bring prosperity to our global society; we should not ignore the impacts they can have on the environmental aspects of our world. All of these cryptos should look to move to more sustainable processing. Some cryptos are moving towards these goals, while others are not, and some are stating they are converting to more sustainable protocols but have yet to convert. As our world continues to digitize, the energy efficiency of HOW we digitize needs to be considered. As for me, I have not yet found an NFT exchange that meets my environmental impact goals, but I have adjusted my investments into more sustainable crypto currency.
Melissa Klimek is the Director of ESG IntegrationSolutions at Dream Source Solutions, and Owner of SEER Gallery, a virtual art platform dedicated to promoting women-identifying and minority artists.