Business development · 25 April 2022

Can NFTs be Sustainable?

can nfts be sustainable
Written in partnership with Dan Haggis, a sustainability advocate, musician, and drummer for the Wombats.
Non-fungible tokens (NFTs) are the latest technology craze sweeping the creative industry and businesses in every sector are also increasingly exploring the metaverse. NFTs are a great opportunity to create new products and experiences for customers and fans but in a climate-constrained world it’s vital that we consider the environmental impact.

What are NFTs?

NFTs are a token of ownership attached to blockchain. They are increasingly mainstream, with artwork and other virtual cryptocurrency assets attracting high sale values. UK Chancellor Rishi Sunak recently announced the launch of an NFT through the Royal Mint as part of a drive to make the UK a “global crypto-asset hub”.

The UK Treasury is also implementing a range of measures to support the NFT and wider distributed cryptocurrency and blockchain market. Governments and regulators around the world are looking at ways to encourage growth and create stability in the market.More than $44bn (£32bn) worth of cryptocurrency was sent to NFT-related smart contracts in 2021, a huge jump from $106m (£78m) in 2020.

Climate and Energy Impacts 

Every business is now expected to take a proactive approach to climate change, whether you’re in the music game or any other industry. Being ahead of the curve on sustainability is a necessity rather than a nice to have. If you’re looking to build relationships with your stakeholders or your fanbase you’ll be expected to show that you care about the climate – and that you’ve thought about it properly.

Energy use is one of the biggest challenges of the climate crisis and the Russian invasion of Ukraine has only exacerbated the issue. Customers, colleagues and fans are rightly asking questions about the energy impact businesses and bands have and what they are doing to address it.

The huge growth of the digital world has also attracted legitimate concerns about the energy consumption required to power it. Virtual rather than physical products and experiences might seem less impactful on the environment but they need masses of electricity to power the data transactions and storage.

The complex blockchain data mining process consumes vast amounts of electricity for computing power. An NFT transaction on the Ethereum proof-of-work platform uses a lot of energy. Estimates vary but the higher end can be more than 260 kilowatt-hours of electricity – equivalent to 9 days electricity use by an average US household. This is new technology and energy usage must reduce dramatically in the near term for it to continue to be viable.

Getting the balance right between the social, environmental and financial impacts isn’t easy. The international conservation NGO WWF even attracted criticism when it launched NFTs for nature in February.

An Opportunity for Innovation and Connection


 
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ABOUT THE EXPERT

Micael Johnstone is a corporate strategy and future of business expert and Co-Founder of Wading Herons.

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