Crypto

Concerns about the environment have caused doubt on NFTs, but that is changing now.

Published on: 8 December 2021 09:45 AM
by KnowESG
Environmental Concerns on NFT is changing
Environmental Concerns on NFT is changing

A Brief Summary

Despite the Environmental concerns which NFT is being criticized for, it has become the next big thing in the market today. Over $330 million in NFT sales from April to October 2021 alone will force adoption, according to Crypto experts.

A Canadian company is turning oil waste into energy that powers crypto mining. This self-sustainable system, developed by a company called CurrencyWorks, will ultimately help power the distribution of Zero Contact, a new movie starring Anthony Hopkins, which is set for release next month as an NFT, or non-fungible token, with zero carbon footprint. Many platforms now advertise their eco-consciousness. Some companies are selective about where they choose to mine coins, seeking out places that use renewable sources or excess energy.

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At the COP26 summit in Scotland last month, world leaders squabbled about global efforts to cut carbon emissions. Meanwhile, in Alberta, Canada's oil-drilling capital, a tech firm is doing its lot to help the world achieve carbon neutrality by converting oil waste into ecologically benign energy that fuels crypto mining. This self-sustaining mechanism, created by CurrencyWorks, will eventually help fuel the distribution of Zero Contact, a new film starring Anthony Hopkins that will be released as a non-fungible token with zero carbon impact next month.

Municipalities in Canada pay a charge to have their trash disposed of at the plant. Pyrolysis is a process that decomposes organic material—in this example, solid waste—at high temperatures and under pressure. This creates electricity that may be used for crypto mining; the plant can power up to 200 mining equipment using municipal and oilfield trash. The business may not appear to have much in common with the gleaming world of NFTs and Web3, the next generation of digital and virtual tools and platforms, at first glance, with its massive oil tank and weighty metal pipelines. However, with or without the leadership of political leaders and their vows, this industrial facility is playing an important part in the global energy shift.

The plant in Edmonton, Alberta, is part of a growing movement in the cryptocurrency world to address the environmental impact of "mine" currencies, a practice that has sparked global outrage due to its high energy consumption. According to a Cambridge University study, global bitcoin mining consumes more electricity each year than Argentina as a whole. During the early NFT boom in spring and summer 2021, when NFT sales of multi-million-dollar artworks and collectible products totaled billions of dollars in trading volume, headlines were more likely to question the decentralized trading ecosystem's climate-unfriendly backbone than the artistic or cultural value of the works themselves.

Some may find it difficult to comprehend how a digital transaction—a series of blinking lights displaying binary codes—can have such a significant impact on climate change. It's useful to keep in mind that every digital process uses energy. According to a NASDAQ research report, the worldwide banking industry utilizes roughly 263.72 Terawatt hours of energy every year. Bitcoin, the most popular blockchain and cryptocurrency in the world (and the most energy-intensive) uses almost half of that. The process of creating blockchain blocks, known as mining, is labor-intensive and, as a result, energy-intensive. The crypto industry is now attempting to evolve. Many platforms now promote their environmental sensitivity. Processes like the ones used at the Canadian facility, which employ the CurrencyWorks protocol Zer00, are gaining traction. Cryptocurrency information storage innovations provide appealing alternatives. Some companies are extremely picky about where they mine coins, looking for locations that use green energy or have extra capacity. (Right now, renewable energy accounts for around 39% of bitcoin mining.)

But bitcoin is still in its infancy, and each month offers new efficiencies. The co-founders of a business named StarkWare, Israeli engineers Eli Ben-Sasson and Uri Kolodny, are quick to emphasize the industry's rapid transformation. It's the Boomers that are in this space, not the young engineers and Gen Z artists who are usually the center of attention. Both have scholarly and theoretical roots. However, they are one of several groups that have devised a method for reducing the carbon footprint of Ethereum mining and transactions by cramming more data into each block of the blockchain. (Brands interested in entering the NFT market, such as Marvel and Disney, have already signed on to leverage StarkWare's technology in their NFT launches, as Ethereum is now the most popular NFT trading platform.) They have just secured a $50 million Series C fundraising round at a valuation of $2 billion.) According to StarkWare, their approach cuts energy consumption by 200 to 200,000 times that of other solutions, but on a purely theoretical level, that number is endless.

"If you think of each block of a blockchain as being incredibly carbon-emitting, because of all the mining that goes on, there are fixed costs that are really high," Ben-Sasson argues. "Imagine an aeroplane spewing a large amount of carbon. However, if you could fit 600,000 people on an aeroplane instead of 100, even if the plane still emits the same amount of carbon—which is bad—the footprint per person is actually rather good. That is precisely where we come in."

Kolodny claims that the company's technology now allows "more than a million" NFTs to be packed into a single block. StarkWare has developed a tool known as a ZK or "zero-knowledge" rollup that transfers transactions off-chain, reducing energy consumption. It's a different approach to the blockchain's foundational "proof of work" technical contract. One of the most contentious issues in the blockchain world right now is whether new chains that aren't "proof of work," as well as extra rollups like StarkWare's, can—or will—be acceptable alternatives to bitcoin's fundamental "work." While the most popular cryptosystems, Bitcoin and Ethereum, are still "proof of work," others, such as Binance, Solana, Tezos, and Flow, are "proof of stake" and hence significantly more efficient. One startup that offers a technique to make Ethereum transactions more efficient as-is is StarkWare, which is known for its high-profile clients.

Immutable X, a company that facilitates NFT transactions and claims to be carbon neutral, has been using StarkWare's technology as part of its platform, according to Robbie Ferguson, CEO. He believes that in the crypto world, a shift toward more environmentally friendly options is unavoidable, both from an economic and social one.

"I don't believe the crypto space is overly concerned," he says. "I believe the crypto industry is on a mission to eliminate financial intermediaries while simultaneously promoting digital ownership." That, I believe, is the most important mission for them. However, mainstream enterprises and, most importantly, mainstream consumers [care]. It's also something we're quite passionate about." When big brands and corporations call for carbon neutrality in their work, Ferguson says NFT platforms and blockchain operations like his have no choice but to think about how to make it happen.

All new solutions for cleaning up crypto, according to Cameron Chell, CEO of CurrencyWorks, the company that owns the Canadian plant, have a place in the technology's future; it's one of the first topics that comes up in "every conversation," he says of the environmental aspect of crypto and NFT creation. "It's a big X against your project if it doesn't have a greater good effect, if it doesn't speak to the community, and if it has a significant carbon footprint," he says. In the near future, he sees his own operation becoming entirely self-sufficient on recycled energy. Others will have to figure out how to get there on their own. However, as the market grows—over $330 million in NFT sales from April to October 2021 alone—leaders like Chell and engineers like Kolodny and Ben-Sasson, who are quite optimistic about their prospects, believe that adoption will be forced.

This effort has been boosted by the evident expansion of NFTs; artists, companies, and collectors alike have expressed an interest in environmentally sustainable practices. "The Ethereum blockchain, in general, isn't fantastic for the environment," says fifteen-year-old Bronx-based NFT artist Theo, who goes by the artist name Huppings, "but a remark by Scott Belsky I enjoy is, 'Let's not cancel new-gen tech based on its first generation of use." Ben-Sasson, Kolodny, and many other crypto artists, leaders, and investors share this sentiment. "While ETH is bad for the environment, its consequences pale in comparison to those of huge enterprises like Amazon," Huppings explains. "Those corporations are the leading contributors to climate change."

Ferguson is a more practical person. "I never want the environmental implications of digital ownership and energy to get in the way of global adoption," he says. He has faith in the market's ability to produce.

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