Are NFTs Hurting the Environment?

Non-fungible tokens are touted as the new frontier in the high-growth crypto investment space, but the boom in digital art is creating high demand for energy

Vikram Barhat 7 June, 2021 | 9:45AM
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NFT in dark room

The soaring popularity of non-fungible tokens (NFTs) has drawn multi-million dollar trades and celebrity attention. But in addition to generating buzzy headlines, it’s also creating an unintentional byproduct that’s keeping environmentalists up at night: massive energy consumption adding to the overall carbon footprint created by cryptocurrencies, Ethereum in particular.

NFTs are Ethereum-based tokens that are part of the Ethereum blockchain. Platforms that sell NFTs typically need buyers to use Ethereum to make their purchases. It is claimed, the digital token already uses about as much electricity as the entire country of Libya. Greater demand and more NFT transactions indicate profit-making opportunities for the miners, which could then lead to increased emissions. The underlying argument is NFTs could significantly drive up the value of Ethereum, thus incentivising more intense, and considerably energy-hungry, mining for profit, thereby multiplying the number of machines miners use. And more machines often means more pollution.

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About Author

Vikram Barhat  is a Toronto-based financial writer specialising in investing, stock markets, personal finance and other areas of the financial services industry.