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 a 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
Blockchain and crypto platforms provide massive opportunities for positive innovation and ways to connect humans in the metaverse. Virtual interactions and experiences create new ways to do business, tackle problems and build trusted relationships, while reducing the need for physical “stuff” on a finite planet.
NFTs have allowed the Wombats to create exclusive content and experiences for fans, allowing them to attend a virtual concert in the metaverse. In a post-pandemic world, everyone appreciates the value of both human and virtual interaction. When we set up our NFTs platform we made sure we fully understood the environmental implications and have partnered with an innovative carbon credits provider to offset the impact seven times over.
Wading Herons works with big businesses who have been managing their climate impacts for many years but we’re also increasingly being asked to help organisations of all sizes to help them address sustainability concerns as societal awareness and expectations grow.
Technological innovation can drive big enhancements in our lives and is a vital part of achieving a sustainable future, but also has unintended negative impacts on people and the natural world. Whether you’re a business, famous artist or rock band it’s about finding a balance between embracing new creative opportunities and minimising your impact on the planet.
Top Tips for a Green Approach to NFTs
- Buy proof-of-stake NFTs. The proof-of-stake method uses less energy than proof-of-work because it does not require the extensive use of computing hardware. Ethereum – which currently supports the majority of NFT transactions – is transitioning to the proof-of-stake method during 2022.
- Use and Invest in Renewable Energy. Buying renewable energy to power the energy use of your NFT and other crypto investments means that you can cut out or minimise the associated carbon emissions. Investing a proportion of the profits from NFT sales in renewable energy projects (wind, solar power and other) also generates new capacity to help decarbonise the wider energy system.
- Buy Carbon Credits to Offset. Purchasing carbon offsets from reputable providers won’t impact the energy generated from cryptocurrency but it will mean that you’re supporting projects to reduce or capture emissions elsewhere in the world. Popular carbon offset projects include tree planting and renewable energy capacity in emerging markets.
