NFTs and energy use
There has been an enormous flood of information regarding NFTs — in general — and the amount of energy needed to facilitate the creation of them and their transfer. I’ve kept my mouth and my blog shut on this topic because I knew immediately that I needed to gather much more data before I spouted off an opinion.
This is an important topic to understand prior to sharing my opinion or views on the matter. Blockchain technology, on the whole, isn’t going to go away. In fact, I imagine its use will only accelerate as it becomes easier to utilize in many more industries and at different scales. So understanding the technology’s impact on our climate, whether that be for minting NFTs or for sending your friend a few fractions of a Bitcoin to pay them back for that afternoon coffee, should be a priority.
I first heard of Bitcoin and blockchain in 2011. I was late to the game as the Satoshi whitepaper was published in 2008.
If you’ll permit me, I’ll share what I wrote in 2017 about blockchain – verbatim:
I’m far more interested in blockchain technology and services than I am about Bitcoin. Think of Bitcoin as the US Dollar. Would you rather invest in the dollar itself or in technology and services around the dollar? The opportunity comparison isn’t very close at all. Now, imagine those same blockchain technologies and services could be used for other digital and crypto-currencies. Now imagine the myriad of other uses outside of finance there are for blockchain.
Bouchon appropriately points out that we’ll see a slew of misapplications of blockchain – likely the same way we saw the misapplications of web sites. The internet is awesome. But it will never solve every human problem. Blockchain is fantastic and has more applications than I can possibly list, but don’t be surprised if you see some dumb ideas that get funded and burn cash (or, Bitcoin).
When I’m speaking to someone about this I inevitably get the same question: “Yeah, but can’t you make money with Bitcoin?”. You can, yes. There are some that have made substantial amounts investing in Bitcoin itself. And there will continue to be some. But the number of people that will earn a return on Bitcoin itself compared to those that do on blockchain will be laughable in 20 years.
Or I could be wrong. 🙂
I think this has more or less played out over the last 3+ years. We’ve seen some crazy things built on blockchain. In fact, back when I was advising more startups, I saw no less than 3 business plans where the entirety of the value proposition was that the company was going to build their idea on top of blockchain. For some things, this makes total sense, for others not so much.
I’ve read a lot of information, research, and reporting about the amount of energy that the NFT market are consuming and — on the face of it — it seems like an enormous waste of energy. However, I’m confident that there is enough attention on that fact and enough people have a stake in both blockchain and NFTs being viable going forward, that there will be a massive amount of progress in short order.
We’ll see if I’m right in another 3 years. But I think we’ll see a massive, and perhaps an extraordinary, reduction in energy use for all services built on blockchain and perhaps rather quickly. There are a few quick fixes that seem to already be in progress that should reduce the amount of energy needed to validate a transaction and I think we’ll also see some mandates that will enforce the source of energy used for blockchain technology. Each of these, and likely many other factors, will show that early 2021 was a huge waste of energy in this industry but it may just end up reducing by such orders of magnitude that credit card transactions will look like more of a climate abuser than crypto.
We’ll see. 🙂