June 10, 2022 – 6 p.m.
By Max Pix of AdAge *
Brands are increasingly recognizing that fungal tokens (NFTs) can provide innovative ways to gain the base of their regular fans and create new revenue opportunities.
But there is often the ongoing question of how experimentation with new technologies (NFTs, cryptocurrencies, metaverse, and the like) can work in a way that is compatible with sustainability initiatives – given their reputation for contributing to spills and negatively impacting the environment.
This reputation provoked reactions from consumers. One example is the K-pop world, where some record companies have protested after the release of NFT products. But are NFTs harmful to the environment? Are there clear ways to make and sell NFTs?
If you’re a brand that aligns with climate awareness, high energy consumption wouldn’t be something that can’t be ignored. But does that mean you have to skip NFTs? The short answer is “no,” and here’s why.
Proof of participation X proof of participation
Traditional methods of making and verifying NFTs are actually energy intensive. Although it is difficult to calculate accurately, EY reported that a single average NFT transaction produced 48 kilograms of carbon dioxide (or more than 105 pounds), which is the equivalent of burning 18 liters of diesel.
Most current NFT transactions are done in OpenSea, an Ethereum-based platform. January of this year was the busiest month ever, with a turnover of nearly $ 5 billion.
This U.S. token market has a proven system of working to validate transactions, a method known to require high computing power. An average Ethereum transaction consumes 60% more energy than 100,000 credit card transactions, according to Statistics.
This is unfortunate because NFTs are not inherently bad for the environment, but proof of work that is bad for the environment. OpenSea (and most NFTs) was built on this platform.
The good news is that Ethereum is in the process of transitioning to the proof-of-procedure process, an alternative mechanism used to verify new cryptocurrency transactions, while avoiding the computational cost of proof-of-work methods. And Solana’s NFTs, made on the public blockchain platform for evidence games, are now available for trading on OpenSea, giving brands more opportunities to experiment with the platform’s lower environmental impact.
NFT ecological platforms
Instead of using proof-of-work, the energy consumption of blockchain transactions is reduced by about 99%, such as buying and selling NFTs. Today, there are some platforms that use this type of validation, the main ones being Algorand and Solana.
The latter also uses a new technology called proof of history. According to the financial advisory firm The Motley Fool, this marks the data blocks with time stamps and, as a result, speeds up the validation process. Solana blockchain’s NFT sales for the first time exceeded $ 1 billion in total volume in early 2022.
Algorand uses another verification method, pure proof of participation, which basically means that the impact of each token holder depends on the participation in the system, and users are randomly selected regardless of their participation. This adds to the decentralized nature and security of the blockchain, while at the same time requiring minimal computing power or electricity.
Brands can quickly build and launch their NFT market using Algorand blockchain’s open source Algomart project. Brands such as the music media company SPIN, Drone Racing League and Motorsport Games have just launched NFT Markets with Algomart.
Achieving the right balance
It is important to experiment with NFT. It’s certainly not necessary for all brands; but consumers are working more digitally than ever before, so it’s up to brands to find it.
But while it’s natural to want to go where the public is, and OpenSea is the best option available, it wouldn’t make sense to go with a block of proof work if sustainability is essential to your brand’s mission.
Brands like GAP, Kia, Honda, and NBA TopShot NFT have made conscious choices to use evidence-sharing blocks, and they won’t be the only ones.
It’s important to consider the impact that brands may have on testing NFTs in the future. We are still in the early stages of NFT and metaverse. We’ve seen such rapid acceleration in that direction in 2021 that it’s realistic to think that the first versions of these technologies will do just fine. Cars were also very bad for the environment in the beginning and got better and better over time. If we don’t start somewhere, we have nothing to learn.
* Translated by Sarah Lidice