Curious about NFT’s and concerned for the environment? Proof of Stake (POS) offers some increased energy efficiency and reduced carbon footprint options. We share with you our view on the most environmentally friendly POS recent Research by the Crypto Carbon Ratings Institute (CCRI) published in January 2022 that looks into the energy efficiency and carbon footprint of six main POS blockchains
With all the negative headlines about the energy consumption of crypto mining, getting into NFTs seems hard to justify for anyone who has a climate-conscience.
Crypto is in its early phase of development and has a way to go to call itself truly sustainable. However, the pace of innovation means we are already seeing blockchains which have improved their carbon footprints significantly. Here, we assess which chains offer the best options for minting and trading NFTs sustainably, so that you can join the NFT revolution and sleep at night.
First, it’s important to understand a few basics when evaluating the environmental impact of crypto. Blockchain is the decentralized technology protocol on which cryptocurrencies are based. Because no one owns the chain , there needs to be some agreed rules or “consensus” as to how the chain can be created and run. Two of the most popular consensus algorithms are Proof of Work and Proof of Stake.
Proof of Work (POW), on which Bitcoin is built, involves a lot of computing power which is heavy on the environment. Considered the most secure system, it requires miners to compete to solve complex mathematical problems to create another block in the chain. The miners need to generate a lot of random guesses before getting it right.
Proof of Stake (POS) is a consensus algorithm with lighter computing requirements needed to create new blocks, making POS blockchains more environmentally friendly. Several newer blockchains base themselves on POS. Instead of miners, there are validators who deposit or “stake” a certain amount of the cryptocurrency coins being validated. The more coins staked, the higher chance of being chosen to validate the next block in the chain.
Research by the Crypto Carbon Ratings Institute (CCRI) published in January 2022 reviews and ranks the energy efficiency and carbon footprint of six main POS blockchains.
The clear winner on energy consumption per year overall was Polkadot (DOT) with 33.36 tonnes of CO2 emissions per year, followed by Tezos (XTZ) with 53.79 , Avalanche (AVA), Algorand (ALGO), Cardano (ADA) following with 232-285 CO2 and Solana (SOL) trailing with 934.77.
So, what does this all mean for NFTs?
Not all blockchains are equal when it comes to NFTs. Below we have rated each of the six chains according to their clean credentials and how well they support NFT creation and transactions:
1. XTZ – Tezos has experienced slower traction as a blockchain to date, being plagued with legal issues initially. But this impressively low emission blockchain hosts marketplaces galore for NFTs, courtesy of its active die-hard community.
Over the past 12 months NFT activity has triggered a surge in transactions involving smart contracts from 10,000 to 50,000 per day, according to Coin Metrics “State of the Network” report issued in February, and tripled smart contract addresses to over 600,000. One of these addresses is owned by none other than Cozmos de medici (or Snoop Dogg to his friends). Tezos has also received attention from gaming titan Ubisoft who announced Tezos support in December.
Tezos’s recent success does not rely on its low carbon footprint. According to co-founder Kathleen Breitman their primary motivation for creating Tezos came from a game theory perspective; making a secure network with a strong governance, to succeed. Together with cheap, efficient transactions, it is a lead player in the ‘clean’ NFT market.
Clean Score: 5/6
NFT Minting Score: 6/6
NFT Trading Score: 5/6
Total : 16/18
2. ALGO – The Algorand Foundation website claims to be recognised as the “premier chain to mint, launch and manage NFTs given its proven inability to fork, meaning that the network will never split into multiple networks which can lead to the duplication of digital art pieces”. It is debatable as to whether this is a compelling reason alone to choose Algorand over other chains for NFT projects. Nevertheless, it promises impressive green credentials.
Further to its low energy output relative to other chains, Algorand offers offsets via a partnership with ClimateTrade, a marketplace for carbon credit offsets. If this makes Algorand carbon negative, as stated, it would be the most sustainable chain for your NFT project.
The Algorand Foundation lists 10 NFT marketplaces on its site. Of these, Abris, Aoarist and Asalp, focus on green and charity solutions for NFT projects. Reflecting the forward thinking ESG approach of the chain.
Clean Score: 6/6
NFT Minting Score: 4/6
NFT Trading Score: 3/6
Total : 13/18
3. SOL – This network made big waves in 2021 with stellar price increases driven by NFT creators looking for quicker, cheaper alternatives to ETH to launch their projects. Like Tezos, it won the hearts of several NFT influencers who defected to Solana to escape the high gas charges on Ethereum.
SOL offers fast transactions (50,000 per second) and low fees, even less than $1 in many cases v an average of $29 on ETH. It offers instant purchases and a more intuitive user interface via Phantom Wallet. For anyone who has used MetaMask to store their cryptocurrencies, Phantom Wallet is a breath of fresh air and allows non-techies and beginners a chance to get in.
There are many marketplaces on Solana which appeal to the broad spectrum of NFT creators and collectors and look to improve the user experience significantly.
Solana has had its fair share of headline hitting problems with instability and serious outages. It is also the highest carbon emitting POS network and the least environmentally friendly blockchain of the six on which to base your NFT activities.
Clean Score: 1/6
NFT Minting Score: 5/6
NFT Trading Score: 6/6
4. ADA – The Cardano network supports numerous marketplaces where you can buy and sell NFTs, although the network does not have any public dApp tracking platforms, so it is difficult to know which claims are real and the volumes being reached.
CNFT launched in July 2021 and Art launched in January 2022, claiming to be the biggest but so do others like Galaxy of Art and CNFT. NFT-Maker launched in March 2022. This is an API with WordPress plugin for NFT creators on the Cardano Blockchain to display, manage and mint their NFTs, and promises to do a lot of the heavy lifting when it comes to security and scalability.
Whilst it all seems to be moving forward fast for NFTs on ADA in terms of development, it is difficult to know if it has the volume and adoption of other chains.
Clean Score: 2/6
NFT Minting Score: 3/6
NFT Trading Score: 4/6
5. AVA – Avalanche had an impressive 2021 as real-world use cases increased exponentially and so did its market value. A swift transaction speed of 4,500 per second means that Avalanche is a favourite to compete in the financial services sector against the likes of VISA. But, it has lagged behind other networks on support for NFTs. Although dApps exist, choice and traction appears to be relatively low.
Given that other networks are less carbon emitting and have better NFT support, unless you are a hardened Avalanche fan, it’s probably not the place to start if you are focused on minting sustainably.
Clean Score: 3/6
NFT Minting Score: 2/6
NFT Trading Score: 2/6
Total : 7/18
6. DOT – Pokadot, is the CCRI report leader consuming the least energy annually overall. Intuitively, is Polkadot also a leader for NFT creators and traders? Sadly, not. Although investing in NFT from projects on-chain is possible, freely minting NFTs is not. There are projects underway, such as Unique Network – a parachain specifically for NFTs – so watch this space!
Clean Score: 6/6
NFT Minting Score: 1/6
NFT Trading Score: 0/6
ETH – We cannot talk NFTs without mentioning Ethereum (ETH) as it is still the dominant network forming the basis of many NFT projects today. The best known marketplace for NFTs run on this chain is Opensea.io.
ETH is not included the in CCRI study because it runs on a POW consensus, nevertheless ETH is cleaning up its act environmentally speaking with a move from POW to POS. The first stages of Ethereum 2.0 have already been launched, with a final stage scheduled for Q2 2022.
According to a blog post by the Ethereum Foundation in May 2021, ETH 2.0 may only consume around 2.62 megawatts of electricity, which is 2,100 times the consumption of the average American home. Assuming this target is achieved, it would still bring ETH in as the highest energy consumer of the POS consensus networks. Plus, as already mentioned, gas fees for minting NFTs on ETH are a killer and can run to a few hundred dollars for just one, which gets a bit steep if you are minting a collection.
To conclude, the Proof of Stake consensus blockchains are clearly winning the ecological race for a cleaner greener blockchain on which to base your NFT activities. But, not all of them are equal
Our current view is that Tezos is your best choice if you want to get into guilt-free NFTs and experience a good user journey with plenty of volume for trading.