A report released last week by the White House calls for all blockchains to adopt measures that would make them more eco-friendly.
NFTs have been singled out as a particularly energy-hungry corner of the blockchain world. While the Non-Fungible Tokens don’t cause any environmental impact themselves, the energy needed to produce them does.
Most NFTs are minted using the PoW (proof-of-work) protocol, which uses large amounts of energy to mint new tokens.
It’s been said that a single piece of this crypto art uses as much energy as an art studio in two years. There are, however, more environmentally friendly ways to produce NFTs. And a new report from the White House is urging the NFT space to adopt them.
Climate and Energy Implications of Crypto in the US
The report, published in the first week of September, calls for all blockchains to take measures that would make them more eco-friendly.
It argues that blockchains which use the PoW (proof-of-work) mechanism, such as Bitcoin and Ethereum, are particularly energy-intensive. Ethereum, for example, is estimated to use 20% to 39% of the total energy used by all blockchains.
The move to PoS (proof-of-stake) could help reduce the energy consumption of Ethereum by up to 99%. Luckily, with the Merge just around the corner, Ethereum will shift to exactly that.
What About Bitcoin’s Environmental Impact?
Things may be looking up for Ethereum, but what about the most popular cryptocurrency, Bitcoin? Unfortunately, the report isn’t as optimistic when it comes to Bitcoin.
The report states that the United States is currently the leading force in Bitcoin mining. If American miners want to stay ahead of the curve, they’ll need to start using more environmentally conscious mechanisms.
In the worst-case scenario, the US government may follow China’s initiatives to ban all things crypto. That would be a major blow to the industry and could have a ripple effect worldwide. Although, it’s worth noting that China’s ban didn’t do much to slow down mining operations.
How the Blockchain Could Help Monitor Climate Change
While there are many critics of Blockchain technology concerning climate change, the White House report also states that the technology has the potential to play a role in environmental markets.
Specifically, it is mentioned that the DLT (distributed ledger technology) could enable the coordination of distributed energy resources and broader supply chain management.
In other words, the government sees potential for Blockchain technology to help fight climate change, not contribute to it.
Where From Here for the NFT Industry
Back in March, the government issued Executive Order 14067, which called for the responsible development of the growing sector. The White House is now following up on that with specific measures that could help make the entire NFT space more sustainable.
Outright banning the technology or certain aspects of it would be a major setback, but the NFT industry could continue to grow while being more eco-friendly with the right measures in place.
Time will tell how this all plays out, but it’s an interesting development worth keeping an eye on.