SALT LAKE CITY (ABC4) – Non-fungible tokens (NFTs) and cryptocurrency are the new hot topic among bullish cyber-investors. What you might not know about, however, is NFT’s significant impact on the global climate.
There’s a lot to learn for readers new to the NFT conversation. An extensive write-up on what NFTs are, how they work, and why they go for so much money can be found on ABC4 here.
In simple terms, an NFT piece of digital property, most frequently taking the form of a piece of digital artwork. What makes NFTs unique, however, is their uniqueness. Most NFTs are literally one of a kind.
The core technology behind NFTs that authenticates this uniqueness is based on cryptocurrency, which in turn is “mined” through extensive computational processes that are recorded in a kind of shared digital ledger independent from any national economy or material backing.
This technology, however, has an extensive environmental cost. The process by which NFTs and cryptocurrency backing is “minted” or “mined” is extremely energy-intensive by design; this keeps the NFT and crypto markets from being flooded and inflated. Some evaluations of the energy cost of all of Bitcoin, for example, put the cryptocurrency on par with the annual energy consumption of a small country.
Whether one thinks that this energy cost is worth the benefits of an independent innovation in global currency probably comes down to their opinions on energy use, national economies, and bullish investing. Utahns, however, can benefit from understanding how business in their state is involved in this eco-unfriendly market.
ABC4’s digital reporting team reached out to several local Utah companies engaged in the NFT market to hear their take on the environmental impact of their business, especially as far as Utah itself has the potential to be impacted.
Tim Nielsen, cofounder of Utah-based NFT company Cloutchain, said the goal of their company is to be “the next level of fan engagement and social media content.” Cloutchain specialized in NFTs that are designed to connect fanbases with their favorite artists and creators.
ABC4 asked Nielsen what Cloutchain is doing to combat the environmental costs of NFTs. Nielson acknowledged that there “is some validity” to the claims about NFT’s high energy costs, but explained that “the reason for that varies dramatically between the network and blockchain” that the NFT is involved with.
In simpler terms, Nielsen explains that the specific iteration of cryptocurrency the NFT is backed by changes its overall energy cost. Cloutchain specifically is backed in the cryptocurrency Polygon, which according to Nielsen is much more energy-efficient than others.
Nielsen also contended that NFT and crypto technologies are constantly improving in order to perform the same computational processes with lower energy prices, as this would result in lower costs and higher profits. In other words, there is a business incentive for NFT companies to reduce energy costs and become more eco-friendly by result.
“If there is another, more efficient cryptocurrency than Polygon, Cloutchain will switch to it,” confirmed Nielsen. He also mentioned the possible switch to renewable energy for blockchain-based currencies and products.
When asked about NFT’s potential environmental impact on Utah specifically, Nielsen commented that it really depends on the networks of computing centers that work to generate cryptocurrencies etc. It is more likely that NFTs and cryptocurrencies have a more significant impact on global climate and environmental change than any localized impact based on computational centers and networks.
That being said, Utah is home to quite a few mining server locations. Their overall high energy demand could result in increased energy prices statewide, especially if they increase in number.
Nielson commented that, “Utah has an active population of innovators, creators, and artists” that can benefit greatly from crypto and the NFT market, and referenced Utah as a leading early-adoption location for the industry and technology.