Hyperledger Foundation Teams with Palm NFT Studio on Deep Dive into the Carbon Footprint of NFTs
In honor of Earth Day, Hyperledger Foundation, the open, global ecosystem for enterprise blockchain technologies, announced the publication of the report “The Carbon Footprint of NFTs: Not All Blockchains Are Created Equal.” This Linux Foundation Research report, developed in collaboration with Hyperledger Foundation and Palm NFT Studio, provides an extensive look at the environmental impact of NFTs (non-fungible tokens) and delves into how and why NFTs can have varying carbon footprints depending on underlying technology stacks.
“For all the excitement about the potential of NFTs to create new value and traceability as digital assets authenticating everything from art and collectibles to products in the supply chain, there is equal consternation about climate impact of the blockchain mining enabling them,” said Daniela Barbosa, Executive Director, Hyperledger Foundation, and General Manager Blockchain, Healthcare and Identity at the Linux Foundation. “As champions of innovation and openness, Hyperledger Foundation views this report as a critical look at the pitfalls and potential of NFTs and, more importantly, a way to put climate considerations front and center in this fast-moving market.”
This extensive report includes an analysis of the carbon impacts of Proof of Work (PoW) and Proof of Stake (PoS) consensus mechanisms as well as an overview of technology alternatives for reducing energy consumption, underscoring the impact different blockchain decisions make on the climate. It goes on to provide guidance on steps and strategies to not only increase the sustainability of blockchain but leverage the innovation of NFTs and smart contracts to tackle climate change itself.
“Defining a problem is the first step to solving it,” said Hilary Carter, Vice President of Research at the Linux Foundation. “Researching and writing this report showed us the double-edged reality of NFTs but also gave us the opportunity to map out new approaches that can lead to a sustainable, even beneficial NFT future. Addressing climate change will include rethinking when, where, and how we deploy technology and, in this case, how we can pivot to climate-forward practices in both the deployment and application of NFTs.”
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Key takeaways from the report include:
- Approximately 80 percent of NFTs are transacted via Ethereum which currently uses the energy intensive Proof of Work consensus mechanism. Ethereum is transitioning to Proof of Stake in 2022.
- The NFT ecosystem is evolving with other lower carbon footprint blockchain options already available, as well as layer 2 solutions that are less energy intensive and more scalable.
- The entire blockchain ecosystem must shoulder the responsibility for environmentally sound solutions.
- Verified offsets should be employed for a fully carbon-neutral solution. Align projects with certified environmental projects will benefit communities and foster cycles of positive reinforcement in scale and investment.
- Embedding energy and climate disclosures in platforms allows users to make informed choices about using one blockchain or sidechain over another.
“This report comes at a critical moment in the evolution of NFTs,” shared Co-Founder and CEO of Palm NFT Studio Dan Heyman. “As they gain traction with enterprise-grade businesses and fans alike, the volume of NFTs minted for any given program shifts from numbering in the thousands to hundreds of thousands and into the millions. It’s imperative that we implement solutions to negate the environmental impact. We’re motivated by the findings of the Linux Foundation research report, and hope they serve as a catalyst for more innovation in our industry, and ultimately a more environmentally conscious blockchain.”
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