Sustainable NFTs?

Sustainable NFTs?

Among the many voices opposing the NFTs is a concern with sustainability.

Cryptocurrency mining consumes a large amount of – some would say unnecessary – energy. As NFTs are a form of crypto, their minting process also takes up considerable amounts of energy.

How can the production and minting of NFTs be sustainable? How do you measure the sustainability of these processes?

The Ethereum blockchain has been in the spotlight for its upcoming sustainable upgrade. This might be the solution to the sustainability problem of NFT production.

Ethereum 2.0

The new upgrade added to the existing Ethereum blockchain promises a few things. Sustainability is one of them.As announced by the company, the gradual roll-out of this upgrade started back in 2020. This aims to enhance the scalability and security of transactions on the platform. To put this in place means a switch in models central to the platform’s functionality. Swapping from a proof of work (PoW) to a proof of stake (PoS) consensus mechanism.

Let us explain a little about the difference between the two models. And how one improves sustainability, scalability, and security over another.

PoW vs PoS

What are PoW and PoS?

Proof of Work systems verify transactions on blockchains. They do this through ways that are machine and human labour intensive. Crypto-miners run programmes and software to solve complex puzzles. Once solved, you can add a new transaction, or block, to the chain.

This method uses a large amount of energy. Not least because of the use of complex programmes and software in the process. And the amount used doesn’t always pay off. If the miner doesn’t solve the puzzle in the end, the energy they used goes to waste.

Proof of Stake systems are different. This system allows users to stake a network’s native cryptocurrency. So, individual users of the network are also miners and validators of transactions.

Not all users can be validators, though. A user has to have staked enough crypto, and other users verify this amount. It is only then that we can consider individual users as a validator.

Scalability

How do the two systems differ in scalability?

For Ethereum, the switch to PoS anticipates a drastic increase in scalability. This term might sound a little foreign. But in basic terms, it means efficiency – the speed of validation of transactions.

The original PoW system in place operates on one single chain. This supports about 30 transactions in a second. This is not an ideal number. Especially considering the number of transactions processed on the blockchain daily.  In fact, delays are often encountered on Ethereum transactions.

The PoS upgrade expects to support up to 100,000 transactions each second. This is where PoS has higher scalability and efficiency. These transactions take place on shards of the original chain. This way, you can process more transactions, and add more blocks to the chain.

Security

One of the concerns for PoS systems, though, has been its security.

PoW systems ensure validators remain decentralised. Whilst most PoS systems only have a small group of validators. This makes PoS systems more centralised. Thus, they have a higher risk of a security breach.

The Ethereum upgrade, though, is different to other PoS systems. It does not rely on a small number of validators. So, how many validators does the Ethereum PoS system need? At least 16,384 validators are necessary for normal operation. If the upgrade lives up to its expectations, security levels are more or less the same.

Sustainability

Finally, what does this all mean for PoS sustainability compared to PoW? And how does this make NFTs sustainable? 

Recently, there are studies on the energy footprint of blockchains. Researchers explain that PoW systems need extreme levels of energy. The main use of this energy is to fight against attacks on transactions. Researchers put out blockchains using the PoW-based consensus mechanism. Bitcoin is an example of a PoW-based. The study explains that this PoS mechanism “exceeds energy consumption of all PoS-based systems”. This proves that PoS mechanisms will be greener than PoWs.

Permissioned vs Permissionless

But nothing is ever this simple. The study points out the type of PoS mechanism used also affects its energy footprint. Researchers refer to two types in the study: permissioned and permissionless.

What’s the difference? 

There is a difference between these mechanisms. This depends on the number of validators and throughput the system supports. For permissioned systems, the number approved on the system is even more limited. Much less than permissionless systems. Especially when compared to traditional PoW-based systems. We have already mentioned that PoS-based systems require fewer validators. In contrast to traditional PoW-based systems. The energy consumption of permissioned crypto-mining is controllable to a degree. For permissionless systems, though, it is less easy to manipulate energy consumption.

Permissionless systems are ones to look out for if we want to make NFTs sustainable. Most existing NFT platforms are permissionless. These are less active than permissioned systems. They need more energy for the validation of each transaction. This is due to the system’s operation standards. Especially when compared with traditional art. PoS-based systems have low throughput and more validators in contrast to permissioned systems. So, permissionless PoS mechanisms are less energy efficient. If we run this on a large scale, the energy footprint of this type of PoS can exceed that of PoW systems.

There is another factor playing into sustainability here. This is the type of hardware used by validators. The better the hardware, the less likely this factor will have an impact. On the validation processes themselves. And on the energy footprint of a blockchain network.

How PoS and PoW systems work also contribute to this energy footprint. As explained, PoW operates based on computer power – how well it can run a programme to solve a puzzle. In contrast, PoS relies on validators who work through their crypto credit scores. So, the energy expenditure on PoW systems is dependent on the type of programme run. PoS energy expenditure is harder to measure. It is difficult to record the model and features of the hardware of every validator on the network. Say PoS validators do not use the correct hardware in mining processes. As a result, the energy output of PoS-based systems can equal that of PoW-based systems.

What does this mean for the Ethereum upgrade? 

Luckily, traditional permissionless blockchains like Ethereum don’t need complex programmes and machinery to operate. Researchers point out that “traditional blockchain with comparatively large numbers of validators running full nodes that verify every transaction, demand comparatively low-powered hardware”. So, it’s safe to assume each validator will not need to use energy-consuming hardware. This in turn makes the PoS-based system greener than its predecessor. 

In theory then, NFTs made on this system should be more sustainable.

Are PoS-based systems the future of crypto?

Let’s look at current data collected on energy footprint alone. It suggests PoS-based mechanisms will likely outlive PoW-based systems in the future. Yet, researchers are also quick to point out complications. Especially when evaluating the energy efficiency of blockchain mechanisms.

In theory, PoS-systems need less energy than PoW-systems to run. So, more sustainable. As mentioned, though, two other factors also contribute to this calculation. The type of hardware used by individual validators. And the type of PoS-mechanism the blockchain. For example, we have a permissionless PoS-based mechanism. Run by the least efficient hardware. This can consume as much energy as a traditional PoW-based system.

Current data suggests that PoS-based systems will remain energy efficient. Even when scaling up to extreme levels of input compared to PoW-based systems. But it is clear that nothing is certain.

What does this mean going forward?

As the Ethereum upgrade is implemented over the course of the next few years. ore data will be available for the study of PoS-based consensus mechanisms.

Even though it all seems a bit blurry now, one thing is clear. We need to avoid unnecessary energy consumption at all costs. This includes everyone involved in the chain of action in crypto-mining. NFTs artists should also try to be more sustainable. Reducing unnecessary energy consumption in crypto-mining is urgent as it is crucial. This is due to the distinct relationship between energy consumption and climate change.

PoS-based consensus mechanisms have the potential to revolutionise the world of cryptocurrency. If implemented well, the digital world may see a complete switch from PoW to PoS in the future. Meaning a drop in energy consumption in crypto-mining. A smaller contribution of this enterprise to global warming. And even offer a way for the digital world to combat against imminent climatic dangers we face.

For more info on NFT art, have a look at our previous articles explaining the basics, and art celebrity involvement in NFTs!