It wasn’t long ago non-fungible tokens (NFTs) were making headlines for their excessive environmental impact. Most of these NFTs were making use of the Ethereum blockchain or a related platform, which meant they were also impacted by the energy-hungry proof-of-work (PoW) mechanism that was part of Ethereum until September of last year. During this month, the PoW mechanism in Ethereum was replaced with an alternative known as proof-of-stake in an event called The Merge, which reduced the energy requirement of the network by at least 99.84%. This event also alleviated environmental concerns surrounding NFTs. It was previously estimated that over the course of its lifespan, a single NFT could be responsible for hundreds of kilograms of CO2.
But whomever thought these numbers were alarming is about to get shocked by the latest trend in the NFT world: on-chain Bitcoin NFTs. In an on-chain NFT the underlying data (e.g. an image) is posted directly to the blockchain, whereas NFTs previously typically only posted a reference to certain data (hosted by a third party) on top of the blockchain itself. This idea can be criticized in many ways, as it does not take much imagination to see how problematic this could become if illegal content is made available on a public “immutable” blockchain, but it also leads to record-breaking carbon footprints.
Estimated impact
On February 1, 2023, Bitcoin mining company Luxor mined the largest block ever, containing nearly 4MB of data (which is the maximum amount of data that can be put into any Bitcoin block). The reason the size of this block peaked was the addition of an on-chain NFT based on the “magic internet money” meme, which took almost all of the available space. At the same time, this also means that the carbon footprint of this NFT is almost equivalent to the carbon footprint of a newly created Bitcoin block. With the power demand of the Bitcoin network estimated at 9.55 or even 12.58 GW, the average electricity consumed to create a block ranges from 1.59 to 2.10 GWh. With an average carbon intensity of 557.76 gCO2/kWh of electricity consumed by the Bitcoin network, this translates to a carbon footprint of 887 to 1171 metric tons of CO2. This carbon footprint would be equivalent to the per passenger carbon footprint of a flight from New York to Tokyo and back, 466-616 times, or the carbon footprint of an average U.S. household over a period of 23 to 31 years.
Other externalities
In the meanwhile the Bitcoin community also seems split about the latest innovation, though not for environmental reasons. The addition of image-data to the blockchain might reduce the available block space for monetary transactions. The same block that held the mentioned on-chain NFT was comprised of only 63 transactions in total, as there was no more room for additional data. Given that Bitcoin blocks are generated only once every 10 minutes on average, this comes down to just one processed transaction every ~10 seconds, which is a serious reduction of Bitcoin’s already low transaction processing capacity (just three to seven transactions per second). The community may have to sacrifice some of Bitcoin’s supposed censorship-resistance to tackle this issue. As long as nothing changes a new record-breaking NFT carbon footprint is likely to appear soon, as the overall power demand of the Bitcoin network has been on the rise along with the recent recovery of the Bitcoin price.
