Tuesday, 4 January 2022

NFTs and Cryptoart: A Look at the True Environmental Cost of Innovation

Andy Watson, Associate Director, Product Management
Innovation

Right now, the hottest internet craze involves digital illustrations of things like flying rainbow cats and Homer Simpson’s head on a dollar bill. And these are selling for millions in cash even though the process is bad for the environment. 

What the heck is going on?

These graphics are known as cryptoart, sometimes referred to as non-fungible tokens, or NFTs. These are a special kind of cryptoasset in which each token is completely distinct from any others. This is opposed to “fungible” assets like Bitcoin and physical currency (one dollar bill isn’t worth more than any other dollar bill, for example).

Because every NFT is unique, they can be used to authenticate ownership of digital assets like artworks, recordings, virtual real estate or pets. This occurs when the buyer purchases a verified token providing digital evidence that the art is theirs—a bit like an artist’s signature. The idea is to offer some semblance of the level of authenticity that is naturally bestowed on physical art. A perfect copy of a Mondrian abstract painted on your garage door is not the same as one created by the artist. Why couldn’t the same be true for a .CAS file? A bonus of the NFT model is that ownership can be extended to resales of that token, allowing artists to continue receiving a cut.

While these assets seem entirely ephemeral, they draw an insane amount of energy from places that may not lean too eco-friendly. As a result, companies moving into this sector must consider sustainability and just how green they want to be. NFTs are minted on the Ethereum blockchain, the second most popular after Bitcoin, and require a level of energy unbefitting of a digital product. One analysis found that the energy footprint of the average transaction on this network is about 35 kWh. This is roughly the same as powering a refrigerator for a month.

And it doesn’t stop there: NFT transactions also involve minting, bidding, selling and transferring a digital token. All these actions are costly, adding up to an average of 369 kWh—over 10 times as much energy. One researcher calculated that selling two pieces of artwork used over 175 MWh. This created greenhouse gas emissions equal to 21 years of a U.S. household’s electricity use. 

How exactly that energy use translates to carbon emissions is a hotly contested subject. Some estimates suggest as much as 70 percent of mining operations may be powered by clean sources. But that number fluctuates seasonally, and in a global energy grid that mostly runs on fossil fuels, critics say energy use is energy use. Mining hotspots running cheap hydropower have banned new operations over concerns that even “clean” mining would push neighbors to use dirtier energy sources.

There are ways of chaining blocks together using trusted stakeholders instead of brute force work, which would significantly reduce emissions. If the crypto-community manages to band together and invest only in proof-of-stake projects, it would change the conversation. But like most breakthroughs, it’s perpetually just a few years away while the growing NFT trend is exacting growing climate costs right now. Ethereum’s developers have planned a shift to a less carbon-intensive form of security, called proof-of-stake, via a blueprint called Ethereum 2.0. But this has been in the works for years, and there is no clear deadline for the switch. In the extremely energy- and resource-intensive financial industry, it may prove successful to move large transaction volumes to a proof-of-stake model.

Swift action is necessary. One immediate step is for online NFT exchanges to offer transparency into the total carbon emissions associated with each sale. This would depend on voluntary compliance, of course. But the public could put pressure on brands creating NFTs and marketplaces selling them to be forthright with the emissions created by each one. This wouldn’t make NFTs any less environmentally damaging in and of themselves. But at least it would enable people to judge the value of digital art while knowing the true cost.

Why this is important for product thinkers and creators

Ultimately, downstream concerns over the environmental impact of NFTs are similar to the holistic view required to design and build great apps. This includes the app’s impact on the devices, systems and services it consumes as well as the effect it will have on user emotions.

Here are some broader UX and build considerations product thinkers and creators should be making every day:

UX:

  • How can we educate our users on ways to maximize value from the app through integrated design?
  • Are the app features intuitive to our target user personas? Have we done user testing with target users on this new or redesigned feature before launch?
  • Are there more efficient ways to get to the same outcome, so we don’t lose the user’s attention?
  • What are ways we can foster user retention and feedback without causing aggravation?
  • How can we offer a great user experience while ensuring sustained user engagement?
  • What are ethical, informative and contextual ways of obtaining permissions from users?

Build:

  • Are there more efficient ways of making API calls to reduce costs and processing time?
  • Is the architecture of the app scalable? Does it align to existing business processes? What are some ways we can future-proof to align to the long-term product strategy?
  • What maintenance and dependent library considerations need to be made before building this feature?
  • Are we considering the app experience and bandwidth consumption on different connections (e.g., Wi-Fi, 5G, LTE, 3G, etc.)?
  • Should processing be done on backend servers to alleviate the workload—and battery consumption—of a user’s device?
  • What kind of data will be collected and stored? What are the considerations that need to be made to secure that data while it’s in transit or at rest?

We strive every day to provide best-in-class user experiences that meet the business goals and objectives of our client. But it’s also important to consider the broader impact of the design and implementation of those features. At Rightpoint, we're constantly using cutting edge tech to build amazing mobile apps and web experiences. What sets us apart is our ability to couple bleeding edge technologies with the tried-and-true methods of great design and development practices. This allows us, and our clients, to be agile with assured effectiveness in all that we do.

Get in touch today to learn more.