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Cryptocurrency

How are NFTs created? Why is bad their impact on environment?

NFTs are the new crypto market craze, but their damaging effect on the environment, as well as total lack of regulation, has many concerned.

Update:
Visitors are pictured in front of an immersive art installation titled "Machine Hallucinations — Space: Metaverse" by media artist Refik Anadol, which was auctioned as an NFT in September.
Tyrone SiuReuters

NFT stands for “non-fungible token,” and it can technically contain anything digital, including drawings, animated GIFs, songs, or items in video games.

Non-fungible means it is individual. The opposite, fungible, has examples like bitcoin. One bitcoin can be swapped for another; they are identical. However, no two NFTs are the same.

In short, it is a digital version of owning art, an autograph, or basically anything digitally. Thus, the lure to own one is to show off in a digital space, as walking down the street people would not realize you own millions of dollars worth of digital monkeys.

NFTs allow you to buy and sell ownership of unique digital items and keep track of who owns them using the blockchain. An NFT can either be one-of-a-kind, like a real-life painting, or one copy of many, like trading cards, but the blockchain keeps track of who has ownership of the file.

To create one, someone simply needs to create art and find a buyer. But as the payment is made in cryptocurrency, using blockchain, there are big environmental questions that are being asked.

What impact do NFTs have on the environment?

Blockchain transactions, and the technology they use, use a lot of electricity. This is because they are stored with huge servers, and the acquisition of a token itself needs a lot of electricity. 'Miners' need to crack computer code to be rewarded, and the proliferation of blockchain technology means potentially thousands of people, and computers, competing for coins.

This means massive energy output. For example, in 2017, the harvesting and storage of Bitcoin used as much energy as the whole of Angola, putting the cryptocurrency 103rd in the world ranking for energy output. Four years later, there is no doubt that this value has increased. Therefore, purchasing NFTs, which use the same technology, means the buyer needs to shoulder some of the responsibility for using the system.

In the future, NFTs are likely to change to a different method of storage, called "proof of stake". In short, this system eliminates the use for mass server blocks to store data, quickly eliminating the emissions

“That would essentially mean that Ethereum’s electricity consumption will literally over a day or overnight drop to almost zero,” says Michel Rauchs, a research affiliate at the Cambridge Centre for Alternative Finance.

But it could take years before this change is universal, meaning emissions will only grow and grow as crypto use becomes more widespread.

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