The Hidden Cost of Cryptocurrency and NFTs – Sustainable Brands

Companies with significant ESG commitments to shareholders will not be able to hold investments in cryptocurrencies or NFTs and still meet theirsustainability goals; public companies with these technologies in their portfolios will be responsible for the emissions created by their investments.

Blockchain has become the go-to technology solution for enabling traceabilitythroughout circuitous product supply chains most notably infoodandtextiles.But in the finance world, blockchain has become inextricably linked to the risein popularity of cryptocurrency and non-fungibletokens (NFTs).

While blockchain has proven its value as an emerging solution for certainapplications, there is more to consider about the techs implications specifically, as we think about the role future iterations of blockchain have oncarbon-reduction goals for a rapidly changing climate.

Thats not to say that these technologies will never be carbon neutral; but intheir current iterations, market leaders such as Bitcoin and Ethereumare not sustainable. New currencies and NFT development processes claim to begreener because they dont rely on the same Proof ofWork system that involveshuge amounts of calculations (and thus, processing power) to produce a singletoken. Cryptocurrencies that instead use a Proof of Storage or Proof ofStakesystem use far less energy, as do currencies using a technology called blocklattice which doesnt requiremining.Similar processes are being applied to the NFT market in an attempt to reachcarbon neutrality. At this point, however, it's hard to tell if thesetechnologies, were they to scale, would be any better or even worse for theenvironment.

Therefore, everyone from the everyday individual to the global corporation should welcome the continued evolution of these types of energy-consumingtechnologiesand how theyre created; since, as of now, most cryptocurrencies and NFTs areproduced by methods that are completely at odds with efforts to mitigate climatechange, which affects every living thing on the planet.

These technologies require massive computing power to generate, resulting in anoutsized and irresponsible carbon footprint. In fact, the process is purposelydesigned to be highly energy inefficient, to make it harder to tamper with afiles legitimacy. Bitcoin alone uses as much electricity as an entirecountry.The same goes for NFTs, the security and value of which hinge onenergy-intensive processes a single transaction can use as much electricity asthe average household uses overdecades.

Every cryptocoin mined uses more energy than all those mined before and about21 million Bitcoins have been mined so far. After its mined, cryptocurrencycontinues to generate a vast network of computer connections with everytransaction. Bitcoin and Ethereum activity combinedconsume as muchelectrical energy as an entire nation nearly 290 TWh per year.

2023 could be the tipping point for these technologies as new federal rulesaround carbon accounting are slated to take effect next year. An SECproposalseeks to improve transparency among funds that purport to take Environmental,Social and Governance (ESG) factors into consideration when making investingdecisions. This new reporting regulation will require any publicly tradedcompany to disclose their full carbon footprint and enforce carbon-offset fineson those that greenwash theirprogress.

Companies that have significant ESG commitments to shareholders will not be ableto hold investments in cryptocurrencies or NFTs and still meet theirsustainability goals. Corporations that continue to embrace NFTs andcryptocurrency will face expensive carbon-offset costs and negative brandperception. And once every publicly traded/reputable company pulls out of cryptoand unloads their NFTs to meet their ESG goals, there will be nothing left toprop up these markets.

Sustainability experts might see this on the horizon; but ideally, individualsand corporations will also have the foresight to not continue throwingadditional money into these notoriously energy-intensive technologies until theycan truly be sustainable. Cryptocurrency and NFTs use mind-boggling amounts ofcomputer energy and create substantial greenhouse gas emissions, outweighing anycurrent perceived value. Public companies with these technologies in theirportfolios will be responsible for emissions created by their investments. Thenew federal reporting regulations might mark a fork in the road for thesedigital currency trends.

Published Aug 24, 2022 2pm EDT / 11am PDT / 7pm BST / 8pm CEST

Andrew Blauvelt is Senior Product Director at Atrius part of the Intelligent Spaces Group, a division of Acuity Brands revolutionizing spaces to sense, think and act.

Jol Dsir is Connected Building Solution Manager at Distech Controls, which connects people and companies with intelligent building solutions.

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The Hidden Cost of Cryptocurrency and NFTs - Sustainable Brands