NFT Environmental Impact Woes Setback Brands and Publishers

If you’ve given even a cursory look into the environmental impact of cryptocurrencies, you can quickly get lost in the wash of near-meaningless analogies. The Ethereum network uses as much energy annually as the country of Chile, and selling a nonfungible token uses as much energy as a European Union resident’s electricity consumption for one-and-a-half months. Mining Bitcoin uses more electricity than entire countries like Argentina. Marketers and publishers have found enticing ways of using NFTs—forms of digital tokens minted on blockchain platforms like Ethereum—to drive new revenue streams and connect with communities. The marketing industry’s contribution is small, but executives hungrily eye the opportunities. And while media hype might have cooled, the transaction volume of NFTs shows no signs of dissipating. The weekly trade volume of NFTs in September reached new highs of $1.1 billion, according to NFT data aggregator CryptoSlam, mostly in art and gaming categories. Analogies aside, as marketers and publishers level more focus on environmental, social and governance (ESG) activity, the industry's shiny new toy begins to lose its sparkle. A deterrent Since May, with excitement and media coverage surrounding NFTs at a fever pitch, many of these analogies have been debunked due to varying and uncertain estimates. Still, for some publishers, engaging with this technology long term “would not be a trivial decision,” said Alice Fulwood, Wall Street correspondent for The Economist. The publication auctioned off its first NFT, a magazine cover from September focused on decentralized finance, in late October. Ethereum, which has been the go-to standard for issuing and minting NFTs and is arguably the best way to reach the broadest audience of potential purchasers, is congested and has a heavy carbon footprint. “It is certainly a deterrent to adopting the technology for more substantial ongoing use in the future,” she said, “unless the Ethereum blockchain can successfully transition to a less energy-intensive consensus mechanism.” For years, plans have been in the works to switch Ethereum to a less energy-intensive proof-of-stake model. Once it does, the problem of adverse environmental impacts will be pretty much solved. But making big updates to decentralized public blockchains is trickier than flipping a switch. A misconception Those more embedded within the crypto community say environmental concerns are lessening. The tech is young, but improving, and there are a growing number of alternative blockchain platforms: ones that are carbon negative, run on proof-of-stake or layer two systems. A common argument is that these blockchains are all running regardless of whether or not NFTs are part of them (to analogize, it's like an airplane making long-haul flights regardless of how many seats are booked). Another argument is that there are environmental impacts of non-digital products, such as printing magazines, commercial productions and media plans. Marketers need to be diligent, understand where their NFTs will be minted, what currencies will be accepted and take responsibility for their carbon footprint. “We are seeing huge demand [from marketers] for involvement in the NFT market,” said Nadine Dietz, chief marketing and strategy officer at Aria Exchange, a soon-to-launch NFT exchange that runs on proof-of-stake, is carbon negative and calculates and redeposits its carbon emissions. “As marketers and providers and creators push the system to find solutions, they will happen.” (Dietz is co-chair of Adweek’s Sustainability Council and a former Adweek employee.) Others, such as fin-tech lawyer Daniel Payne at law firm Murphy & McGonigle, agree that environmental concerns won’t hamper the growth of NFTs because they haven’t hampered that of cryptocurrencies. “It’s hard to see any real impact on the price,” Payne said. The exception, rather than the rule, is staunch crypto-enthusiast Elon Musk’s decision in May to stop Tesla purchases that use Bitcoin due to the increasing use of fossil fuels for mining. Any real thwarting would come from government entities taking strict stances against crypto mining, as they have in China, sending the U.S. and Canada's global contribution to mining from 12% in January to 45%, according to the Cambridge Centre for Alternative Finance. But no one said the topic was easy for marketers to grasp. Even the distinction between Bitcoin and NFTs is causing the latter to have a worse reputation than it deserves, said Tyler Moebius, CEO and CTO of SmartMedia Technologies, which combines Blockchain with ad tech. Moebius claimed the majority of NFTs are minted on the more energy-efficient Polygon network, and one of the largest NFT marketplaces is the less heavy carbon footprint, Binance. “Unfortunately,” Moebius said, “it is a big misconception in the ad industry that is holding back the growth of using NFTs to drive deeper brand engagement and loyalty across a mobile-first generation."

Blockchain

NFTs Face a Setback as Brands and Publishers Consider Environmental Implications

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Lucinda Southern

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