Web3's Environmental Trade-Offs Raise Concerns

Early on Sept. 15, dozens of Ethereum developers gathered on a Zoom call hosted by nonprofit Ethereum Foundation. The purpose of the call was to celebrate the successful architecture upgrade, or “merge,” from a type of blockchain known as “proof of work,” which has been running since 2015, to a new blockchain called “proof of stake.” In the long run, this switch could be bullish for crypto investors, eventually leading to more users. The merge of Ethereum was a watershed moment in the Web3 world, mostly due to its environmental footprint. The new blockchain will consume 99.5% less energy compared to its previous version. This switch also undercuts the energy consumption narrative of nonfungible tokens (NFTs) that's predominantly present on Ethereum. That's because Ethereum is one of at least 10,000 blockchains, many of which are still running on a proof of work architecture, which is natively responsible for millions of tons of CO2 emissions each year, according to Pete Howson, assistant professor in international development at Northumbria University. Web3 is an ephemeral umbrella term referring to an ideology of decentralized platforms that has lately allured many brands to experiment with its different assets including NFTs, the metaverse and crypto. By comparison, in Web2 information is kept in a fixed place, generally a single server. While these assets are intrinsically linked, they stand separate in how they function. Still, the upshot is that each asset inherently consumes a lot of energy, raising concerns among marketers. “The reason we're just hearing about Web3 is it's super new,” said Peter Shankman, futurist at marketing company BluShark Digital. “It is going to take a lot of resources.” Big Tech embraces Web3 There is ample market interest in Web3, but marketers are wary of making any major investments at the moment, especially given the volatile crypto market, which has dropped 72% in value this year, and backlash around its carbon footprint, said Matt Maher, CEO and founder of M7 Innovations. In early October, Google announced it would start allowing some customers to pay for cloud services with digital currencies early next year in partnership with Coinbase. The tech giant, over time, will allow many more customers to make payments with cryptocurrency. Coinbase's existing offering, Coinbase Commerce, supports 10 currencies, including Bitcoin. The amount of energy it takes to mine a single bitcoin is estimated to be between 86,000 to 286,000 kilowatt hours (kWh is the amount of energy a 1,000-watt appliance uses in an hour). At the same time, cryptocurrency companies are setting up mines across the U.S., adding to noise pollution and leaving residents agonized, as reported by The Washington Post. Although the terms of the deal between Google and Coinbase weren't disclosed, if Google did enable Bitcoin payments, "that will make [Google’s] 'Carbon Neutral since 2007' claim redundant," said Howson. "Coinbase is just facilitating the payments. So it would be Google's responsibility." Google declined to comment. Brands won't entirely bite Still, many brands consider the environmental trade-offs when taking into account the revenue and investments they make on these platforms. In September 2021, GMG Ventures, the Guardian's parent company, invested $4 million in Unlock Inc., an NFT protocol designed for subscriptions and memberships, to experiment with other options following concerns about the carbon footprint of Ethereum, according to Julien Genestoux, founder and CEO of Unlock. This was a year prior to Ethereum merging into proof of stake. Similarly, Adam Kleinberg, CEO and co-founder of marketing agency Traction, suggested exploring NFTs with a video game client, but they were averse to the idea due to disapproval expressed within gaming communities on its environmental impact. Eventually, the client did not pursue the project. The downside of the metaverse More than 500 companies, including Louis Vuitton, Disney and Coca-Cola, have run activations on the metaverse. The virtual platform will have a $5 trillion market value by 2030, according to global management consulting firm McKinsey & Co. However, the metaverse relies on VR and AI, which require expensive data processing facilities that use a colossal amount of energy. A single AI language processing model’s estimated carbon footprint and electricity cost was more than 626,000 pounds of carbon dioxide, according to a 2019 study by the University of Massachusetts at Amherst. In a separate study, Intel analysts found that a global computing infrastructure would need to be 1,000-fold more powerful than it currently is to sustain the metaverse. But the environmental impact of the metaverse's energy consumption is not even on the radar of some marketers, Kleinberg said, suggesting the energy consumption on the metaverse is more of a platform problem than a brand problem. “It's up to Apple and Meta, although I can't imagine Meta doing anything for the greater good, to find better ways to utilize these resources that costs the environment less,” said Shankman.

Metaverse

Web3's Environmental Trade-Offs Raise Concerns Among Marketers

While some are unaware of the new tech's environmental repercussions, others are critical of its adoption

Trishla Ostwal

About

Subscriptions

Events

Publications

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

Trishla Ostwal