If 2020 was the year of the SPAC, then 2021 is definitely the year of the NFT. NFTs, otherwise known as non-fungible tokens, are blockchain-based digital collectibles. They represent ownership in digital assets such as art, trading cards, virtual real estate, virtual items, music and other assets. We’ve even written a highly inclusive guide that explains the history of these applications and what they look like now.
There’s at least one takeaway to be had: many NFTs are based on the Ethereum blockchain. Ethereum, the second-biggest cryptocurrency by market cap, is still a highly inefficient and demanding use of energy. In short, Ethereum is a pretty big polluter. Digiconomist, a platform tracking crypto emissions and impact, appraises Ethereum’s carbon footprint as equal to the footprint of the entire country of Tanzania. They’ve even estimated the footprint of a single Ethereum transaction: 31.6 kg of carbon dioxide (kgCO2).
One prolific blockchain investor and advocate is helping to create a simple way for people to take on this problem and offset your carbon footprint. Matthew Le Merle, managing partner of Fifth Era and Blockchain Coinvestors, is an investor in NFT marketplaces OpenSea and SuperRare, Dapper Labs (creators of NBA Top Shot and CryptoKitties) and a handful of other blockchain companies.
He’s also one of the people behind Universal Carbon, a carbon token that represents one metric tonne of carbon in carbon credits. Le Merle offered some insight to Bullish on the underpinnings of Universal Carbon and why it’s important. Besides explaining how it works, Le Merle also offered some guidance for companies and independent creators.
“All human activities pollute, and I think that some artists care so much about this that they’re going to say: ‘I’m not going to do NFTs unless I can have a net-positive energy impact,” Le Merle said.
“We’ve made that exceptionally easy because Universal Carbon is a digital carbon credit. So if you issue an NFT, which is basically a piece of digital art as a token, then you can offset its energy impact by buying and retiring some Universal Carbon.”
Companies, artists and crypto enthusiasts can buy and burn Universal Carbon on an exchange like Uphold. Since Universal Carbon is equal to one-year tonne of carbon emissions, you’ll need to buy and burn 0.03161 metric tonnes worth of Universal Carbon to offset each Ethereum transaction. As of March 31, UPCO2 is worth about $10. So that means offsetting your NFT is worth about $0.32.
Le Merle said NFTs are important because they shift the power to allow artists to benefit financially from their work.
“In the old model, artists were not credited. You would know the games, but not the artists,” Le Merle said.
“NFTs have changed that equation, and we can now give visibility into who actually creates the art, feature them and disintermediate the layers between you and the things you’ve made.”
Carbon credits aren’t a complete solution. They have been criticized as having their own shortcomings. However, Ethereum’s mind-boggling energy consumption will be significantly tapered with the launch of a new update, Eth2. Until then, every new transaction, swap or NFT is going to have an impact.
Le Merle said he hopes for a future where blockchains and their applications will be powered by clean energy and stop leveraging the carbon economy.
“We need to use less energy, use green energy where we can and only then do we offset it. Universal Carbon isn’t fixing climate change, but it’s a step in our transition to a sustainable future.”