With the pounding of a gavel, auction house Christie’s heralded a new age for the non-fungible token (NFT) one day in March 2021. Unlike the typical oil paintings, antique bowls and bottles of rare whiskey, that particular lot was a virtual, intangible piece of work by American digital artist Mike Winkelmann.
Also known as Beeple, he became US$69.3 million ($93.8 million) richer that day, and his work, Everydays: The First 5000 Days, placed third on the list of record auction prices for works by a living artist.
Something was definitely in the air that week; the third and fourth dearest NFT sales were made within 48 hours of Beeple’s successful auction. CryptoPunk #7804 fetched US$7.56 million on March 10, while CryptoPunk #3100 was sold for just US$50,000 less just a day later.
One year after these eye-watering transactions, these numbers are only inching higher, though away from the public eye.
According to industry data tracker NonFungible, the average price of NFTs began rising in 2021 after three years of stasis. In 2021, the average price grew from US$32.77 in January to a high of US$1,023.95 in November.
NonFungible puts the annual average price of NFTs in 2021 at US$807.52 — a 1,542% y-o-y spike from US$49.18 in 2020.
See also: Prices in a 'bubble', artist says after US$69 mil NFT sale to Singapore buyer
However, one Australian NFT website, NFT Club, notes a “sizeable dip” in the average value of NFTs in December 2021, with prices falling by 28.99% to US$727.11.
Sales estimates vary across data providers, which is unsurprising given the frontier nature of this market.
See also: Rise of online art auctions and digital art signal disruption
DappRadar says NFT sales volume totalled US$24.9 billion in 2021, compared to just US$94.9 million the year before. CryptoSlam says the 2021 total was $18.3 billion.
NonFungible, which tracks the blockchains Ethereum, Ronin (which hosts the game Axie Infinity), Flow (NBA TopShot, MotoGP) and Immutable X (Gods Unchained and Guild of Guardians) places 2021 sales at US$17.7 billion.
Its 2021 report reads: “In brief, as demand increased, supply struggled to keep pace. This led to two notable consequences: a sharp rise in prices [and] a proliferation of new ‘quick win’ projects, with low added value.”
It continues: “The community of more than two million active wallets now finds itself, at the start of 2022, awaiting new projects with greater added value in order to live up to the promise made by NFT technology.”
Prices down, emissions up
Last year’s flashy sales may have served as a historic torchbearer, but fears of US regulatory scrutiny and the Russian invasion of Ukraine have placed a damper on even the most popular collections.
US senator Elizabeth Warren spoke out against crypto mining earlier this year, as lawmakers investigate its environmental impact. “With Bitcoin and with the other cryptocurrencies — I think there’s a real issue about the environmental impact as well, this whole notion of how much energy is consumed just to keep the currency tracking going,” she said.
See also: The rise of play-to-earn gaming in the metaverse
As of May 3, the average selling price of an NFT has moderated to US$1,979, down from an unusual spike to US$7,911 on March 17, owing to a surprise giveaway by the Bored Ape Yacht Club NFT project.
The dust may be settling on the dollar value of NFTs, but what is consistently rising is the cost to our climate.
Like most proof-of-work cryptocurrency transactions, minting new NFTs, especially on the Ethereum blockchain, exacts a massive toll on the environment, though the jury is still out on exactly how much.
London-based artist and programmer Memo Akten estimates that an NFT-specific transaction has a higher carbon footprint of about 48kg, though he later revised this to 100kg simply to mint one NFT.
A March 2021 article by Quartz estimates that the lifetime cost of an NFT averages 211kg of CO2.
This encompasses everything from submitting a bid (23kg) to selling (51kg) and transferring an NFT (30kg). Each secondary sale, where a collector resells or relists their NFTs, is thought to produce 81kg of CO2.
Based on sales volume, NFT Club has named CryptoKitties as the most damaging collection despite its age, totalling 240 million kg of CO2. Launched in 2017 on the Ethereum blockchain, players spend Ether to breed and trade virtual cats.
Meanwhile, video game Axie Infinity placed second for its impact on the environment.
Touted as the next big thing in the play-toearn and GameFi (gaming finance) market, players collect and mint axolotl-inspired digital pets known as Axies.
Before Axie Infinity’s migration to the Ronin network began in April 2021, it had logged 336,764 sales on the Ethereum blockchain, representing some 27 million kg of CO2.
Allegedly a less energy-intensive option, the Ronin network is an Ethereum sidechain created specifically for the game. Had Axie Infinity remained on Ethereum, it would have generated just under 1.5 billion kg of CO2, claims NFT Club. Instead, it has produced just 27 kg of CO2.
However, whatever green karma the game had hoped to earn was overshadowed by the largest breach in the crypto space.
On March 23, hackers compromised the Ronin network and stole some US$620 million in Ether and USD Coin (USDC). Ho Chi Minh-based game developer Sky Mavis will reportedly take a US$450 million balance sheet hit to ensure all the stolen crypto is replenished, and COO Aleksander Leonard Larsen says recovering the lost funds could take two years.
‘A crime against humanity’
Based on the average figure that a single tree can process 60kg of CO2 in its lifetime, NFT Club calculates that 1.37 trees are needed to offset a single NFT sale.
NFT Club even named rapper Snoop Dogg, who has been vocal about his virtual collections. “[He] currently has a portfolio of 3,683 NFTs, meaning he would need to plant 5,050 trees to account for the environmental impact of his collection.”
Reducing emissions from NFT use on Ethereum could come from a number of fronts, says the Blockchain for Climate Foundation, a Vancouver-based consulting firm that aims to “put the Paris Agreement on the blockchain”.
These steps include moving from a proof-of-work model to a proof-of-stake mechanism, developing “layer 2” solutions like the Ronin sidechain and purchasing high-quality carbon offsets for the remaining emissions.
But with the potential returns to be reaped from NFTs, will people care?
NonFungible reports US$5.4 billion in total resale profits from NFTs in 2021, a staggering 44,681% y-o-y leap.
One figure did fall, however. Average ownership between two transactions shrank 69% y-o-y to just 48 days, reflecting a more fickle and opportunistic market.
As Texas-based digital artist Everest Pipkin states in a March 2021 blog post: “Cryptocurrency is never going to be ecologically just."
“During unprecedented temperature increases, sea level rise, the total loss of permanent sea ice, widespread species extinction, countless severe weather events and all the other hallmarks of total climate collapse, this kind of gleeful wastefulness is — and I am not being hyperbolic — a crime against humanity.”
Photos: Bloomberg
Chart: NonFungible
