Cryptocurrencies and NFTs: The fashion that pollutes more than a country and has no regulations

In recent years, the fashion for cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, among others, has been increasing. At the same time, NFTs (Non-Fungible Tokens) have gained some fame, however, to create each of them, high amounts of energy are used that generate the same levels of pollution as countries such as Switzerland or Argentina.

As it is a new technological trend, there are no clear regulations on the subject, and those that exist are focused on the financial system and their transactions, not because of the CO2 they generate through their energy consumption.

To understand this, it is necessary to know everything about how cryptocurrencies or NFTs are generated, one example is enough: If a person leaves the electronic devices of his house on every day, such as the computer, the TV, the blender and more, the receipt to be paid at the end of the month will be highly expensive because he spent a lot of energy.

The same goes for cryptocurrencies and NTFs, because for each of them it is necessary to put computer farms to work (24 hours a day) that pollute the same thing as a country, which can have a strong impact on the environment.

According to a report by the University of Cambridge by researchers at the Bitcoin Electricity Consumption Index (CBECI), if bitcoin were a country, it would be among the 30 countries that use the most energy in the world, above Argentina and Switzerland.

In the case of cryptocurrencies, it is necessary to solve a mathematical problem: this is known as mining, since for each solved equation profits are delivered. To find that result miners need to use several computers with powerful GPUs that they have working hard.

If we add to that that there are thousands of miners - not only using a computer but entire farms - all over the world trying to solve the equation first to keep the profit, the consumption of energy and resources is worrying.

Juan Pablo Pineda, Chief Operating Officer of Messengers Urbanos, explained to Infobae that this can be understood as a lottery game. “In order for me to participate in that lottery (as a miner) I have to show work, that I spend energy and resources. If I don't prove that, anyone can pretend to be many different miners, and they can own the network. So to prevent someone from taking over the entire network, everyone has to prove that they spent energy and resources.”

Something similar happens with NFTs that to guarantee their authenticity require a certificate that depends on blockchains or blockchain on the Ethereum network, that is, to carry out a process, albeit simpler, similar to that of cryptocurrencies.

“What blockchain itself does is not generate cryptocurrencies, it is to generate a decentralized certificate that you are crediting that piece of information. The certificate is generated by each of the nodes of the blockchain network [...] A node is basically one of the computers located in every part of the world that serve as a blockchain server,” said programmer Victor Fabian for Infobae Mexico.

Despite the fact that NFTs have similarity to cryptocurrencies, it is not known with certainty what carbon footprint they are leaving in their wake, firstly because of the lack of regulations, and secondly, because they are decentralized entities and there are no authorities to verify their transactions.

For now, the clearest benchmark is that of the University of Cambridge, which focuses solely on Bitcoin, and ensures that its miners use more energy in a country, which puts into perspective how much energy cryptocurrencies and NFTs accumulate with their blockchains, which have no surveillance and are gradually increasing to the couple of its popularity.

Pablo Pineda pointed out two possible options: that crypto miners use renewable energy or that they generate less CO2. Or that traditional mining (Proof of Work) changes to a more modern one called Proof of Stake (PoS).

In the first case, coal or gas plants would not be viable for mining, so those responsible would have to move their nodes to countries where solar, wind, nuclear or geothermal energy is used. However, the same specialist acknowledged that “it is not easy because the miner is going to be located where it is cheapest”, and for now renewable energies are more expensive.

The other option is instead of “benefiting” computer farms that solve mathematical equations faster (Prof of Work), the new methodology rewards those with the most cryptocurrencies (PoS).

“The problem is solved by returning to the issue of lotteries and tickets. If I buy a lottery ticket, I have a super low probability of winning, but if I buy 10 tickets I will have a better chance; but no one will still be able to buy 100% of the tickets because it will be such a large amount of money that no one is capable of having. It then solves the initial problem that no one can own the system,” Pineda explained.

So it doesn't demand that miners prove that they spent resources to solve the problem, but rather relies on who has the most to give you the opportunity to continue accumulating cryptocurrencies.

It is worth remembering that decentralized transactions also spend a lot of energy, while financial institutions such as MasterCard, by comparison, do not do so and are just as reliable.

“MasterCard does not have the problem of agreeing to 1,000 decentralized entities, it is the one that makes its decision whether to be valid or not, so no energy is spent on accepting a transaction. You don't have to agree with 1,000 people. If you compare a MasterCard transaction against a Bitcoin transaction, the amount of energy you're spending is monumental, like 1% versus 99% for a single transaction,” he said.

While opting for a cleaner option, which as a last resort is for them to disappear, the excitement of being part of the trend and being fashionable is blinding the problem of pollution and the urgent regulations that countries must apply to control them.

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