Apr 15, 2021
Non-fungible tokens (NFTs) have become a bustling market with an expansion rate that seems to have no limits. Many people and businesses are pondering use cases for these tokens, but some have become less enthusiastic about NFT minting. That is because issuing NFTs can be expensive and cause a substantial carbon footprint on many leading blockchains. In fact, many artists are walking away from NFTs for that reason: they simply use too much energy.
Thankfully, there is Algorand – the most secure and decentralized blockchain that supports all types of tokens, including non-fungible tokens (NFTs). Minting NFTs on Algorand is fast, cheap, secure, and environmentally friendly, making NFTs more accessible than ever before.
The Two Challenges Facing NFTs
To speed up the adoption of NFTs, the market needs lower fees, and a lower carbon footprint -- both problems that Algorand can help solve.
While NFTs have made some artists millionaires, the high fees for minting, buying, and selling NFTs means that many artists and NFT issuers can easily lose money. This is an aspect that first-time creators should consider.
Fees are paid whenever you mint NFTs, as well as when collectors buy, sell, or trade them. When it comes to minting or transacting, issuers have to pay for the computing energy required to validate transactions on blockchain. If you deal with a Proof of Work (PoW) blockchain, the fees might be higher.
Last month, Business Insider shared the story of Robert Martin, a senior content strategist at Kapwing, a platform that revolves around digital storytelling. He said that buying and selling NFTs was “like the Wild West.” In his first experience with the tokens, he lost over $200 in fees.
Martin said he had purchased an NFT for about $30 on Rarible, and ended up with a loss of over $200 on the NFT, even though a buyer was ready to pay about $90 for the token. For NFT creators, this is hardly a money-making proposition.
While NFTs are extremely popular, they must overcome the “high fee hurdle” before they can receive mainstream adoption among artists, investors, and others. While these fees can start at only a few dollars per NFT, they can easily reach hundreds of dollars, eating away at profits for those creating or trading them.
But fees are not the only challenge in the burgeoning NFT market. The NFT market’s increasing carbon footprint is another issue that needs to be addressed.
According to a report by The New York Times, “the creation of an average NFT has a stunning environmental footprint of over 200 kilograms of planet-warming carbon, equivalent to driving 500 miles in a typical American gasoline-powered car.”
The immense carbon footprint of NFT issuance comes from the consensus mechanism deployed by the leading blockchain for NFTs. Unfortunately, the majority of NFT mining and trading is taking place on a Proof of Work (PoW) chain that requires energy-intensive crypto mining every time an NFT is created or traded. Needless to say, this is not sustainable.
In order for this new industry to flourish, mining and maintaining NFTs must reduce the impact on the environment.
Fortunately, there are eco-friendly alternatives for the NFT market. Algorand provides an infrastructure that can upgrade the characteristics of NFTs while making NFT mining and trading processes more affordable, secure, and environmentally friendly.
NFTs on Algorand: The Advantage
What makes Algorand attractive for NFT issuers, buyers, and sellers is that it requires very low fees thanks to its Pure Proof of Stake (PPoS) algorithm, which also results in a very low carbon footprint.
Low fees are important, especially for NFT creators minting tokens at scale. For example, SIAE (Società Italiana degli Autori ed Editori), which is the largest copyright collecting agency in Italy, used Algorand to roll out NFTs representing authors’ rights.
The agency tokenized 4.5 million rights of over 95,000 member authors. If it used another popular blockchain for minting NFTs, SIAE would have paid between $40 and $100 per NFT, or between $180 and $450 million in total fees. Whereas, the cost to mint an NFT on Algorand can be as low as a transaction cost of .001 Algo, resulting in an enormous difference with lower fees.
The great thing about NFTs built on Algorand is they have the same functions and capabilities as their counterpart tokens created on other popular chains. Moreover, the fact that Algorand is forkless makes these NFTs more secure.
The Pure Proof of Stake (PPoS) consensus protocol, invented by MIT Professor Silvio Micali, allows every Algorand user to become a block validator by staking ALGO – the native token of the system. While this kind of approach is common for Proof of Stake (PoS) systems, Algorand’s system picks block validators randomly and secretly for every period.
In this way, Algorand achieves full decentralization, as it gives all users equal chances to be selected by the system. This also ensures the highest possible degree of security, since no one knows who the next block validators are. There is no need for mining, which allows Algorand to achieve carbon neutrality, an important selling point for NFTs as they go mainstream.
Solution Architect Cosimo Bassi calculated the average cost of minting an Algorand NFT is roughly 0.0000004 kg of CO2 per NFT: a truly negligible amount, especially compared to the estimated 200 kg of planet-warming carbon produced by a single NFT on competing blockchains.
Again, Algorand’s Pure Proof of Stake (PPoS) algorithm is not based on energy-intensive Proof of Work (PoW) or inefficient Proof of Stake (PoS). This means it requires a minimal amount of energy to operate. What’s more, Algorand partners with carbon-neutral cloud energy sources for staking and relay servers, to make the network orders of magnitude more efficient. The small amount of carbon emission that is generated by the Algorand network is offset with credit purchased from ClimateTrade.
Algorand provides the ideal infrastructure for the fast-growing NFT market because: