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White House to NFT Space: Make Minting Greener

BY Jex Exmundo

September 08, 2022

The Alpha:

  • In March, President Biden issued Executive Order 14067, which called for the responsible development of the digital assets industry. To fulfill this objective, the Executive Order called for research into steps that industries and government agencies should take to keep individuals, businesses, society, and our planet safe.
  • One report that came from this Executive Order was published by the White House on Thursday. It details a list of steps all blockchains should take to become more environmentally sustainable. This report directly affects the NFT space, as the tokens live on blockchains.
  • The report argues blockchains operating under a proof-of-work consensus mechanism — namely Bitcoin and Ethereum — are particularly energy-consumptive.
  • With Ethereum taking up to “20% to 39%” of the global energy usage generated by blockchains, the upcoming Ethereum merge may help reach the sharp reduction in blockchain energy consumption the White House is calling for.

Why it matters

It looks like everyone is excited about the upcoming Ethereum merge. Even the White House. With environmental concerns leading the list of arguments against further development of blockchain technology, the coming shift of the de-facto NFT blockchain to a proof-of-stake consensus mechanism for verifying transactions recorded onto it looks to resolve one of its most often discussed issues — along with encouragement toward future growth. It’s generally accepted that blockchains operating under this consensus mechanism pose a “considerably lower” risk as they are scaled up, compared to their proof-of-work counterparts, according to the new White House report.

Currently, NFTs are far from an exception to the potential environmental toll of blockchain technology. As detailed in an article from computational artist Memo Akten, each NFT transaction on Ethereum-powered platforms reportedly consumes a similar amount of energy as a multi-hour flight. That includes minting, which allegedly consumes the same amount of energy as a “1–2 hour flight,” Akten said.

The exact numbers are hard to pin down. But it suffices to say that NFT transactions do cost a rather high amount of energy. Of course, that all stands to change following The Merge.

“Every consensus mechanism has strengths and weaknesses. […] Responsible development of digital assets would encourage consensus mechanisms that minimize energy usage and environmental impacts while maximizing benefits to consumers,” the White House said. And that’s exactly what the Ethereum network is developing.

What’s next

Although things are looking up for Ethereum, Bitcoin must follow suit in adopting a more environmentally-friendly consensus mechanism. As detailed in the White House’s report, the U.S. is currently the world’s leading force in Bitcoin mining — a position that may become environmentally sustainable down the road. At worst, the White House may follow the initiatives of countries like China in officially banning all things crypto — and, in turn, NFTs. However, it should be noted that the CCP’s crypto ban has hardly slowed down crypto-mining operations in the country.

Keep in mind that an outright ban is an absolute worst-case scenario. All things considered, this report can be seen as a gentle reminder from the White House to keep sustainability in mind as blockchain technology continues to go mainstream. As the March Executive Order mentioned, “We must reinforce United States leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets,” President Biden said. “The United States has an interest in ensuring that it remains at the forefront of responsible development and design of digital assets and the technology that underpins new forms of payments […], particularly in setting standards that promote: democratic values; the rule of law; privacy; the protection of consumers, investors, and businesses; and interoperability with digital platforms, legacy architecture, and international payment systems.”

But wait, there’s more:

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