NFTs Were a Wasteful, Destructive Scam

Do you remember NFTs?

Do you remember how they were consistently, credibly called out as an obvious con?

Do you remember the stories about how much energy was going into powering the computers running that con?

Pepperidge farm remembers, and so do I.

An article went around not long ago, about the fact that NFTs are mostly completely worthless now (as though they weren’t worthless from day one), and it got me thinking.

I like the idea of a society in which people can try things just to see if it’ll work, and I think we should be focusing more on increasing carbon-free energy production than on restricting people’s ability to use energy. I also think that that only goes so far. I want more nuclear power, for example, but I’m not on board with people building reactors in their back yards, and I’m not on board with turning an increase in nuclear power plants into a speculative bubble.

And I’m not on board with allowing vast amounts of resources to go into powering something like NFTs, simply because there’s a lot of money involved. The technology involved is interesting, and I’m sure it has great uses, but in my inexpert opinion, the value of crypto-stuff in general has been greatly overblown, and NFTs seemed a thousand times worse. A lot of people with a lot of money pushed really hard to make that bubble happen, and I’m sure they made a lot of money from it. I’m sure a small number of lucky working people also made fortunes, but as is usual in capitalism, I think that was a small minority.

I don’t know how many people lost money from NFTs specifically, or how many were convinced to invest cash they couldn’t afford to lose, but given the state crypto overall, I’m willing to bet it was a lot.

At the start of 2022, the Super  Bowl featured celebrities like Tom Brady, Larry David and Matt Damon in  commercials for crypto companies. Logos for crypto companies like FTX  could be seen plastered on multiple sports arenas and a new wave of  crypto influencers emerged, garnering hundreds of thousands of  followers. Cryptocurrency was everywhere.

It was supposed to be an alternative to traditional finance.

Instead  of exchanging money through a third party, like a bank, cryptocurrency  allows users to transfer digital currency directly. However, unlike  traditional forms of currency such as the U.S. dollar, the government  does not insure deposits and federal agencies have taken limited steps  to regulate the crypto industry.

But  the major crash of the crypto market last year has brought headaches,  fear and anger among the millions of people around the world who  invested their savings and are left wondering whether they’ll ever see  their money again.

Curt Dell, a father of three from California, told ABC News’ Rebecca  Jarvis that he’s lost over $200,000 in Bitcoin after the digital crypto  lending company Celsius went bankrupt last year.

“It robbed [my family] of so much potential,” said Dell, a California resident who works in sales. “It’s such a bad situation.”

Sam Bankman-Fried is currently on trial for his alleged crimes, but I have a sneaking suspicion that as with Madoff before him, his punishment will distract from the vast majority of those whose actions created the bubble.

There are those who argue that bubbles, including the crypto bubble, are actually good things, because they generally follow new technology, which is later adopted. I think there may be a good point in there somewhere, but the people who make such arguments tend to ignore or dismiss the people harmed by those bubbles, and that’s just the surface.

I’ll admit that I find it a little hard to feel too much sympathy for someone who had $200,000 to invest in such an obvious con. If Dell had that money lying around, I think he and his family will be OK for its loss. A lot of other people, who invested far less than that, will probably suffer more for it, but made the investment because they felt it was their one shot to escape poverty in a rigged system.

Maybe, in a world with a solid social safety net, and no climate crisis, it would make sense to allow bubbles like this to just happen, both as a way to test the bounds of a technology or concept, and as a way to root out scammers, and limit their ability to scam people. Unfortunately, we live in a world where losing money to a scam can be devastating, and the bubble in question actively added to the climate crisis.

According to artist Memo Akten, minting an Ethereum-based NFT alone requires 142 kWh of energy. This is the equivalent of about 100,000 Visa transactions,  said Dexter Baño Jr., an advocate for environmental protection and  technological advancements. To further illustrate how huge that figure  is, he noted that in 2019, American households only used an average of 30 kWh of energy per day.

“This means that you can power a house in the United States for 4.7 days with the energy being used to mint an NFT,” he said.

Now, if you’re in the mood for some math:

“Based on data from the Energy Information Administration, there are 0.85 pounds of CO2 (carbon dioxide) released into the air per kWh of electrical energy used. Multiplying this by the amount of energy spent on each mint transaction on Ethereum, that snowballs to 120.7 pounds of CO2 for every NFT creation. This is 6.16 times the CO2 output of burning one gallon of gasoline,” Baño said.

It’s  important to note that this only covers the creation of one NFT. The  process of buying and selling each NFT involves more transactions that  need to be verified—mined—and therefore even more energy that goes into  all that extra computer activity.

“Since  NFTs are getting mainstream, more people are transacting on Ethereum.  As long as proof-of-work still exists in that chain, the environmental  impact is still high,” said Angeline Viray, who trades and invests in  cryptocurrencies and NFTs.

This isn’t good. To me, it feels like the way this bubble played out demonstrates pretty clearly that we are nowhere close to taking global warming seriously, as a society.

We have to use fossil fuels to replace fossil fuels, and using energy for bullshit like this is, in my view, unacceptable. It’s also absolutely going to keep happening, in all sorts of ways, for as long as we are governed by the current system.

I don’t really have a policy prescription here, other than to say that we ought to be making climate action the central focus of our economy, to the same degree that we currently center greed. There’s something broken when waste and fraud at that scale is simply… the way things work.


  1. invivoMark says

    I knew crypto was awful for the environment, but I’ve never seen an estimate of just how awful. I’ve never been able to get a “crypto bro” to acknowledge the environmental component, presumably because they prefer not to actually reflect on their beliefs. Or maybe they’d just rather be rich in an environmentally ruined world than have average wealth in a prosperous world.

    I have so little sympathy for those who got scammed.

  2. Dunc says

    The technology involved is interesting, and I’m sure it has great uses

    Yeah, it’s interesting, but no, I’m really not at all convinced it has great uses. The underlying mathematics has been around for decades, and blockchain specifically has been around for 15 years. In that time, lots and lots of very, very smart people have expended an enormous amount of time and effort in attempting to find a genuine use case for it (other than facilitating crime or fleecing rubes), entirely without success. How much more time, effort, and talent are we going to waste on this quest before we admit that cool and interesting do not necessarily equate to useful?

    Instead of exchanging money through a third party, like a bank, cryptocurrency allows users to transfer digital currency directly.

    In theory, yes. In practice, actually doing your own blockchain transactions, or even managing your own wallet, is such a monumental ball-ache that almost everybody hands these tasks off to third parties. Decentralisation is a myth.

  3. says

    Yeah, I think it was El Salvador that made bitcoin official currency, and there was shit like people accidentally overpaying for coffee by hundreds of dollars, because the value changed so quickly.

    I feel like the possible for utility is in shit like record-keeping, rather than as actual currency.

  4. Dunc says

    I feel like the possible for utility is in shit like record-keeping

    Believe me, people have tried… But it turns out that blockchains don’t actually bring any additional features that anybody really wants, while they do cause a number of problems that more straight-forward approaches don’t suffer from. As yet, nobody has ever managed to come up with a blockchain solution that can’t be improved by removing the blockchain bit.

    As I understand it, the main problem with El Salvador’s attempts to roll out bitcoin wasn’t so much volatility as that it just didn’t work. The app people were supposed to use, the payment network, and the backend systems were all just hopelessly broken in really fundamental ways. Still, volatility would have been a problem if it had worked… Or one of the problems, anyway. Transaction throughput would have been another major issue, because bitcoin is unfixably shit for processing transactions in the real world.

  5. another stewart says

    I’ve read that “blockchain is a solution in search of a problem”. Which I guess is the short form of Dunc’s comments.

  6. billseymour says

    Dunc @4:

    As yet, nobody has ever managed to come up with a blockchain solution that can’t be improved by removing the blockchain bit.


    I’m reminded of the computer scientist, John Potter, who once posted in a newsgroup:

    [Object-oriented programming] is designed to handle complexity.  If you don’t have any, using OOP will provide it.

    Try writing “Hello, World” in Java.  It takes almost as much syntactic sugar as does COBOL.

  7. flex says

    I can’t say anything about the NFT bubble, but I did know a fellow who’s son convinced him to take out a new mortgage on his paid-off house to invest in internet stocks in 2000. He lost his shirt, was in his late 50’s with a new 30-year mortgage, and was looking at working until he died to keep up with the payments.

    So I can have some sympathy for those who got scammed. Yes, they made the final decision to invest in something which was dubious on the face of it. But none of us are experts, or even competent, at everything we are exposed to. Not every fish recognizes the grin of a shark immediately. If they did, sharks would starve.

    Our current society has apparently decided that the freedom to lie to others is more important than protecting people from harm. Lawyers don’t get rich by preventing lawsuits. Maybe regulations and safeguards only protect idiots, but we are all idiots sometimes.

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