What does the reaction to NFTs tell us about how people evaluate ecological damage?
Recently, the Ethereum Foundation finalised the ERC-721 interface standard for Non-Fungible Tokens (NFTs). This standard lays out a protocol for the exchange and ownership of this new class of assets. An extremely simple explanation of the ERC-721 standard is as follows:
A blockchain is a decentralized ledger. It can contain things called smart contracts, which are like little computer programs. A smart contract can implement the ERC-721 interface, which means that it keeps track of variables called Non-Fungible Tokens (NFT). Each token has an owner, a unique identifier, and can be traded to other people. Each token can also include metadata information about the object it is representing.
While the standard had been considered for over 2 years with initial experiments like CryptoKitties, its finalization coincided with a rapid expansion of NFT tokens and markets for trading those tokens.
If you ask people why they are pissed, they will likely tell you that it has to do with the large amount of electricity used to power global cryptocurrencies. But this is a somewhat puzzling response. Surely, if your issue is with greenhouse gasses and environmental damage, criticism should be directed towards things like using fossil fuels to generate that electricity. It seems like a general problem of production, not a specific problem of demand. The total energy usage of all computer processing on earth dwarfs the amount dedicated to mining blockchains, but I doubt that many of the people arguing that NFTs are wasteful and shouldn't exist would extend their opinion to all processing costs.
Intuitively, we might imagine that the issue here is that people perceive the use of electricity as "wastage" and therefore not worth the negative environmental impacts of other, more justified usages. However, I'm not sure that many people who propose this evaluation would support its inverse implication - that there are uses of fossil fuels to generate mains-grid electricity that are non-problematic and worth the environmental damage, given the option of renewables.
There is, in my opinion, also an element of bandwagoning. Many people have soundly placed cryptocurrency within the "bad thing" box, perhaps more have heard the "miner" lingo with its anti-environmental subtext, and so they have gathered a bunch of normative beliefs together without really forming a coherent model of what they're making ethical judgements about.
Did you know that the US energy grid wasted 67.5% of the energy produced in 2019?
Now, that's not to say that we should be holding the grid to any perfect standard, but it does imply that we have a huge amount of optimization to address through building smarter electricity grids, building more optimized energy markets, and rolling out innovations like smart-meters and battery storage. And yet this vastly greater level of wastage does not evoke nearly as large an emotional or verbose reaction from the general public.
It seems that the intensity of this response is generated by the strong disagreement in different people's valuations - some people perceive these nascent "trading-card" NFTs to be worth millions, whereas others consider them to be inherently worthless. In my opinion there is a speculative bubble surrounding these early-adopter "trading-card" assets, but at the same time the ERC-721 standard will generate an extraordinary amount of functional value going forward. But it seems curious that this perception of ownership value transfers to resource consumption valuation.