Within a few days last week, the World Wildlife Fund hyped up and then quietly canceled plans to raise money for conservation efforts by minting its own NFTs. The UK chapter of WWF unleashed a firestorm on itself by releasing “Tokens for Nature depicting 13 endangered species. The tokens look like glass cubes encasing each animal: a giant panda, Javan rhino, and Galápagos penguin, to name a few. And they really pissed off other environmentalists.
“My initial response [to World Wildlife Fund’s NFTs] was they must be joking … They’re supposed to be all for sustainable innovations, and they’re getting involved with one of the least sustainable things on the planet,” says digital currency economist Alex de Vries, who has been outspoken about the risks some cryptocurrencies pose to the environment.
“They must be joking”
The World Wildlife Fund seemed to believe it had found a solution to the climate controversy swirling around NFTs by working with the Polygon, a so-called Layer 2 blockchain that’s tied to the Ethereum network. But while Polygon claims transactions on its blockchain use very little energy, de Vries told The Verge that Polygon is responsible for some of the pollution generated by the notoriously energy inefficient Ethereum and isn’t counting it. Factoring in its relationship with Ethereum, de Vries estimates that a single transaction on Polygon is a whopping 2,100 times higher what WWF estimated.
At the heart of the discrepancy is whether — and in what circumstances — Layer 2 blockchains reduce energy use. While most NFTs are part of the Ethereum blockchain, the way Ethereum verifies transactions is slow, expensive, and energy-intensive. As Ethereum gets more crowded, companies are looking for new ways to scale it up. You can think of a Layer 2 blockchain like Polygon as a sort of carpool lane added to the Ethereum highway.
Like a carpool lane, Layer 2 networks are supposed to be able to fast-track transactions. This ostensibly saves time, money, and — crucial for Polygon’s environmental claims — energy. In one blog post explaining its energy use, Polygon calls itself “the eco-friendly blockchain scaling Ethereum.” Because Ethereum uses an energy-hungry system to validate transactions, it has an annual carbon footprint comparable to Singapore, by de Vries’ estimate. Polygon says its own energy and environmental footprint is just a tiny fraction of that because it uses a different process for validating transactions.
Think of a Layer 2 blockchain like Polygon as a sort of carpool lane added to the Ethereum highway
But while passengers in the carpool lane might be individually responsible for fewer emissions than people driving alone on the rest of the highway, adding a new lane still makes room for more polluting cars on the highway. Likewise, Layer 2 solutions still work in tandem with their main blockchain, and when that blockchain is energy inefficient, that creates more pollution, according to de Vries.
And Ethereum is wildly inefficient when it comes to energy use. To validate transactions and mint new tokens, Ethereum “miners” race to solve ever-more-complex puzzles. All the computing required to solve those puzzles is what makes the blockchain’s energy use skyrocket. Bitcoin uses the same kind of process, called “proof of work.”
In contrast, many newer blockchains, including Polygon, use a process called “proof of stake” to validate transactions. Rather than solve complex puzzles, people need to lock up tokens they already have as collateral in order to be in the running to validate transactions and mint new tokens. No puzzles, no skyrocketing energy use. Experts critical of Ethereum’s and Bitcoin’s environmental impact have generally been much more optimistic about independent cryptocurrencies using proof of stake.
But since Polygon isn’t independent, its claims that it is an “eco-friendly blockchain” are fraught at best. De Vries points out that Polygon has contracts on the Ethereum network representing millions of transactions. Those contracts are necessary to move assets back and forth between Polygon and Ethereum and perform other critical functions for Polygon. De Vries takes those contracts, which are verified using proof of work, into account in an analysis of Polygon’s carbon footprint he published Friday on his blog. While WWF UK said in its NFT announcement that a single transaction on Polygon produces just 0.207 grams of CO2, De Vries calculated those same transactions produce close to 430 grams of CO2.
Ulrich Gallersdörfer, CEO of Crypto Carbon Ratings Institute, agrees that calculating the energy consumption of Polygon’s blockchain in isolation offers an incomplete picture. “While Layer 2 solutions can be seen as independent networks, they still rely on the security of the underlying Layer 1 network and therefore its electricity consumption and carbon footprint,” Gallersdörfer said in an email to The Verge.
Calculating the energy consumption of Polygon’s blockchain in isolation offers an incomplete picture
Another argument for moving transactions to Layer 2 networks is that energy savings can be achieved by bundling several transactions together — say, two people exchanging several NFTs. But ultimately, those bundles are brought back to Ethereum’s ledger as a single transaction recorded on Ethereum’s energy inefficient blockchain.
On a more basic level, Layer 2 solutions help polluting blockchains get bigger. Polygon allows users to store, spend, and trade Ethereum-compatible tokens more cheaply. As one of the more advanced Layer 2 solutions, it also connects other Ethereum-compatible blockchains and apps to each other and to the main chain. All those capabilities might persuade someone to stick with Ethereum and Polygon rather than turn to a truly independent blockchain that runs on proof of stake. Ethereum says it will transition to proof of stake, but that move has been delayed for so long that de Vries and others are skeptical it will ever happen.
WWF sang Polygon’s praises when its Germany and UK arms first decided to mint NFTs. “After extensive research and appropriate due diligence, we firmly believe that the benefits to our organisation and to our work brought about by entering the NFT space are worth the limited environmental impact of minting NFTs on Polygon,” WWF UK wrote on a now-defunct webpage breaking down how it calculated energy use and emissions from its NFTs. Polygon didn’t respond to multiple requests for comment from The Verge, and WWF UK declined to be interviewed.
On Friday, just a day after releasing “Tokens for Nature,” WWF UK decided to “bring this trial to a close.”
“We recognise that NFTs are a much debated issue and we all have lots to learn about this new market,” the environmental group said in a statement. WWF Germany’s “Non-Fungible Animals,” on the other hand, which launched in November, are still raising money for conservation, although the organization says this isn’t the ultimate goal. “For us it was never about the funds. It was about raising awareness regarding the species extinction,” a spokesperson for WWF Germany said in an email to The Verge.