Content uploaded by Dan Weijers
Author content
All content in this area was uploaded by Dan Weijers on Sep 10, 2024
Content may be subject to copyright.
978-1-6654-3580-2/21/$31.00 ©2021 IEEE
Environmentally smart contracts for artists
using non-fungible tokens
Dan Weijers
Philosophy Programme
University of Waikato
Hamilton, New Zealand
dan.weijers@waikato.ac.nz
H. Joseph Turton
Philosophy Programme
University of Waikato
Hamilton, New Zealand
hjturton@googlemail.com
Abstract—We propose Environmentally Smart Contracts, a
new kind of smart contract for non-fungible tokens to solve the
prudential-moral dilemma facing digital artists. The current
proof-of-work-dominated non-fungible token environment
requires artists to trade off the prudential benefits and the
environmental costs of selling their art on blockchains. By fully
correcting for environmental externalities, Environmentally
Smart Contracts will allow artists to reap the sales benefits of
non-fungible tokens without contributing to environmental
degradation. Concrete steps to encourage the development of
Environmentally Smart Contracts are discussed.
Keywords—non-fungible token, digital art, environment,
blockchain, environmentally smart contracts
I. INTRODUCTION
US$69,000,000 for digital art? Artists around the world,
from seasoned professionals to creative neophytes turned
their heads and dropped their jaws when they heard about the
first sale of digital art at a major auction house. Everydays—
The First 5000 Days, a digital collage of 5000 digital pictures
by Beeple, shocked the art world by selling for just over
US$69 million [1]. Many observers, and even Beeple
himself, furrowed their brows – why would someone want to
pay so much for a digital picture that can easily be copied
[2]? Sure, it’s supported by fancy blockchain technology,
but that doesn’t make the digital picture any more real. At
the same time, others began wondering how they could cash
in on this digital art revolution [3]. These soon-to-be-rich
artists quickly searched online for how to become a part of
the blockchain-supported art movement. But their fervour for
profit was quickly doused by articles and videos about the
huge environmental harms caused by blockchain-supported
art [4]. As socially conscious ethical antagonists, they
couldn’t possibly support something that is so clearly bad for
the environment. But as human beings with needs for food,
shelter, and financial validation of their creativity, they really
wanted to find a way to sell their art digitally. What should
they do?
In this paper we provide both concrete but non-ideal
steps artists can take now and an ideal multi-party solution
that artists and others could support and increase the viability
of in various ways. The ideal solution lays out a way for
artists to get all of the benefits of selling their art via
blockchain technology without perpetuating the
environmental problems currently plaguing the industry.
First, we explain the relevant technologies and the
environmental problem. Second, we discuss the dilemma that
the opportunity of selling via blockchain technology poses to
artists. Third, we detail some of the steps that artists could
take right now to partially resolve the dilemma and support
our ideal solution to it. To achieve this, we discuss some
innovative uses of Smart Contracts that could be adapted to
create a system that dissolves the dilemma for artists,
allowing them to sell their art online without worrying that
their sales, or future trades of their art, encourages or causes
damage to the environment. We recommend that artists and
others encourage new and existing blockchain platforms,
especially Ethereum, to push for the implementation of the
ideal solution we propose: Environmentally Smart Contracts
for non-fungible tokens.
II. NON-FUNGIBLE TOKENS, BLOCKCHAINS, AND
ENVIRONMENTAL IMAPCT
First suggested in Ethereum Improvement Protocols 721
[5][6], a non-fungible token (NFT) is a small amount of data
that certifies something as literally unique. Being literally
unique, there is nothing that an NFT could be traded for that
is the same in all relevant respects (hence ‘non-fungible’)
[5]. Examples of fungible tokens include amounts of
cryptocurrency, such as 1 Bitcoin, which can in theory be
perfectly traded for a different 1 Bitcoin. In practice, newly
minted Bitcoins may be valued slightly more than old ones
[7]. But this is also true for new cash, which may be valued
slightly more than grimy, glitter-encrusted old bank notes.
And, in both cases, the extra value new versions of the
tokens accrue is likely to be negligible.
NFTs exist as an entry on a blockchain—a digital
ledger—that all but completely ensures the entry remains
discoverable and unaltered for the life of the blockchain. The
NFT data includes a record of its creation and every trade it
is subject to [8]. By certifying the uniqueness and transaction
history of something, NFTs seem well disposed to use for
items that gain most or all of their value from their rarity or
uniqueness. Prime examples would be collectible items, such
as trading cards and many kinds of art [9]. Furthermore, the
proof of ownership provided by the blockchain technology
underpinning NFTs is especially useful for items that are
traditionally very difficult to verify ownership of, such as
digital items. For these reasons, NFTs appear to be very
useful for securing the value of digital art [5].
Blockchain technology has been widely touted as a force
for decentralising and democratising financial [10] and even
political [11] institutions. NFTs can also decentralise and
democratise art [12]. Many artists around the world struggle
because they are not given access to the relevant cultural and
economic institutions and establishments required to sell
their art profitably. They never get invited to exhibit at the
Tate Modern, their art never comes up for auction at
Sotheby’s, and their local area lacks the market and
infrastructure for selling any art. This issue has been
compounded for digital artists because of the worries about
the authenticity and uniqueness of the art mentioned above
[13]. Marketplaces for NFT digital art, such as Opensea,
Rarible, and SuperRare, allow any art to be displayed for
sale, completely bypassing the gatekeepers of the established
2021 IEEE International Symposium on Technology and Society (ISTAS) | 978-1-6654-3580-2/21/$31.00 ©2021 IEEE | DOI: 10.1109/ISTAS52410.2021.9629203
Authorized licensed use limited to: Univ of Waikato. Downloaded on December 07,2021 at 21:23:55 UTC from IEEE Xplore. Restrictions apply.
artworld. All that digital artists must do to be able to securely
sell to the world is “mint” their art with NFTs.
The minting process brings an NFT into existence with
its first entry on a blockchain digital ledger, thereby securing
the value of a digital work of art. But, not much in this world
is free. Minting, as with many other actions performed on
blockchains, incurs a fee, payable in the native currency of
that blockchain. The financial costs of minting vary across
platforms and across time as the cost of using blockchains is
often dependent on current market forces as well as the rules
for how that blockchain and currency operate. In early 2021,
prices for minting on platforms using Ethereum were very
costly because of high demand [14]. In February, for
example, it cost about US$100 ETH [15] (the native
currency of the Ethereum blockchain) to mint a single work.
Prices have since settled down considerably, with minting a
single work now costing US$20. But the financial cost isn’t
the only cost of NFTs.
Many artists considering using NFTs were shocked to
discover the considerable environmental costs associated
with the major blockchains, such as Bitcoin and Ethereum,
and any NFTs that rely on Ethereum [4]. Taking Ethereum as
an example, anything done on this blockchain requires
paying fees in Ether (ETH). Since Ethereum is a proof-of-
work blockchain, ETH comes into being by a process called
“mining”. When mining, computers are set to work,
competing to be the first to solve a complex mathematical
problem. The first miner to solve the problem is rewarded
with newly minted cryptocurrency. Successful mining
effectively requires dedicated computers and electricity. Lots
of electricity. Current estimates suggest that Ethereum
miners use the same amount of energy as the country of
Greece [16]. Calculating how much damage NFTs do to the
environment is very complex [17]. We can estimate how
much electricity it takes to mine, say, one ETH, but if we use
exactly one ETH to mint and sell several NFTs that ETH
doesn’t just disappear or get thrown away. It is cycled around
to the miners of Ethereum. What the minting does is increase
the congestion on the Ethereum blockchain, which pushes up
the price of transactions on the blockchain, which increases
the attractiveness of mining, meaning more miners use
electricity to mine Ethereum. Given that multiple contextual
factors, including supply and demand of Ethereum, fossil-
fuel-based electricity, green electricity, NFTs, and several
other goods, affect the amount of electricity used whenever
an NFT is minted, measures of environmental impact of
minting are rough estimates at best. Nevertheless, the total
environmental costs of the whole system are far from
negligible and the whole system seems incredibly wasteful.
Millions of over-powered computers work away night and
day to solve pretend puzzles to provide a level of security for
blockchains that could be approximated in other non-
polluting ways.
In proof-of-stake systems, as opposed to the proof-of-
work systems above, the network is secured, and the native
cryptocurrency of a blockchain is produced, by people
“locking up” that cryptocurrency in the network rather than
by energy-intensive mining. Locking up entails individuals
depositing the currency into the network as validators [18].
New currency is given randomly to validators based on the
extent of their deposits. The more an individual has
deposited, the greater chance they have of receiving it. Since
proof of stake blockchains don’t require computers to do any
extra work, this method has something like 99.9% less
environmental impact than the energy-intensive proof of
work method currently used by Ethereum [19].
III. THE DILEMMA FOR ARTISTS
NFTs provide an exciting opportunity for digital artists to
get more exposure to liquid markets, sell more of their work
for a higher price, and perhaps make a living. However,
many artists see themselves as positive forces in society that
spur others into positive states of mind and behaviours
[20][21], not as bad examples that encourage waste and
environmental degradation. Unfortunately for artists, the
current range of options for using NFTs means that they are
only likely to get the benefits of higher profits if they mint
and sell on Ethereum. There are options to mint and sell
NFTs on minor proof-of-stake blockchains, but the audience
is much smaller and the sales are much lower. No $69,000
pay days appear to be on the horizon in these
environmentally friendly blockchains, let alone individual
$69,000,000 sales. So, the ethical-prudential dilemma for
many digital artists is to choose either contributing to the
degradation of the environment for higher profits or missing
out on the opportunity for higher profits while watching
others degrade the environment.
What should a self-respecting, environmentally conscious
digital artist do when facing this dilemma? Some artists
prioritised prudential concerns, embracing the energy-
intensive main blockchains. A subset of these attempted to
mitigate the environmental damage of their actions by
apportioning some of their profits to carbon off-setting.
Unfortunately, the majority of carbon-offsetting schemes do
not appear to be very helpful, especially in the long-run [4].
Furthermore, paying the schemes in a proof-of-work
cryptocurrency or paying to cash out of the cryptocurrency
just further add to the environmental costs of the system.
More famous artists, such as Beeple [22], can afford to fund
carbon-offsetting schemes generously. Up-and-comers,
however, are unlikely to be making enough money to undo
all or even any of the harm their NFTs cause. And herein lies
the main ethical problem with famous artists minting and
selling their work on proof-of-work blockchains. Even if
they divert a lot of their profits to effective carbon-offsetting
schemes, their presence and big sales on a proof-of-work
blockchain bring more buyers and more artists to that
blockchain, encouraging the growth and entrenchment of an
unnecessarily wasteful and polluting system. Non-digital
artists that are already famous and successful, and hence
don’t really need NFTs to achieve a high level of
profitability, have even more reason to avoid promoting
energy-intensive proof-of-work blockchains by minting
NFTs on them. Again, even if they engaged in some carbon-
offsetting, it is not clear that they could fully compensate for
the harm their potentially talismanic support of this system
will inflict on the environment over the years. Lesser-known
artists minting NFTs on Ethereum is less consequential, but
still morally problematic because their actions also help
maintain and grow this system. This moral approbation is
possible because these artists all had another option.
A few notable artists and many lesser-known artists
minted their NFTs on smaller environmentally
unproblematic blockchains, such as Tezos or Phantasma, or
on Ethereum sidechains like xDai or Polygon and the newly
launched Arbitrum (which uses ETH and has reduced but far
from negligible fees) and most interestingly Palm (which
Authorized licensed use limited to: Univ of Waikato. Downloaded on December 07,2021 at 21:23:55 UTC from IEEE Xplore. Restrictions apply.
adds a small carbon offset to transactions). However the
biggest marketplaces and the biggest buyers are on
Ethereum: 8 of the top 10 NFT marketplaces by sales volume
are on Ethereum [23]. Foregoing higher profits for their
ethical principles, artists outside the Ethereum chain may be
hoping that their ethical principles sustain them through
winter. We should commend the principles of artists minting
their NFTs on sidechains, but an unfortunate moral hazard
lies here too. Even if an artist does sell an NFT on an
environmentally friendly side chain such as xDai, it can be
“bridged” onto Ethereum. Bridging is the transfer of tokens,
including NFTs, from one blockchain to another. Bridging
from a side chain to an energy intensive mainchain incurs a
mainchain fee (and thereby contributes to environmental
degradation). The main reason for bridging NFTs to
Ethereum or other mainchains is to increase the options for
selling the NFT—as mentioned, the demand and prices are
greater on the mainchains than on sidechains like xDai.
Owners of NFTs might also bridge them to a larger and more
reputable blockchain to increase the security of the proof of
uniqueness (the key to NFT’s value for digital art). Since
many NFT purchases appear to be investments, once they are
bridged to a mainchain, they may be traded several times,
with each trade contributing more harm to the environment.
So, minting and selling on environmentally friendly
sidechains like xDai seems like the morally right decision
because it avoids the environmental costs of minting on
energy-intensive mainchains like Ethereum. However,
sidechain minting may still may end up contributing to
considerable environmental damage through bridging. All
things considered, minting digital art on xDai or other proof-
of-stake blockchains substantially reduces the prudential
benefits of higher profits compared to Ethereum and still
contributes to environmental degradation, albeit less so.
Neither of these solutions (mainchaining and carbon-
offestting or sidechaining) allows digital artists to take
advantage of the opportunities presented by NFTs without
supporting an unnecessarily wasteful and environmentally
damaging system. So, the dilemma remains.
IV. OUR RECOMMENDATION: ENVIRONMENTALLY SMART
CONTRACTS
The good news is that Ethereum plans to move to a
proof-of-stake instead of a proof-of-work system [19]. The
bad news is that it might take a while for this to happen. It is
planned for this year [19], but it is certainly possible that it
takes until 2022 and potentially even later. Artists can help
encourage Ethereum to make this change as quickly as
possible in several ways. They can refuse to mint or sell their
art on any proof-of-work blockchain and let the foundation
team at Ethereum know why. They can support the trial and
development of Ethereum’s proof-of-stake chain, Beacon,
including locking in some of the associated cryptocurrency if
they can. They can also do what many artists do best—create
art that sends a loud message about the environmental ills of
proof-of-work blockchains and NFTs associated with them.
Of course, they should avoid being hypocritical in the
process. Unfortunately, this may rule out minting and selling
their art on proof-of-stake side chains because of the bridging
problem mentioned above. It seems a more thoroughgoing
solution is needed.
In order to combat the likelihood of investors and others
bridging NFTs to wasteful and polluting proof-of-work
blockchains, Ethereum could harness and enhance the
technology of smart contracts to make bridging NFTs
automatically internalise the environmental externalities
associated with proof-of-work blockchains. The result would
be Environmentally Smart Contracts.
Smart contracts, originally proposed by Szabo [24], are
enabled by the digital-ledger nature of blockchains. These
contracts are smart because they are irreversible,
unblockable, and openly trackable. Smart contracts can also
be irreversibly encoded with conditions that cannot be
removed no matter how many times the NFT the contract is
for is traded [5]. Currently, most sites that allow you to mint
NFTs also allow you to specify a certain percentage of any
sales or resales to go to the original artist in perpetuity [5].
Rare Art Lab is an example [25]. These rules are encoded
into the smart contract controlling the NFT and anyone that
buys the NFT and then sells it will find that that a percentage
is skimmed off the sale price and automatically deposited to
the original artist’s digital wallet.
Several people have suggested smart contracts use rules
like this to apportion some of the sale price of NFTs to go to
charities [26][27]. By including contributions to climate
focussed not-for-profits (that have proven to be effective;
e.g., [28]) in the smart contracts, the tiny environmental costs
of minting and selling on a proof-of-stake blockchain can be
fully redressed or even overcompensated for. But, dealing
with the threat of bridging is slightly more complicated and
would require a new kind of smart contract.
Smart contracts could be coded to either prevent, or add
conditions to, bridging the associated NFT to a proof-of-
work blockchain. In light of the prudential concerns of artists
(and others) and the decentralising and democratising
affordances of blockchains, we recommend including
conditions on bridging to proof-of-work blockchains rather
than a prohibition. An Environmentally Smart Contract
(ESC) would be coded to add a large environmental tax to
any sale or movement of the associated NFT on any proof-
of-work blockchain. The tax needs to be large enough to be
sure that the environmental costs are completely redressed
and that an additional “punitive damages” amount is added
to the tax to further dissuade use of wasteful and polluting
blockchains to mitigate any environmental costs that occur
via general increased interest in the blockchain generated by
trades on it. Directly linking the tax to the transaction fee at
the time of sale or movement seems the best way to achieve
this.
The advantages of ESC, as defined here, should be clear.
Most importantly, the environmental taxes mean that trades
of the associated NFT are all but guaranteed to be net
positive for the environment. Also very important, the
increased environmental tax for bridging and any future sales
on proof-of-work blockchains dissuades individuals from
bridging NFTs away from proof-of-stake blockchains, while
also dissuading buyers and sellers on proof-of-work
blockchains (who will likely share the cost of the
environmental tax). This means that as long as artists use
ESCs, they can mint and trade as they please, with little risk
of losing out on higher profits, or of incurring the moral
hazard of contributing to environmental degradation. So,
digital artists, especially, should do what they can to petition
Ethereum and other blockchains to facilitate the creation of
Environmentally Smart Contracts. Perhaps they can even use
their artistic skills in this endeavour.
Authorized licensed use limited to: Univ of Waikato. Downloaded on December 07,2021 at 21:23:55 UTC from IEEE Xplore. Restrictions apply.
REFERENCES
[1] M. O’Brien and K. Chan, “How two friends made art history buying a
US$70M digital work,” CTV News, 26 march 2021.
www.ctvnews.ca/sci-tech/how-two-friends-made-art-history-buying-
a-us-70m-digital-work-1.5363510/nft-1.5363520
[2] G. Kay, “We talked to crypto-art investors to figure out what's driving
people to spend millions on NFTs, despite no guarantee their value
will increase,” Business Insider Australai, 20 March 2021.
www.businessinsider.com.au/why-are-people-buying-nfts-investing-
in-nft-crypto-art-2021-3?r=US&IR=T
[3] T. Hasleton, “How to make, buy and sell NFTs,” CNBC, 23 March
2021. www.cnbc.com/2021/03/23/how-to-create-buy-sell-
nfts.html
[4] V. Di Liscia, “As NFT Sells for $69M, Artists question
environmental impact of blockchain,” Hyperallergic, 11 March 2021.
hyperallergic.com/628845/as-nft-sells-for-69m-artists-question-
environmental-impact-of-blockchain/.
[5] Q. Wang, R. Li, Q. Wang, and S. Chen, “Non-fungible token (NFT):
overview, evaluation, opportunities and challenges,” arXiv preprint
arXiv:2105.07447, 16 May 2021.
[6] E. William, S. Dieter, E. Jacob, S. Nastassia, “Erc-721 non-fungible
token standard. Ethereum improvement protocol, EIP-721,”
Ethereum, 2018. eips.ethereum.org/EIPS/eip-721
[7] H. Korin, “Are Your Bitcoins Clean or Dirty?” ORBS, July 2021.
www.orbs.com/are-your-bitcoins-clean-or-dirty/
[8] M. Franceschet, G. Colavizza, T. Smith, B. Finucane, M. L.
Ostachowski… “Crypto art: A decentralized view,” Leonardo, 2020,
pp. 1–8.
[9] J. Fairfield and L. J. Trautman, “Virtual art and non-fungible tokens,”
unpublished, SSRN, 11 April 2021.
ssrn.com/abstract=3814087
[10] S. Abdulhakeem and Q. Hu, “Powered by blockchain technology,
DeFi (decentralized finance) strives to increase financial inclusion of
the unbanked by reshaping the world financial system,” Modern
Economy, 2021, 12, pp. 1–16.
[11] M. Atzori, “Blockchain technology and decentralized governance: Is
the state still necessary?” Journal of Governance and Regulation,
2017, 6(1), pp. 45–62.
[12] I. Pandey, “NFTs are democratizing the art industry for everyone,”
Hackernoon, 17 June 2021. hackernoon.com/nfts-are-
democratizing-the-art-industry-for-everyone-nfp35el
[13] L. Johnston, “The problem with art on digital platforms is...” The
Space, no date. www.thespace.org/resource/problem-art-digital-
platforms
[14] C. Harper and C. Kim, “Ethereum gas limit hits 15M as ETH price
soars,” Coindesk, 23 April 2021.
www.coindesk.com/ethereum-gas-limit-eth-price-soars
[15] Shashwat, “How much does it cost to mint an NFT?,” Nerds Chalk,
15 March 2021. nerdschalk.com/nft-minting-cost/
[16] Digiconomist, “Ethereum energy consumption index,” no date.
digiconomist.net/ethereum-energy-consumption/
[17] K. McDonald, “Computing per-transaction responsibility for
ethereum,” GitHub, 19 April 2021.
github.com/kylemcdonald/ethereum-nft-
activity/blob/main/Per-Transaction%20Models.ipynb
[18] O. Ogino, “Proof-of-stake (POS),” Ethereum, 16 April 2021.
ethereum.org/en/developers/docs/consensus-mechanisms/pos
[19] C. Beekhuizen, "A country's worth of power, no more!" Ethereum, 18
May 2021. blog.ethereum.org/2021/05/18/country-power-no-more/
[20] Artwork Archive, "What is the artist’s role in society?" no date.
www.artworkarchive.com/blog/what-is-the-artist-s-role-in-society
[21] O. Eliasson, "Why art has the power to change the world," World
Economic Forum, 18 January 2016.
www.weforum.org/agenda/2016/01/why-art-has-the-power-to-change-
the-world/
[22] J. Kastrenakes, "Beeple sold an NFT for $69 million," The Verge, 11
March 2021. www.theverge.com/2021/3/11/22325054/beeple-
christies-nft-sale-cost-everydays-69-million
[23] DappRadar, "NFT Marketplaces," no date.
dappradar.com/nft/marketplaces
[24] N. Szabo, “Smart contracts: building blocks for digital markets,”
Extropy: The Journal of Transhumanist Thought, 1996, 8(1), 50-53.
[25] R.a.r.e art lab. www.lagelnd.com/rare
[26] Pixelplex, "Blockchain charity projects and their philanthropic
benefits," no date. pixelplex.io/blog/blockchain-charity-
projects-and-their-philanthropic-benefits/
[27] B. Hu and H. Li, "Research on charity system based on blockchain,"
2020 IOP Conf. Ser.: Mater. Sci. Eng. 768 072020
[28] M. Gunther, "Which are the most effective climate change
nonprofits?" Nonprofit Chronicles, 12 December 2020.
medium.com/nonprofit-chronicles/which-are-the-most-effective-
climate-change-nonprofits-d1083f0a2f02
Authorized licensed use limited to: Univ of Waikato. Downloaded on December 07,2021 at 21:23:55 UTC from IEEE Xplore. Restrictions apply.
