Are fashion brands’ NFTs an environmental headache?

NFTs, environmental impact, fashion. I’m sure you’re wondering what these three terms have to do with each other. For starters, as you may already know, the fashion world is opening up to new digital channels in an attempt to seduce younger consumers. NFTs are part of this “new era” and are changing the fashion industry as we know it. However, like everything else in life, it’s not all rosy. NFTs’ production has quite an impact on the environment… Just keep reading because we are spilling all the tea!

What is an NFT?

NFT stands for non-fungible token. “An NFT is a digital asset that represents real-world objects like art, music, in-game items and videos.”[1] Unlike most digital creations, NFTs are usually unique or at least one of a very limited run.

Make no mistake: an NFT is not a cryptocurrency. They “cannot be traded or exchanged at equivalency” as traditional cryptocurrencies do (i.e., one bitcoin is always equal in value to another bitcoin). As no two NFT’s are identical, they can’t serve as a medium for commercial transactions.[2]

So far, so good. Now, what’s the point of owning an NFT? Even if it is a unique piece, I can still screenshot it and save a copy for myself, right? Well, the thing is that much of the NFT’s current market is centered around collectibles[3] and, for those passionate and serious about collecting, the word “original” can be orgasmic. NFTs are designed to give their buyer something that cannot be copied, and this is where the crux of the matter lies: an original item with built-in authentication that serves as proof of ownership.[4] Think about it in this way, everyone can have a copy of the Monalisa, but only the Louvre has the original. Also, “tokenization” makes their buying, selling, and trading more efficient and reduces the probability of fraud.

NFTs and the Environment

NFTs themselves don’t cause any environmental impact, however, the way they are produced is highly energy-intensive. Most NFTs are mined using the proof-of-work operating method which is known to use large amounts of electricity[5] (miners compete against each other to solve a complex problem using high-powered computers).[6]

To put it into scale, according to the Ethereum Energy Consumption Index, the footprint of one Ethereum transaction in the proof-of-work platform (including NFTs) is more than 265 kilowatt-hours of electricity, which is equivalent to the power consumption of an average U.S. household over 8.97 days.[7] Likewise, one NFT transaction on the Ethereum platform emits almost 148 kilograms of carbon dioxide, equivalent to 327,953 VISA transactions or 24,662 hours of watching YouTube.[8]

But don’t panic! Due to the increasing awareness about the environmental impact of the proof of work mining method, new alternatives and variants have been developed, namely:

1. Proof-of-stake method, a mining method that uses far less electricity and provides a more environment-friendly way to mine NFTs.
2. Miners that use proof-of-work to generate NFTs can use renewable sources of energy.
3. Investors who wish to offset the environmental impact of an NFT purchase can buy carbon offset credits.[9]

What Does Fashion Have To Do With All Of This?

The metaverse is impacting all aspects of our lives and fashion is certainly not immune to such impact, especially the luxury sector. After all, the core philosophy behind the latter is challenged (i.e., exclusivity, craftsmanship and long-lasting value). It all leads to one question, does the digital universe represent an opportunity or a headache?

Spoiler alert, NFTs are here to stay. Today, NFTs bring a new level of exclusivity and the opportunity to turn digital designs and collections into valuable, luxurious and unique collector’s items. Here are some examples of high fashion brands that have made wise use of NFTs:

• Gucci: With a film inspired by their “Aria” collection in collaboration with Alessandro Michele, Gucci became the first luxury brand to enter the NFT world. The 4-minute film was sold at Christie’s auction for USD25,000.

• Burberry: Burberry partnered with Mythical Games to launch an NFT collection in Blankos Block Party. To the brand, the collaboration “reflects the house’s longstanding spirit of innovation and creativity.”[10] As part of the collection, Burberry launched its own branded in-game NFT accessories that can be purchased, upgraded, and sold in-game. This was not Burberry’s first approach to the digital space, though, back in 2019 the brand created (an succeeded) its own digital game.[11] A “green” detail: Burberry NFTs don’t run by the proof of work method, but rather through a private EOSIO blockchain protocol using a proof of stake one.[12]

• Dolce & Gabbana: Last year, during Venice Fashion Week, Dolce & Gabbana launched Collezione Genesi, a 9-piece NFT collection on the Polygon blockchain. It featured entirely hand-made, museum-grade items across Alta Moda (women), Alta Sartoria (men), and Alta Gioielleria (high jewelry).[13] The collection auctioned for USD5.56 million and buyers not only received the NFTs, but the physical items and exclusive access to D&G events.

• The last example is Hermés, well… not exactly. Some months ago an animation of a baby growing in an Hermès Birkin bag started circulating (a.k.a., the “Baby Birkin”) and recently sold in a Basic.Space auction for USD23,500. The icing on the cake: Hermés is the owner of the trademark for the Birkin bag and wasn’t involved in the issue of the NFT! Naturally, the luxury brand filed a lawsuit against the author claiming trademark infringement and dilution.[14]

Bottom line: How sustainable are fashion brands’ NFTs?

The future is here and, either one way or the other, fashion brands need to keep up if they want to stay alive. As I said before, NFTs are here to stay but their existence and exploitation shouldn’t be at the expense of the environment. Progress without environmental awareness is not progress; on the contrary, it means taking two steps backwards.

If brands want to create NFTs without causing harm to the environment, then they have several options for doing so. Here are some blockchain platforms that use the proof-of-stake method and support the creation and exchange of NFTs: Solana, Algorand, Cardano, Tezos. As for Ethereum, which currently supports most NFT transactions, it’s currently in the transition to becoming less of an energy hog and using the proof of stake operating method.[15]

Now it’s your turn: if you are not willing to use almost nine days’ worth of electricity because of an NFT but still want to invest in one, just avoid the ones created through the proof of work method. I know, this currently limits your purchase options, but this is only temporary. Remember that Ethereum is in the middle of a transition to proof of stake!

This new “toy” can be very profitable and attractive for both the brands and the customers, but it is a ticking bomb for our planet. If we don’t know how to use it responsibly the consequences can be disastrous. And for that, be as responsible and smart a consumer as you can!

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What do you think about NFTs in the fashion business? Have you ever bought one? If not, would you consider it? Let us know in the comments below!