In this post, we explore the NFT: The Non-Fungible Token. I am only going to give ‘token’ time to defining this, partially because I am still learning about it. But I think you should know about this technology because (1) like it or not, it appears to be “a thing”, and (2) there is a reinforcement of a project management concept on which I blogged about already this month – that of secondary risk.
Some of you may recognize the “Charlie Bit My Finger” image I put in the header of this postYou’re seeing a screen capture of a viral YouTube video. I did a Google search of that phrase as I’m writing this and it yielded about 2.3 million results. You may also have read articles, like this one from the BBC, which describes how this video is now being removed from YouTube because it has become an NFT. An NFT video of a kid biting another kid’s finger - that just sold for more than three-quarters of a million dollars. Say WHAT?
So we start with, what is an NFT? It’s one of those acronyms for which spelling it out helps make as much sense as a FoaB (Fish on a Bicycle). But here goes: NFT stands for Non-Fungible Token.
So now we have to break that down. Fungible is not a word we use every day. If you asked me what it meant yesterday, I would have said fungible was an edible mushroom. But no – it has nothing to do with fungi.
I actually have a go-to source for terms like this: Investopedia. Here’s their definition:
Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Fungible assets simplify the exchange and trade processes, as fungibility implies equal value between the assets.
So what’s fungible? Cash money is an example. I can find an equal exchange for a US$1 bill – twenty nickels, or four quarters or ten dimes are equal exchanges.
What’s non-fungible? Again, from Investopedia:
If Person A lends Person B his car, it is not acceptable for Person B to return a different car, even if it is the same make and model as the original car lent by Person A. Cars are not fungible with respect to ownership, but the gasoline that powers the cars is fungible.
And finally, the last letter of the acronym - token. Remember, we are still just spelling out the acronym here. I hope you now “get” the Non-Fungible part, so let’s move on to TOKEN. Think of tokens as a ‘unit of value’. This applies to cryptocurrency as well as a token like the old-timey ones we used to use to allow admission to the subway. Crypto tokens are cryptocurrency tokens. Cryptocurrencies or virtual currencies are denominated into these tokens – units of value, which reside on their own blockchains. Blockchains are special databases that store information in blocks that are then chained or linked together. This means that crypto tokens, which are also called crypto assets, represent a certain unit of value.
So why is this so hot now, literally on fire? Yes, literally, ON FIRE.
Have a look at this video. A group of crypto-enthusiasts called Injective Protocol bought a Banksy painting for about $100,000 and then burned it, to make their point about NFTs.
The point they were trying to make is about trust. By destroying the original they are trying to build trust in blockchain technology.
Whether or not you get this (I’m still wrapping my head around it) there is, as I said above, the aspect I’d like to tackle here is regarding secondary risk. The secondary risk, believe it or not, is the carbon footprint of NFTs.
According to a recent article, the positives of NFTs for artists are abundant:
Artists around the world were thrilled: NFTs provide the opportunity for them to make significant money on their work, reach a broader audience all over the world and link a digital file to a creator, ensuring authenticity. And with the value of cryptocurrency skyrocketing, some think there's never been a better time to get in on it.
We could look at NFTs as a way to respond to the risk of theft of art. That’s nifty.
However, that same article goes on to talk about the downside – a nasty side - of NFTs. It turns out that blockchain technology is very energy-intensive. Blockchain incorporates a "proof of work" (PoW) method to create digital assets and it is – by design – highly inefficient and thus uses significant computing power, translating into large amounts of actual energy usage. In fact, the computers are, in effect, trying to solve a complicated mathematical puzzle, something like trying to open a safe by trying every combination. They make millions of attempts every second to solve the puzzle so that they can (on behalf of the ‘miner’) get ‘added to the blockchain’. The higher the value the token, the more difficult these puzzles are to solve, and that makes them increase in value, creating a spiraling need for greater computer power and larger data warehouses and stronger cooling units just to keep up. As you can imagine, this causes an exponential increase in actual power consumption.
The NFT open-source network, Ethereum, according to the article, is “currently estimated to (annually) consume roughly 44.94 terawatt-hours of electrical energy, which is comparable to the yearly power consumption of countries like Qatar and Hungary.”
So while NFT is ‘nifty’ for artists, it contains a secondary risk. How do we respond to the secondary risk? First: be aware of it – and articles and blog posts like this, I hope, help in that area. Next: make the network less energy-hungry. Efforts such as Greentouch from the past have been successful at reducing the energy consumption of IT networks. This secondary risk provides a tertiary risk – an opportunity – for network engineers to focus on algorithms and technologies to keep the PoW vibrant and focused on security while still being less energy-hungry. This has been done in the past. I have blogged about GreenTouch, a consortium of IT and telecom companies who are fierce competitors but who collaborated on algorithms to reduce the energy use of the technology simply by using clever algorithms to reduce the number of times optical amplifiers transition from a zero to a one. This collaboration resulted in a new optical transceiver which was expected to reduce the overall power consumption of the entire metro access network by 27 percent; this translates to about 4 terawatt hours of electricity saved on an annual basis, equivalent in terms of annual greenhouse gas emissions to taking nearly 600,000 cars off the road. If competitor telecom companies can do that in 2014, think of what an open-source collaboration could do with 7 years of increased knowledge under their belts!
In addition to working on better networks, this provides opportunities for computer and data storage companies to improve the physical need for energy of their systems, something they are doing already, but this should motivate them to ‘up their game’ in this area. It also should be a motivator for these companies to source their energy supply on renewables like solar and wind.
So while some technical enthusiasts are “burning up” art, they should also be “burning down” work products to reduce the hunger of NFTs and cryptocurrencies in general for carbon-intensive energy.
You think it’s important to reduce carbon emissions? Think again. Sure, it is important, and whatever you believe about climate change and its causes, you hopefully agree that IF the global temperatures are rising, we want to understand it. So, here’s a little-known fact. The pledge at the Paris Climate Agreement to limit global temperature rise to no more than 2 degrees C above pre-industrial levels, is going to require not only emission reduction, it’s going to require removing carbon from the atmosphere. In fact, 87% of the UN’s International Panel on Climate Change models make assumptions that include ‘negative emissions’. Wise project managers know that assumptions are the ‘seeds’ of threats and opportunities. And that project management truth holds true here as well.
That’s right: the agreements reached in Paris, and somewhat reaffirmed in Bonn last week include assumptions. They assume that the portfolio of programs and projects to bring down the rising global temperature includes not only initiatives which aim at emitting fewer tons of greenhouse gasses, but importantly, also projects to significantly remove vast amounts of greenhouse gasses already present. Otherwise stated, it means we need to undo what’s been done. And that means we’ll need to create carbon sinks.
That’s where science – and project management – will need to come to the rescue.
Take Sweden for example. In a recent article (“Sucking up carbon”) from The Economist, Sweden’s lawmakers have passed legislation which requires no net emissions of greenhouse gasses into the atmosphere by 2045. Even if everyone in Sweden went to fully-renewable sources of power and drove electric vehicles, they would still be emitting (adding) greenhouse gasses by virtue of (for example) use of fertilizer and from use of airplanes. This ‘net zero’ will therefore call for the removal (subtracting) of greenhouse gasses with emergent and not-yet-invented technology.
What really makes a difference with respect to climate change is the total amount of greenhouse gas in the atmosphere. If we need to keep the temperature stable it means staying inside a certain budget of greenhouse gasses in the atmosphere. If we go over our budget, even with strict “spending controls”, we will need to balance that budget via extraction. So let’s talk extraction for a moment.
As any good project manager should, let’s begin with the end in mind and understand our project objective. In the long term, this is a gigantic impending aspiration. The numbers are actually mind-boggling. To take into account the aforementioned assumptions – the median IPCC model – assumes the extraction of 810 billion tons of carbon dioxide by 2100. Stated in different terms this means “undoing” 20 years of our global emissions (taken at the current rate) by that year.
The Economist article discusses NETS (negative-emissions technologies), the generic term for techniques which serve as carbon sinks. One family of NETS is BioEnergy with Carbon Capture and Storage (BECCS), which involves power stations fueled by crops that can be burned generate energy while injecting the carbon into the ground rather than into the air. The problem with this technology is that it is at least twice as expensive as standard power generation and it cannot produce the size of sink necessary for the large numbers in the objective.
Another technique is afforestation – the regrowth of deforested logging areas – very large areas. It has been estimated that the area of afforestation would have to be somewhere in the range of sizes between India and Canada – up to 68% of the world’s arable land. Clearly, this technique alone will not suffice.
The other technologies don’t yet exist, meaning the projects are in the research and development stage. Machines designed to capture carbon dioxide from the air are problematic. If you try to extract CO2 from a smokestack of a power plant – no problem; the concentration, there is 10%. Try the same in the atmosphere, and although levels are indeed historically high, the concentration is only 0.04%. Still, companies like Global Thermostat in the US, Carbon Engineering in Canada, and Climeworks of Switzerland are working on such contraptions. Here is a video explaining what Global Thermostat is up to:
And here is one from Climeworks:
Other thinking in this area includes techniques to accelerate how the soil and natural weathering processes remove CO2 from the air.
But here’s the thing: mechanical techniques at the moment show only 40 million tons of CO2 per year. Remember our project objective? It was 810 billion tons by 2100. That’s 10 billion per year. 40 million, as they say, ain’t going to cut it.
So there will need to be a wave of innovation over the next decades which focus on adding value by subtracting carbon (and other greenhouse gasses). This will spell opportunity for large R&D as well as deployment projects, which in turn will require informed, inspired, capable project managers. Are you ready for a challenge? Get informed, stay informed, and get ever more curious about greenhouse gas extraction. We’re hoping that this story provided you with a good (excuse the pun) takeaway.
For more information about the technologies involved, try these sources: