Most images on the internet are only a right-click away from becoming part of someone's personal collection. They're essentially free. As a result, charities find it difficult to fundraise with them. That is, until non-fungible tokens, or NFTs, were introduced in 2017. NFTs, unlike regular digital media, cannot be easily copied. Conservation charities have used them for fundraising for as long as they have existed.
In 2018, a cartoon drawing of Honu, a cat-turtle, raised US$25,000 (£18,485) for ocean conservation charities. Rewilder is a non-profit organization that uses NFT auctions to raise funds for reforestation land purchases. The organization claims to have raised $241,700 USD.
Several cartoon apes have been sold for $850,000, with the proceeds benefiting orangutan conservation organizations. The most expensive NFT to date, a picture of some small grey balls, sold to multiple buyers in December 2021 for US$92 million.
With many UK charities in dire financial straits, it's no surprise that some want in on the crypto action as well.
With its Tokens for Nature collection, WWF UK recently joined the NFT circus. However, even before the fundraiser began, the project sparked a backlash from environmentalists who were concerned about its carbon footprint. The sale was called off within a few days.
The NFAs (or Non-Fungible Animals) project aimed to raise a large amount of money as well as raise awareness about endangered animals. The number of rare animal images for sale corresponded to the estimated number of animals remaining in the wild. For example, there were 290 Giant ibis NFAs. A single sale of an ibis jpeg would have netted around $400 USD.
NFTs that are 'eco-friendly'?
According to one estimate, NFTs emit more carbon dioxide than Singapore due to their energy consumption.
The majority of NFT creators use Ethereum technology, which is a blockchain system similar to Bitcoin that involves an energy-intensive computer function called mining. Mining computers take turns validating transactions and guessing the combination of a long string of randomly generated digits. The computer that correctly guesses the combination first receives a reward in ether, a cryptocurrency.
However, unlike regular NFTs, WWF claimed that its NFAs were "eco-friendly." According to the charity's sustainability statement, selling all 8,000 or so NFAs would have a carbon footprint comparable to a pint of milk or a half-dozen eggs. The reason for this insignificant impact, they claimed, was a clever blockchain application called Polygon, which would have allowed WWF's project to interact with the Ethereum blockchain less directly. The WWF would no longer be required to accept as much responsibility for its portion of Ethereum's massive carbon footprint.
So, what's the deal with the Twitter meltdowns?
The WWF's assumption was tricky. This is due to the fact that Polygon relies on Ethereum contracts to perform critical services such as moving assets between Ethereum and Polygon and creating checkpoints between the two. According to Alex de Vries of the cryptocurrency monitoring website Digiconomist, the footprint of the WWF's project was approximately 2,100 times larger (12,600 eggs) than the charity's estimate.
Second-order effects must also be considered. The amount of carbon emitted by Ethereum is unrelated to the number of transactions that take place on the network. PoW mining is responsible for Ethereum's shady reputation. The collection may drive up the price of Ethereum by increasing the hype surrounding NFT markets. This would encourage more PoW mining, increasing the overall carbon footprint of the network.
The first buyers of NFAs would do so through the WWF's dedicated website. Buyers, on the other hand, can relist their artwork on the popular NFT marketplace, OpenSea. OpenSea is currently the top gas guzzler on the Ethereum network, accounting for nearly 20% of all blockchain transactions.
Backlash against blockchain
The WWF is not the first charity to reconsider its stance on cryptocurrency donations. After seven years, Greenpeace will no longer accept bitcoin donations in 2021. Friends of the Earth quickly followed suit. The WWF controversy forced International Animal Rescue, a wildlife charity, to put its NFT fundraising plans on hold indefinitely. On the basis of climate change, Internet nonprofits Mozilla and Wikipedia have also reconsidered their crypto-giving strategies.
There are numerous NFT-friendly blockchains that do not contribute to carbon emissions. Despite this, research shows that it is difficult for charities to raise funds using NFTs without getting their hands dirty.
Charities should be aware of the growing public opposition to blockchain projects. Some argue that predatory marketing tactics are driving the technology. Others claim that blockchain is a platform for Ponzi schemes, swindling, and multi-level marketing schemes. According to OpenSea, 80 percent of the NFTs created on its platform are spam, scams, or otherwise fraudulent.
According to research, cryptocurrencies can also limit the work of conservation organizations. In 2018, WWF collaborated with AidChain, a blockchain development company. AidChain encouraged WWF to pay their service providers in AidCoin to improve transparency in the donor tracking process. Donors could then track and manage how their funds were spent by using an Ethereum smart contract.
Platforms like this one can enable non-technical crypto donors to attach concrete conditions to their donations. If the conditions are not met, the funds will be forfeited. Excellent for the donor. It was a bad day for the charity's conservationists.
Conservation organizations, such as the WWF, should do their homework before reacting to the crypto-giving hype. Animal jpegs and cryptocurrencies may appear to be a harmless way to raise funds. However, blindly jumping on the blockchain bandwagon risks tying their hands while long-standing donors shift their support elsewhere.
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