Why environmental charities should follow WWF’s lead and avoid fundraising through NFTs
Most images online are just a right click away from being in someone’s personal collection. They are almost free. This makes it difficult for charities to raise funds from them. That is, until 2017, when non-fungible tokens, or NFTs, appeared. Unlike ordinary digital media, NFTs cannot be copied so easily. And ever since they’ve been around, conservation charities have been using them to raise money.
A cartoon turtle cat named Honu raised $25,000 for ocean conservation charities in 2018. Rewilder is a non-profit organization using NFT auctions to raise funds to buy land for reforestation. The charity claims to have raised $241,700.
There have been various cartoon monkeys sold for $850,000, with the money going to orangutan conservation charities. The most expensive NFT to date, a photo of small gray balls, sold to multiple buyers for $92 million in December 2021.
With many UK charities in dire straits, it’s no surprise that some also want to get in on the crypto action.
Recently, the World Wildlife Fund UK joined the NFT circus with its Tokens for Nature collection. But even before fundraising began, the project sparked a backlash from environmentalists online who worried about its carbon footprint. Within days, the sale was completed.
The NFAs (or Non-Fungible Animals) project aimed to raise a lot of money and raise awareness for endangered animals. The number of rare animal images available for sale matched the estimated number left in the wild. There were 290 NFA giant ibises, for example. An ibis jpeg would have raised around $400 in a single sale.
According to one estimate, NFTs generate more carbon emissions than Singapore due to their energy consumption.
Most NFT creators use a technology called Ethereum, which is a blockchain system similar to Bitcoin that involves a power-intensive computing function called mining. Specialized mining computers take turns validating transactions while guessing the combination of a long string of automatically generated numbers. The computer that correctly guesses the combination first wins a reward paid in a cryptocurrency called ether.
Unlike conventional NFTs, the World Wildlife Fund claimed that its NFAs were “respectful of nature”. In its sustainability statement, the charity suggested that selling the roughly 8,000 NFAs would have a carbon footprint similar to a pint of milk or half a dozen eggs.
The reason for this negligible impact, they say, was a smart blockchain application called Polygon, which would have allowed the World Wildlife Fund project fewer direct interactions with the Ethereum blockchain. The World Wildlife Fund would then not have to take as much responsibility for its share of Ethereum’s monstrous carbon footprint.
So why the tantrums on Twitter?
The World Wildlife Fund’s hypothesis was tricky. This is because Polygon depends on Ethereum contracts to perform essential services, such as moving assets between Ethereum and Polygon and creating checkpoints between the two. According to Alex de Vries of cryptocurrency monitoring website Digiconomist, the footprint of the World Wildlife Fund project was actually about 2,100 times larger (12,600 eggs) than the estimate provided by the charity.
There are also second-order effects to consider. Ethereum’s carbon emissions are not directly related to the number of transactions made on the network. Proof-of-work mining is what gives Ethereum its nasty reputation. By inflating the hype around NFT markets, the collection could drive up the price of Ethereum. This would encourage greater proof of mining work, thereby increasing the overall carbon footprint of the network.
Early NFA buyers would buy them from the World Wildlife Fund’s dedicated website. But buyers can relist their works on the popular NFT marketplace, OpenSea. OpenSea is currently the top gas consumer on the Ethereum network, responsible for almost 20% of the actions on the blockchain.
The World Wildlife Fund is not the first charity to reassess its stance on crypto donations. In 2021, Greenpeace stopped accepting Bitcoin donations after seven years. Friends of the Earth quickly followed. WWF fury has forced wildlife charity International Animal Rescue to put its NFT fundraising plans on hold indefinitely. Internet nonprofits Mozilla and Wikipedia have also reconsidered their crypto-distribution strategies due to climate change.
There are several NFT-enabled blockchains that don’t cause carbon-related headaches. Even so, 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 disapproval of blockchain projects. Some argue that the technology is driven by predatory marketing tactics. Others argue that the blockchain is a platform for Ponzi schemes, scams, and multi-level marketing deals. According to OpenSea, 80% of NFTs issued through its site are spam, scams or otherwise fraudulent.
Research also shows that cryptocurrencies can restrict the work of conservation charities. In 2018, the World Wildlife Fund partnered with blockchain developers, AidChain. To improve the transparency of the donor tracking process, AidChain encouraged the World Wildlife Fund to pay its service providers in a cryptocurrency called AidCoin. Using an Ethereum smart contract, donors could then track and manage how the funds were spent.
Platforms like this can allow donors who are not crypto experts to encode concrete conditions to their donations. Break the conditions – lose the funds. Ideal for the giver. Lousy for the charity’s conservation experts.
Before reacting to the hype of cryptocurrency donations, conservation charities such as the World Wildlife Fund need to do their homework. Animal jpegs and cryptocurrencies may seem like a harmless way to raise money. But mindlessly jumping on the blockchain bandwagon could tie their hands as longtime donors provide support elsewhere.
Peter Howson is a senior lecturer in international development at Northumbria University, Newcastle.
This article first appeared on The Conversation.