What are the trends and leading projects in crypto carbon ecosystem? As such, Bitcoin and other crypto coins are created and verified by a set of decentralized networks of computers spread all over the globe that solves a complex math problem that becomes more complex over time.
This process is called crypto mining and it needs a huge amount of computational power or hash rate.
This consumes a lot of energy which, as you may know, results in an overwhelming environmental impact.
Cryptocurrencies face a lot of criticism due to their high energy consumption which results in emitting a huge amount of carbon footprint.
This poses a significant challenge for all traders, investors and other players in the crypto space which also hinders the mass adoption of crypto.
With that said, Bitcoin alone emits more than 57 million tons of Carbon Dioxide per year.
This is a huge amount and when that of all other crypto coins is taken into account it becomes magnanimous and more drastic.
Therefore, some immediate actions must be taken to reduce the environmental costs of using crypto.
This can be done easily and effectively by combining carbon offsets with crypto mining.
Reducing crypto carbon footprints and protecting the ecosystem is a serious issue that needs some immediate actions both at the corporate and regulatory level to address it.
In fact, people have started to take action and there are a lot of different projects launched and mandates imposed in order to tackle this growing problem.
For example, a specific directive such as the Sustainable Finance Disclosure Regulation or SFDR was issued by the European Union and came into force in January 2022.
This article will let you know about all the challenges and solutions with regards to it.
Contents
The Trends and Leading Projects in Crypto Carbon Ecosystem
There are some significant projects and steps taken to reduce the impact of carbon emissions of crypto.
In line with such improvements, the ECC or the Evergreen Carbon Credits has also created an only one of its kind acquisition and verification system of licensed carbon credits making use of the blockchain technology and NFTs or Non-Fungible Tokens.
According to this ECC system, the businesses as well as the individuals can choose the amount of carbon credits they wish to buy.
For calculating the amount of carbon credits they can use the online calculator.
When they buy their desired amount of carbon credits an NFT certificate of the same is sent to their digital wallet.
A significant component of the ECC system is that it accepts crypto coins as a mode of payment.
The digital transaction is seamless and reduces further energy consumption.
The best part of it is that the crypto investors and miners can offset their carbon footprints with no need to convert their newly mined crypto coins into fiat money such as US Dollars.
Apart from allowing the crypto miners to offset their carbon footprints, The NFT carbon credits of the ECC system also act as a valuable resource for the crypto traders and exchanges helping them in the process of becoming carbon neutral.
According to an estimate of Statista, a single transaction of the Ethereum blockchain consumes an equal amount of energy consumed by as many as 200,000 VISA transactions.
However, this huge amount of energy consumption for crypto transactions can be easily mitigated with the crypto-friendly NFT carbon credits.
In short, the ECC system offers a much proactive approach and ease in use of crypto as well ensures that the ecosystem becomes carbon neutral by using the unique and innovative blockchain technology.
On the other hand, the government agencies are also implementing more regulation on crypto mining.
Ideally, MRV or Monitoring, Reporting and Verification are a vital part of a lot of these sustainable markets.
Typically, the carbon removal credits are paid to NFT holders depending on the MRV metadata of each of the NFT.
When public blockchain and NFTs are integrated into a mining operation it brings in a lot of transparency.
This is because all of the transactions made on the blockchain are recorded on it and an NFT is generated for the same.
After they are retired, reselling of carbon credits on an open market or duplication of them is not possible.
This is because every high-quality and certified carbon credit that may be listed for sale will be typically authenticated by a third party and issued by a highly regarded organization.
Most people assume that Bitcoin and blockchain can be used interchangeably because Bitcoin in particular dominates the crypto ecosystem.
However, this is far from the reality.
It is very important, and there is no doubt about it, but it is only as a sign of far superior things to come.
For example, the success or failure of blockchain that powers Bitcoin will eventually have a much greater impact on the crypto ecosystem in comparison to any other type of crypto coins.
Therefore, it needs some solutions created for specific purposes.
The carbon NFT is one such solution that locks away Carbon Dioxide and helps in protecting forest lands for even a century.
These tokenized carbon credits produce DeFi products for assets and forest conservation.
These ESG NFTs are considered to be probably the best income generating assets and store of value in the crypto and blockchain industry.
The NFT minting PaaS helps in accessing the voluntary carbon markets.
At the same time, these also help in creating a larger supply of confirmable carbon removal credits.
The private landowners also get a motivation with the financial incentive offered by these to use regenerative agro-forestry strategies and to conserve forest land which eventually helps in maximum Carbon Dioxide sequestration.
As for the businesses, these tokenized NFTs offer them a much better way to remove their carbon footprints, trim down supply risk, and lock in an unwavering price in the long term.
Each of these unique NFTs correspond to the carbon elimination rights of the actual acres of forest land and produce a definite amount of carbon credits for the same each year.
Therefore, these NFTs have helped in meeting and overcoming the challenges faced by the carbon markets all over the world while creating an innovative and effective solution that will let them exploit their potential.
These types of solutions now help the crypto carbon ecosystem and market to unlock technologies and finance that supports conservation and restoration.
They also help in managing the land for the betterment of the people, nature, and the climate.
However, these carbon offset credits also have some significant issues.
One of the most significant issues is that all of these are not verified enough.
Therefore, there is the need for more verifiable carbon removal credits so that businesses simply cannot make claims and pledges for being carbon neutral or carbon negative just like that.
Once again, it is the carbon bonded NFTs that are mined on a renewable energy power blockchain that comes to the rescue offering higher transparency and better accountability.
This adds to the authenticity and uniqueness of the carbon removal credits.
Adding to that, locking away the carbon ensures that the mining and storage of the NFTs are also carbon neutral.
Each of these carbon credit NFTs however represents a ton of Carbon Dioxide that has been offset.
The Trends
Now before moving on to the trends, you should know a little bit about blockchain technology and crypto.
This will help you to understand the crypto carbon ecosystem in a much better way.
In their simplest form, a blockchain is a distributed ledger that records all transactions made on it digitally.
These records are immutable and any sort of information today can be linked to and by a blockchain.
Cryptocurrencies, on the other hand, have drawn a lot of interest among the investors as well as the major share of media attention.
However, with the growth of the crypto market space, the developers started applying blockchain technology to one of the hottest markets in recent years – the carbon credits market.
The carbon credits are typically a unit of measure.
It certifies that a specific project, action, or an object has eliminated an equivalent of one metric ton of Carbon Dioxide from the air.
The math behind it is very simple: One credit = one ton.
Well, the idea behind this is quite simple. It is to simplify the application of carbon offsets to the real world. Some of the significant problems in its application are:
- Its measurement – It is really difficult to measure the amount of Carbon Dioxide removed by a particular set of actions even before it actually does so. This can be even more difficult for nature-based offsets where a living organism, such as trees, is added to the equation.
- Its verification – Even if carbon offset is measured, it is really difficult to verify its accuracy and the result that the set of actions did actually produce.
However, it is the blockchain technology that can help with both these issues, in theory, by linking the offsets to the crypto coins or tokens that operate on blockchain technology.
These tokenized carbon offsets then help in verification and accurate measurement.
Now, the crypto carbon ecosystem is dominated by a lot of trends and all of these are not aimed at tokenization directly.
Here are some of the biggest and most notable trends.
Carbon-friendly crypto:
Bitcoin uses a Proof-of-Work or PoW consensus mechanism for mining which is infamous for its power hungry nature.
That is why it is not considered to be quite environmentally friendly in particular.
However, it is pretty hard to say for sure just how environmentally unfriendly it is.
According to some old reports, Bitcoin mining produces as much as 22 million metric tons of Carbon Dioxide emissions, which is about the same amount of carbon emissions of the Netherlands.
Some recent figures of a few crypto-friendly news sources are even more alarming.
These sources report that the carbon emissions of 2020 and 2021 are 36 million tons and 41 million tons, respectively.
These amounts are significant, worrying and ever-growing at a fast pace.
However, when global emissions are considered, even the highest emission amount becomes pale in comparison.
Therefore, the label of ‘energy intensive’ has stuck with crypto coins, especially Bitcoin.
All these facts and figures have pushed the crypto world to look for and move towards a carbon-friendly approach.
It can be anything from as mundane as disallowing Bitcoin payments to more extraordinary forms such as creating an entirely new crypto ecosystem with more carbon-friendly blockchain.
This indicates the paradigm shift of the crypto mining industry from the energy-intensive Proof of Work consensus mechanism to a more eco-friendly Proof of Stake consensus protocol.
Tokenized carbon offsets:
This is another significant trend noticed in the crypto carbon ecosystem as of now.
With the market for carbon offsets all over the globe showing no sign of slowing down, it is expected to reach up to billions in worth by the end of this decade.
With such a fast-moving global market, there are some significant challenges faced when it comes to enforcing or verifying offsets.
The tokenized carbon offsets seem to help significantly in meeting and overcoming those challenges, as stated earlier.
The Non-Fungible Tokens are unique as it is due to their very nature which allows a few specific crypto carbon offset projects to issue NFTs, whether it is for the entire project or just a part of it.
These NFTs can be sold for exorbitantly high amounts which may be over and above the prevailing market value.
However, most of these projects are in their early stages of development and therefore their performances cannot be assessed right now.
Still, the fact that blockchain can be linked with the carbon offsets will resolve quite a large number of long-running VCM issues such as double counting of credits.
This is one particular aspect that is good enough to drive the Non-Fungible Token carbon credits trend even further.
Blockchain-powered carbon exchanges:
And finally, it is the carbon exchanges that are powered by the blockchain technology where the tokenized carbon offsets and carbon NFTs are sold frequently.
Few of these carbon exchanges even offer offsets from all over the globe but typically tokenize those offsets on their respective exchanges.
Usually, these exchanges follow the same traditional model followed by the commodities exchanges to allow carbon trading.
A few of these upcoming efforts follow the more eco-friendly Proof of Stake blockchain.
However, there are a few other specific projects that involve other aspects and often a combination of other trends.
For example, a few projects produce art-inspired NFTs. These are typically linked to an offset that is already generated.
However, the users of these projects are also allowed to request custom NFTs that are created just for them and connected to a definite number of offsets.
Exchanges can sell specific types of carbon-related tokens even if it is not a dedicated crypto carbon exchange.
It is all the result of the crypto world becoming more and more aware of the need to be environmentally friendly.
It is this awareness that has created an ecosystem that is ready to allow ambitious tokenized credits and carbon offset NFT projects.
Leading Projects
Here are some specific carbon crypto projects that are creating a lot of buzz in the crypto circuit as of now and are drawing a lot of attention.
These leading carbon projects use the blockchain technology to verify carbon credits and also resolve the two issues mentioned earlier with a single cutting-edge solution.
However, not all of these projects are equally successful and only a few have been able to establish a satisfactory track record in the long term.
Still, all of these projects mentioned below offer some promise and variation to that aspect.
Therefore, do your own research before you put them into practice in a cost efficient and market friendly manner.
Moss – Two Projects in One
Moss is two projects in one solution that offers a popular token called MCO2.
It also offers an NFT project based on the climate. Both these projects are designed on the concept of tokenization in order to motivate reduction of carbon emissions and carbon offset production.
The MCO2 tokens are actually ERC 20 tokens available on popular exchanges such as Coinbase.
When a user buys the MCO2 token, they in turn fund a carbon offset project automatically.
However, most of their projects are located in and around the Amazon rainforest.
These offset projects are not administered by Moss directly. Rather, they source offsets of high quality from other sources and tokenize them.
Each of these projects offers a particular amount of offsets.
Moss typically generates a definite amount of tokens based on the estimated offsets which is the same as the basic amount – One MCO2 token = an offset for one ton of Carbon Dioxide from the air.
Moss typically locks in the offset projects permanently by burning the MCO2 tokens.
This reduces the overall supply of the offsets in the market and, in turn, boosts up the price of the leftover offsets.
However, the operation of the Moss Amazon NFT project is slightly different.
Moss purchases a part of the Amazon forest that is particularly at risk of deforestation.
This specific piece of land is then split into smaller portions of 1-hectare each.
This is about the size of a football field. The rights to these specific parts are digitized and tokenized as Non-Fungible Tokens with each of the NFTs being unique and tied to an exclusive part of property.
Therefore, the Moss Amazon NFTs resemble actual land sales where the proceeds from the sales are used to fund more purchases.
However, 30% of the sale proceeds go to a preservation fund which is used for physically protecting and patrolling the specific Amazon NFT holdings.
The distinctive features of Moss are:
- It is mostly based on Brazil
- The Amazon NFTs offer actual ownership
- It is a part of Celo Reserve and supports climate-based stablecoins such as cEUR or cUSD and
- It offers due diligence for procurement and enforcement.
Ideally, with the use of blockchain technology, Moss typically simplifies the carbon offsetting process and at the same time guarantees higher transparency and traceability of everything.
KlimaDAO – An Ambitious Project
KlimaDAO is a very ambitious project that is built on the ordinary crypto carbon design of tokenized carbon offsets.
Since Klima is also a DAO or a Decentralized Autonomous Organization, one of its primary objectives is to augment the prices of the carbon offsets on the VCM.
This is achieved in the following process:
- Buying carbon offsets
- Tokenizing the carbon offsets and then
- Burning or selling them to control the market.
The most significant aspect that sets it apart from the other projects is that it has a clearly stated aim to become a carbon-backed currency instead of being just a marker for credits that are held in reserve.
The KLIMA tokens, to that end, are backed 1:1 by reserve holdings in BCT tokens issued by Toucan.
In simple words this means that KlimaDAO will have to lock away Basic Carbon Ton or BCT in the treasury to mint more KLIMA tokens in order to increase its supply.
The BCT is typically tied to the real-world offsets.
Ideally, the treasury of KlimaDAO functions as a black hole for carbon offsets and BCT.
It removes both of them from the market and pushes the carbon price in the real-world much higher in turn.
A few of the notable features of KlimaDAO are:
- Its DAO structure
- The KLIMA to be a currency of a new ecosystem based on carbon and
- It is tied to the BCT.
The most distinctive feature of the KlimaDAO is its Decentralized Autonomous Organization structure that allows holders of the KLIMA tokens to take part in its governance.
This means that the KLIMA holders can recommend new measures as well as vote on their passage.
Toucan – Base of a New Web3 Carbon Crypto Stack
Toucan is not simply a crypto carbon project. Rather, it is more about using each of its distinctive features to bring a number of correlated projects together to create a new carbon crypto stack.
Toucan helps in bridging carbon credits on the chain and at the same time connects the Web3 architecture.
This pushes the decarbonization aspect even further. To put it in simple words, Toucan forms the foundation of a new carbon-based Web3 stack.
At the core of the Toucan project is the Tokenized carbon Dioxide or TCO2. Each of these tokens signifies a single verified carbon credit of the real world.
These tokens are semi-fungible and the unique information related to each project is recorded on the chain and are encoded.
Each of these tokens is verified by Verra. All these links Toucan to one of the leading carbon offset standards.
However, the bridging process of the projects is completed only when a Toucan verifier approves the BatchNFTs. These approved BatchNFTs are then fractionalized and thereby it creates the TCO2 tokens.
These tokens can be deposited into a Toucan carbon pool to aggregate liquidity.
The depositors usually receive a carbon reference token such as BCT in return which provides a carbon building block for the DeFi as well as the ReFi developers.
However, most of the projects of the Toucan stack are not planned to use the TCO2 tokens directly.
This means that trading the tokens one-on-one may not always be possible.
The simple reason behind it is that the projects represented by each token are different.
BCT pool was the first Toucan pool and Klima was the first user.
Typically, the pools on Toucan are gated. This means that each of the TCO2 tokens will have to have a few specific attributes in order to pass its gating criteria.
These parameters for gating are usually set by the pool party members and Toucan.
Some of the unique features of Toucan are:
- Its TCO2 tokens
- Token pooling
- Gated pools
- BCT token and
- A Web3 carbon crypto stack.
SavePlanetEarth – Gold Standard Verification
SavePlanetEarth is a ‘carbon sequestration crypto project.’ Its structure however resembles the structure of Toucan and Klima projects.
The foundation of the project is tokenization of confirmed carbon credits.
It is on this specific foundation that the entire ecosystem is built which signifies a blockchain and a currency that are powered by green energy.
However, there are also a few unique attributes that sets SavePlanetEarth apart such as the $SPE base token and the Gold Standard verification used for the carbon offsets instead of Verra.
The SavePlanetEarth project also depends largely on NFTs especially for the early stage of management of the project as well as carbon credit certificates.
It also includes a roadmap that consists of a multi-level exchange which is powered by its base token. Carbon credits can be purchased or sold here.
Apart from this, the exchange also encourages making external investments by allowing businesses to trade their own carbon credits on it once these are verified by SPE.
Some of the other distinctive features of SavePlanetEarth are:
- Phantasma blockchain
- Gold Standard verification and
- The projects obey the rules of all 17 of UN Sustainable Development Goals.
Apart from these major and well-developed projects, here are a few lesser known and less-well-developed projects that are still in their early stages but are quite worthy enough to keep in mind.
AirCarbonExchange – This project came to the limelight by helping the financial sector of Abu Dhabi to attain absolute carbon neutrality.
The ACE sources carbon offset projects as an exchange and then tokenizes them into many different tokens. Each of these tokens is customized for a particular sector of the market.
This project however does not have any broader plans but to continue facilitating the companies in adopting the carbon crypto tokens as a product and to trade them consequently.
Base – This particular project focuses on supporting and funding development of different crypto carbon projects.
In addition to that, it also sources and verifies fitting projects that can enter into the BCT and TCO2 programs of Toucan.
CarbonTokenProject – This project follows a unique approach and tokenizes on the smallest scale – tokenizing the trees in your backyard.
They use data oracles, human verification, and the blockchain technology to tokenize trees.
With such an innovative approach the CarbonTokenProject is perhaps the first grassroots, or tree roots to be more precise, carbon crypto initiative.
KumoDAO – This is another crypto carbon currency but there is a significant difference.
It aims to be a stablecoin pegged with the US Dollar. However, it poses significant technical challenges for this reason as well.
Still, it is easy to use with a conventional monetary system.
With all these projects already functioning and more in the pipeline, the global carbon market seems to be moving in the right direction fortunately.
It can now overcome the issues regarding quality assurance that it is beset with by using the blockchain technology which ties one credit to one particular project inextricably.
Conclusion
The application of carbon credits to the crypto ecosystem is quite promising a popular trend now, as this article points out.
There are several projects that have come up for this. This, as experts think, is just the starting point for achieving a better and greener crypto ecosystem.
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