30th March 2022 > > Environmental benefits of cryptos Part 2.

tl;dr

Cryptos are GOOD for the environment.

Market Snap (at time of writing)

Market Wrap

Technical analysts (TA) are getting themselves all excited again. Almost every single one of them who was spouting doom and gloom when the price of BTC was in the mid-30s are now calling for high-50s to 80s after the last 5 weeks of positive price action.

Forget what the techies say, it’s all just stuff and nonsense in my opinion.

$50k is psychologically important - a decisive breach to the upside will bring a swathe of new investment. Failure to do so might lead to a sharp yet brief sell-off as coins that have been acquired in the last 6 months are sold for a small profit by weak hands.

Curious Cryptos’ Commentary – Environmental benefits of cryptos Part 2

(Note this a continuation of yesterday’s commentary).

The core concept of using blockchain technology in the voluntary carbon market (VCM) is to associate every single carbon credit with metadata that attests to its quality and origin.

It is the same principle that is being used revolutionise supply chains to guarantee that cheap t-shirts for instance have not been made by genocidal rulers in China utilising slave labour in the form of beleaguered Uighur Muslims.

The intention is to build a transparent and highly liquid carbon credit trading system to rival those under the control and aegis of governmental organisations.

Raphaël Haupt, CEO of the carbon-to-crypto start-up Toucan, explains:

“Markets are efficient if they’re open, transparent, and fair. Currently, this is just not the case with the legacy carbon market.”

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A key problem with the legacy carbon market is that credits from different sources are not directly fungible, leading to a fragmented market with differing prices for differing credits.

Verra is an off-chain organisation that acts as a vehicle that “allows certified projects to turn their greenhouse gas (GHG) emission reductions and removals into tradable carbon credits.”

This is how they describe themselves:

“Verra is a global leader helping to tackle the world’s most intractable environmental and social challenges by developing and managing standards that help the private sector, countries, and civil society achieve ambitious sustainable development and climate action goals.

Verra’s global standards and frameworks serve as linchpins for channeling (sic) finance towards high-impact activities that tackle some of the most pressing environmental issues of our day.”

Like all legacy financial organisations, its core business is being threatened and disrupted by blockchain technology. Rather than embracing cryptos, the response has been one we have seen elsewhere – denial and a desire to attack the credibility of blockchain technology:

https://verra.org/statement-on-crypto/

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Yesterday I mentioned a TradFi ETC (exchange traded commodity) Wisdomtree Carbon that aims to track the price of carbon credits. With credits currently priced in the single figures, it has been claimed that if the world is to reach net zero by 2050, each carbon credit representing one tonne of carbon dioxide needs to reach $100, and soon. If that comes to pass, this is a juicy upside for anyone who is long carbon credits through an ETC or by any other means (NOT investment advice, merely an observation).

Brazil based Moss buys carbon credits from forest preservation projects, and repackages them (much like the ETC above) into a crypto coin known as MCO2:

The company has stated:

“MOSS’s mission is to combat climate change and preserve the Amazon Forest. In just one year since it was founded, MOSS has traded more than 1.3 million carbon credits and indirectly preserved 1MM ha of the Amazon Forest (equivalent to the size of Lebanon).”

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Toucan has a similar coin called TCO2, and a variation on a normal Decentralised Finance (DeFi) liquidity pool, the Base Carbon Tonne (BCT).

Suffering from a lack of liquidity, Toucan launched last October a partnership with KlimaDAO, a reserve treasury protocol (see CCC 12th & 26th November 2021).

Though initially successful by bridging 17mm tons of carbon onto the Polygon network, as we have seen all reserve treasury protocols are at worst scams, and at best simply use ponzi style economics. KlimaDAO now trades at $24 compared to an all-time high of $3,600. Ouch!

And in an unforeseen turn of events, Verra, critical of blockchain technology, did their best to further damage Toucan’s business with some seemingly underhand behaviour.

Verra had 600,000 tonnes of carbon credits sitting on its registry since 2014. These had been sourced from Chinese gas projects and were widely recognised as having been created fraudulently. Essentially worthless they were destined to sit there forever more.

Despite Verra’s denunciation of crypto solutions for carbon credits, they offloaded these particular ones to Toucan, which have since been tokenised.

This event has certainly called into question the credibility of Toucan’s operations, which is unfortunate to say the least.

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There is clearly a lot more work to be done in this area of crypto innovation, but let me leave the last word on this topic for now to Raphaël:

“You know, if looking back 10 years from now, we realise … we’ve contributed to starting this movement, and it’s not taken off … whether or not we’re still part of that, I honestly don’t care … I think it’s the most impactful work that I could do as a human being right now.”