A lot has been said about the potential of blockchain and other Web3 solutions to transform carbon credit markets by ushering in a new era of transparency, fraud protection and disintermediation. What hasn’t been talked about enough are the fruits of this transformation. More specifically, how can the on-chain carbon credit be used to scale the pace of climate impact?
Make no mistake, on-chain carbon credits have so much more potential than simply being a better mechanism for the “buy and retire” process we have now. For one, they can plug directly into decentralized financial services. They can also be the primary asset within the regenerative finance (ReFi) ecosystem, acting as a sort of “gold standard” for ReFi currencies and other economic activity.
For concrete examples, we can look to other on-chain real-world assets, such as real estate, bonds and art, to understand what’s possible with Web3 beyond basic transaction facilitation. Things like collateralization, cash flow financing and providing retail investment instruments are the kinds of activities that can achieve the kind of climate impact scale we need in the fight against climate change.