Carbon Infrastructure
Key Actors:
- The Protocol - the sum of all Solid World DAO mechanisms and processes that create a liquid market for forward carbon credits.
- The Project - The organization that aims to receive issuance of certified carbon credits in the future based on following an approved methodology.
- The Foundation - The Solid World Foundation, which functions as a legal arm to sign and enforce agreements off-chain.
- Market Participant - Any organization or individual interacting with Solid World DAO's on-chain infrastructure.
- Liquidity Provider - A Market Participant who provides the financial means to turn commoditized forward agreement units into fiat currencies.
The Solid World Protocol is a set of mechanisms that aim to create a liquid market for forward credits. In order to understand why all of these elements are necessary - we need to consider the current status quo.
Forward agreements for carbon credits are made regularly. However, these agreements are currently not standardized, opaque to outside observers, are not particularly liquid, and do not provide transparency for projects. This creates a situation where projects do not fully grasp their negotiating power and deals are very hard to compare and evaluate.
Our infrastructure consists of key parts - which are outlined here:
An off-chain process, in which Solid World DAO's community of experts confirm the project's viability, ownership, and risks as well as confirm that delivery is within reasonable bounds guaranteed in cases of project failure or under-delivery. If this step results in an affirmative position by the team - the team proposes Contract Tokenization for the Project.
An on-chain process, in which the Delegates affirm that the previous step has been done correctly and complies with the DAO's acceptance criteria. As a result of this, an agreement is signed with the Foundation and the Project and is tokenized.
An on-chain mechanism through which the tokenized agreement is exchanged for a liquid commoditized form of forward credit agreements. This provides the Project with access to the financing required to successfully deliver certified credits later on via selling off the commodity tokens. Specific agreements are tokenized based on a forward discount - with the forward discount being distributed via Self-Incentivization later on.
An on-chain mechanism, through which Market Participants can take commodified forward agreement credits and turn them back into the underlying specific agreements for the purposes of arbitrage or delivery. Exchange rates from commodity back to specific agreements are based on a forward discount and decommodification premium.
An on-chain mechanism, through which the Liquidity Providers are compensated for providing the financial means for commoditized forward credits to be exchanged for other value. This compensation comes from the assets composing the commodity pool nearing their delivery event and therefore being re-priced.
A hybrid process in which Market Participants may exchange the specific agreements for relevant certified credits when the underlying project reaches certified issuance. Delivery can take place both off-chain (onto the original registry) and on-chain (onto collaborating protocols like Toucan or Flow) depending on Market Participant's preferences.
Last modified 5mo ago