Blockchain
Solid World is taking a step toward financializing carbon credits on the blockchain with the opening of the first pool of carbon assets on automated market maker Polygon, the company said in a press release today.
In the liquidity pool, projects can essentially pre-sell future carbon credits at a price determined by an automated market maker, said Stenver Jerkku, CEO of Solid World.
A string of blockchain startups like Solid World that aims to provide financial and tech tools to mitigate the impacts of climate change have grown in size in recent months. Entrepreneurs hope that blockchain can bring transparency and boost financing for climate-positive projects.
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The Solid World pool will focus on mangrove restoration carbon projects, which aim to develop ecosystems of small trees and shrubs that grow in coastal brackish waters. Mangroves can store up to four times more carbon than other tropical forests, according to the WWF, and also protect coastlines from storms and sea level rise.
Liquidity pools serve a similar function in crypto markets to market makers in traditional finance. Users pool their funds to enable asset buying and selling. Forward contracts specify the purchase or sale of an asset at a later date, often tied to parameters such as price.
Such contracts are often used in hedging strategies, but in the case of Solid World, they can provide security for long-term carbon credit projects. The liquidity pool will provide key financing for the mangrove projects “while providing a structured supply to distributors looking to sell high-quality carbon credits,” the press release said.
The Solid World pool scores carbon credits on a risk framework powered by artificial intelligence, which considers climate, legal, political and economic vectors when assessing the risks associated with financing carbon projects.