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The fight against global warming spurs various initiatives that, in turn, create financially progressive markets. One of them is the fast-developing market of crypto carbon offsets. And, according to a report from The Wall Street Journal (WSJ), millions of carbon credits are now linking with cryptocurrencies. Furthermore, this connection lures numerous DeFi projects and long-time crypto investors like billionaire Mark Cuban.
Last year, we saw the first carbon-neutral ETFs. This new development could lead to creating a multi-billion market with eco-friendly results. Its supporters claim that it could increase the transparency of carbon credits and support renewable-energy farms. The premise is optimistic for many. However, these credits could be the subject of trades on unregulated marks even if the projects receive third-party certification.
The Rise of DeFi Projects Selling Crypto Carbon Offsets
A carbon credit is a tradable certificate that enables companies to emit a specific amount of carbon dioxide. One of these credits allows the company holding it to cast a mass equal to one ton of carbon dioxide. At the moment, countless organizations purchase them to compensate for their emissions.
So, who trades them?
According to WSJ, one of the leading participants in this market is Toucan, a decentralized finance (DeFi) project. This platform enables users who own carbon credits to attach them to BCT digital tokens. Simply put, BCT stands for Base Carbon Tonne. The tokens launched in October 2021, and users can trade them on cryptocurrency exchanges.
So far, users have linked more than 17 million carbon credits to BCT tokens. They sell for over $5.50 and value $95 million on crypto exchanges.
Toucan is currently working to change the credit carbon market by delivering real-time pricing information. Also, it aims to provide a public record of trades. This way, anyone can track who is eligible for carbon credits for funding projects that reduce adverse climate changes.
Despite its relatively young age in the crypto markets, BCT has benefitted from increasing support. Fueling its popularity is another crypto asset, KLIMA. This digital token comes from KlimaDAO, another DeFi project that drives climate action. Also, the organization rewards its users with a carbon-backed, algorithmic digital currency.
KlimaDAO allows crypto traders to swap KLIMA tokens for BCT tokens. Then, it keeps the BCT in its treasury, thus taking them out of circulation. So far, over 14 million BCT tokens have reached the project’s treasury and can no longer be part of crypto carbon offsets trading.
The interesting part about this venture is that KlimaDAO is an anonymous enterprise. Nobody knows who developed it, which aligns with the anonymity of blockchain-based projects.
Nevertheless, its representatives believe that reducing the availability of carbon credits will increase their value. As a result, companies will have an extra incentive to buy and use carbon offsets. Therefore, more organizations will engage in eco-friendly initiatives.
According to the WSJ report, the KlimaDAO creators state “their actions are fully transparent” even if their identities remain anonymous. However, skeptics believe that this unnecessary secrecy will reduce the transparency in the carbon offsets market.
Mark Cuban’s Support for Crypto Carbon Offsets
Despite its anonymity, KlimaDAO has earned the support of essential crypto investors, such as Mark Cuban. The Dallas Mavericks owner admitted he owns KLIMA tokens. He told WSJ:
“While the anonymity wasn’t optimal and it’s a bit of a learning experience, if it works, the environmental impact could be consequential.”
The binding of the market for crypto carbon offsets with the DeFi sector could be good news for the crypto industry. For instance, the debate over Bitcoin mining and the potentially disastrous effects on the environment have devised the crypto community. This unexpected merger could show that companies could opt for eco-friendly initiatives with the incentive of crypto carbon emissions.