Tokenization of natural assets, hot carbon trading, first-line VCs in Silicon Valley gather for carbon neutrality

What is the hottest vent at the moment?

This answer may belong to carbon neutrality:  the amount of carbon dioxide emitted and the amount of carbon dioxide removed offset each other.

With the commitment of many European and American countries to achieve carbon neutrality in 2050 and China to achieve carbon neutrality in 2060, global capital is gathering together.

The Global Energy Transition Commission (ETC) stated in a research report published on its official website that in order to achieve the goal of carbon neutrality, the world needs to invest more than US$80 trillion from now to 2050.

On July 16, the national carbon emission rights trading officially opened. In the secondary stock market, the “carbon neutral” concept stocks have already become dazzling stars. Some stocks have been pulled 21 daily limit due to the “carbon neutral” concept.

In Silicon Valley, top VCs such as a16z, USV, Sequoia Capital, etc. have all targeted this track and participated in investment in many projects, many of which have bold ideas: tokenize natural assets and link stable coins with natural assets.

USV: Tokenize natural assets

In January 2021, the thesis-driven venture capital firm Union Square Ventures (USV) established a US$162 million climate fund to invest in companies and projects that help alleviate the climate crisis.

Whether it is Internet or blockchain investment, USV can be regarded as a “pioneer”.

After the Internet bubble burst, USV was formally established in 2003. It is known for its bold investments in Internet startups. It invested and successfully exited numerous unicorn companies including Zynga, Indeed, Tumblr, Twitter, Lending Club, and Etsy.

In 2016, the then USV partner Joel Monegro published an article called “fat-protocols”, which was once regarded as an investment bible by industry insiders and guided the public chain investment boom.

Today, USV has invested in well-known projects such as the Coinbase Exchange, Algorand, FileCoin, etc., and is also the fund of funds of many top venture capitalists such as Multicoin, Polychain, and Placeholder.

When USV aimed at carbon neutrality, partner David Gabeau proposed an idea- to tokenize natural assets.

In his view, blockchain-based cryptocurrencies provide new functions for global assets and financial markets, so there is great potential for marking natural resources as tokenized assets.

Before proposing this idea, USV invested in Silviaterra (now NCX) in the field of carbon neutrality, and used Basemap to measure the size, type and average age of each acre of woodland in the United States to enter the carbon offset trading market.

For any organization that wants to reduce its own carbon emissions, there are roughly two basic methods: directly eliminate carbon emissions from its own operations, or purchase carbon offsets.

The reason is simple. If an organization generates one ton of carbon emissions and then pays the other party to offset the one ton of carbon emissions through tree planting or wind power generation, then carbon neutrality is achieved.

By 2016, carbon offset transaction size is only $ 3400, has always been a niche market, but with the carbon and a national strategy, carbon offset trading will become blue ocean international, former Bank of England Governor Mark Carney has said to In 2030, the carbon offset market may reach 100 billion U.S. dollars.

Silviaterra uses computer vision technology, using aerial images and other sensor data to automatically assess how much carbon the trees in the forest store, providing data support for assessing carbon trading.

In April 2021, Silviaterra upgraded and changed its name to Natural Capital Exchange (NCX), which can be understood as a carbon emission exchange, mainly dealing with carbon offset transactions between large companies and pine forests in the southern United States.

Large companies that produce carbon emissions can purchase carbon offset contracts from forestry operators through NCX. According to the contract, the forest farm operator promised not to cut trees for a certain period of time, keep the trees, and continue to absorb carbon dioxide to compensate for the carbon emissions produced by the purchaser. For example, Microsoft bought 300 million US dollars of carbon emissions on NCX.

But this is far from enough. According to USV partner David Gabeau, tokenizing natural resources will help global cooperation and help natural resources accurately price.

Turning natural assets into encrypted assets on a decentralized blockchain can make natural assets have the following important characteristics:

Transparency and uniqueness: As companies and governments invest a lot of money to purchase natural assets in remote lands to achieve carbon neutrality, the uniqueness of trading assets and avoiding repeated transactions are essential. Blockchain can achieve this.

Instant access to the global market: Natural assets are global, and the global market is crucial to unlocking their value. The borderless and permissionless trading market verified on the chain allows people from anywhere in the world to participate in the carbon trading market.

Use as collateral: Once enough natural assets are tokenized, they can also form the basis of a new type of digital collateral. Tokenized assets can be mortgaged for loans, insurance, stablecoins and other financial products on the chain. Instead of pegging stablecoins to existing currencies such as the U.S. dollar, new stablecoins in the future can be mainly (or possibly completely) backed by natural assets.

This is a bit similar to the idea of ​​carbon currency in Kim Stanley Robinson’s new book “Future Department”.

Public third-party verification of asset quality (oracles) : The quality of natural assets also needs to be verified. Not all natural assets are homogeneous, and their quality changes over time.

Adding identifiers such as source and age on the chain can help determine the quality of assets. With tokenized assets, any third party can add and verify quality data.

Due to the huge scale of the world’s natural assets, and carbon trading will become a rigid demand in the future, tokenized natural resources may become one of the largest types of encrypted assets. Blockchain technology combined with financial incentives will release the true value of natural assets and help solve the climate crisis.

The combination of carbon offset trading and blockchain may be a hot spot for investment in the future. Coincidentally, Tianjin’s Emissions Rights Exchange released the country’s first ant-chain-based carbon neutral deposit product on July 15th. The issuance, transaction and audit of carbon offsets are transparent and traceable.

At present, USV is still looking for related investment targets for the tokenization of natural assets.

a16z: Betting on the carbon offset API Patch

The Silicon Valley bad boy, the well-known “media company” a16z (Andreessen Horowitz), has not been absent from the investment in the carbon neutral market.

In February 2021, a16z led a USD 4.5 million seed round of funding for carbon offset API developer Patch.

Patch makes it easier to manage carbon offset transactions. Carbon offset projects can be accessed through an API and a few lines of code.

Patch has developed a carbon offset platform that enables companies to calculate their carbon footprint and find corresponding carbon offset projects to solve carbon emissions problems. Using Patch, companies can purchase carbon credits from projects that specialize in concrete mineralized air carbon capture, improved forest management, and biochar.

The biggest feature of Patch is its API, which contains pre-written code that can be directly integrated into the company’s website, allowing companies to directly integrate Patch’s different carbon offset functions into commercial platforms.

For example, API can track business flights of company employees and recommend and promote the purchase of carbon offset credits to the company. Patch’s algorithm calculates the amount of carbon that needs to be neutralized based on the length of the trip and the mode of travel (ie, airplanes, cars).

Up to now, there are 8 carbon offset suppliers from all over the world on the Patch platform. Through the use of Patch API, carbon offset orders can be directly obtained.

At present, Patch is also actively paying attention to the carbon emissions caused by Bitcoin mining. Backed by a cryptocurrency VC such as a16z, it will not be surprising for Patch to introduce blockchain or cryptocurrency in the future.

Sequoia Capital: joro, carbon neutral indulgence

The above-mentioned entrepreneurial projects are focused on the B-end market of carbon compensation, and in the personal-oriented C-end market, there are also many carbon neutral entrepreneurial projects emerging.

In China, the largest C-end carbon neutralization application is Alipay’s Ant Forest.

Every green energy of carbon-free behavior can be gathered into a real tree in the desert Gobi. This mechanism is based on “rewards” and has social interaction scenarios.

At present, there are several C-end applications emerging abroad. Contrary to the reward mechanism of Ant Forest, the mechanism they adopt is “punitive”.

For example, after downloading the app, every day-to-day behavior of yours will be calculated into the corresponding carbon emissions. When the number is too high, you have to pay a fine to offset the carbon emissions, similar to the indulgences in medieval Europe: pay a sum of money To “God”, God forgive you for discharging carbon energy.

It seems to be an unreliable “utopia”, but many applications have received investment from top VCs.

In 2019, Wren graduated from YC and received $150,000 in investment. In 2020, he received a seed investment of $1.5 million from Paul Gramham and USV.

Wren will generate a personal carbon footprint report through questionnaires, such as “How many long/short flights a year?”, “How often do you eat red meat or dairy products?”, etc., and then convert it into carbon based on certain data and rules Emissions.

As far as major countries in the world are concerned, the per capita carbon emissions in the United States is 19 tons of carbon dioxide, China is 9 tons, and the United Kingdom is 8.9 tons… If your carbon emissions are at this level or far exceed it, then you need to pay 24.13 US dollars per month. Offset your carbon emissions and complete a carbon atonement.

What will Wren do with this “carbon ransom”? After deducting operating costs, it participates in global carbon neutral projects to help offset carbon emissions.

For example, in northern Uganda, the smoke produced by using local energy is equivalent to one person smoking two packs of cigarettes a day. An energy company converts agricultural waste into clean energy to meet the cooking and combustion of 200,000 refugee families in Uganda by 2023. Demand, Wren goes to fund this company.

In the Amazon rainforest, Wren funded a foundation that uses satellite images and drones to detect and organize illegal deforestation.

In this area, Sequoia Capital has also shot-Joro.

In 2020, Joro received a 2.5 million seed round investment led by Sequoia Capital. Compared to Wren, Joro will not only collect personal information to calculate carbon footprint, but also connect to your bank card or credit card to calculate the carbon emissions “produced” by users based on consumption records.

In the method of calculating carbon emissions, Joro has its own set of unique algorithms. For example, if the consumption records on the credit card cannot give specific consumption details, then Joro will estimate personal carbon emissions based on past consumption behavior indicators.

“We can know that the user spent $100, and through research on him to know his diet for a week… The cross combination of this information, we infer how much carbon emissions a person spends on a dollar will generate, and thus give a real-time carbon Track record.”

In terms of business model, Joro and Wren also need to collect carbon neutrality fines and then fund projects that improve the environment. Compared with Wren’s pure commitment to carbon compensation, Joro also has the meaning of carbon education, allowing people to always understand their consumption behavior. Carbon emissions.

In 2020, users in Joro will offset the carbon emissions that can be absorbed by almost 500,000 trees.

Such a business model may seem a bit weird in China, because it relies purely on personal conscience discovery and revolutionary consciousness, so there is room for survival in a “white left” society, but whether it is sustainable in the long-term may be a question mark.

How to use incentives instead of punishment to get more people to participate in carbon compensation; how to ensure that funds are transparent and truly used for carbon neutral projects…

Whether it is Joro or Wren, maybe you can consider blockchain.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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