This week we’re coming back to the topic we discussed over a month ago. In our first episode of Tapx Talks we were talking about making web3 green. The conversation was so interesting and there was so much more to cover that we decided to have a part 2 of it. 

In part 1 of Making web3 green, we discussed the following:

  • Is blockchain really environmentally unfriendly?
  • What is ReFi and why should you care?
  • The challenges of making web3 green.
  • Bonus — some great book recommendations from the speakers.

Read the recap of Part 1.

Ela from Toucan Protocol, Marcus from KlimaDAO, Irfon from DOVU, and new to the discussion, Justin from Polygon joined us to elaborate more on this topic.

This time, we were talking about tokenisation of environmental assets, how to motivate communities to tackle climate change, and where the ReFi will be in the next 10 years.

The future of web3 is green, so let’s explore how!

How can blockchain technologies and web3 help achieve a net positive impact?

Pretty much everything we’re doing is extractive, but blockchains do provide all of the tools that we need to create an economy that actually is regenerative, and we haven’t had the technology that was able to do that before.

Now, there are a lot of projects that help to fight climate change by using blockchain technology.

For example, DOVU is on a mission to build the trust layer for carbon offsetting. DOVU implements carbon sequestration practices to tokenise carbon credits. This makes it easy for organisations to offset their carbon footprints with carbon that’s sourced directly from farmers.

Another example is Polygon, the Ethereum scaling solution that is on a mission to onboard the next 1 billion users on web3. And they are convinced that technology shouldn’t come at a cost to the planet. 

Polygon is offsetting its carbon footprint by partnering with Klima DAO. By the end of the year, they are going carbon-negative. By doing so, they also encourage the polygon ecosystem partners to do so as well. They are also going to provide resources for their ecosystem partners so that they can offset their own carbon footprint.

Klima DAO uses a stack of technologies to reduce market fragmentation and accelerate the delivery of climate finance to sustainability projects around the world.

Every KLIMA token is backed by a real-world carbon asset. Tokens are used to offset carbon emissions, interact with DeFi applications, and get exposure to the rapidly growing global carbon market.

They are also building a robust partnerships programme where they are trying to drive demand for carbon credits.

At Toucan, they are building infrastructure to move carbon credits to open blockchain. 

Toucan infrastructure consists of a carbon bridge used to tokenise carbon credits, carbon pools that are used to aggregate credits with similar attributes, and a carbon meta registry — a library that holds information about every carbon credit that has ever bridged on-chain via the Toucan bridge. 

What is the tokenisation of environmental assets and why does it matter?

Tokenisation of environmental assets is basically assigning value to nature and using that value to drive the funding back to the places where it matters instead of being extractive and taking it away from the planet. 

This practice creates a brand new economic system called ReFi (regenerative finance) that is aimed to unlock the value of environmental assets and give back to nature while using those assets.

Environmental assets include carbon credits, biodiversity credits, water and plastic credits, and more. 

It really makes sense that the environmental assets market should run on an open blockchain, says Ela of Toucan protocol. 

Tokenising carbon assets helps to solve the problems that exist right now in the web2 economy. These are middlemen who capture a lot of value, fragmentation which makes it super hard for actors to participate in the market to affect efficiently on carbon market solutions, and lack of transparency. 

Every credit has different co-benefits, different methodology, and so on and there are a lot of different registries. 

It’s quite hard for a project to get accepted to the biggest fund which right now is Vera so that demands a different route and that creates a lot of fragmentation. This, in turn, makes it really hard for people to participate in this market because there’s no unified standard, there’s no price discovery, it’s not clear how much the credit is worth, etc.

The next problem is the middlemen which are kind of like market makers — they buy credits and then they resell them with crazy fees — from 50% to 80%. 

Another issue that blockchain can address is opacity. Now no one can tell for sure which credits are on demand and which are already bought, there’s no healthy price discovery. 

By tokenising carbon credits or any other types of environmental assets,  we turn these assets into building blocks and that creates new demand sources that haven’t existed before. 

In the future, much more environmental assets will be tokenised and brought on-chain.

How blockchain can promote the maturation of the voluntary carbon market

Carbon credits can be put into different decentralised applications — DeFi, NFTs, gaming,etc.

Blockchain can be a solution for the existing legacy systems, says Marcus Aurelius.

Web2 organisations like Vera can actually register and issue credits for projects while maintaining the necessary level of credibility. 

There is no need to build everything from scratch just because it’s on a blockchain. 

There are a lot of opportunities for the newer markets to apply some of the lessons we learned and some of the technologies that are developed for issuing the existing problems. 

It’s the maturation of the voluntary carbon market from a very slow, outdated approach to the modern approach enabled by blockchain technology, says Irfon from DOVU.

Web2-based businesses can pivot to blockchain and work together with web3-based businesses. Because we can do more together. That’s the way global problems such as climate change should be issued and fought.

Putting everything on-chain gives an opportunity to present new standards that can be used across different ecological assets.

How can we get the community to help tackle climate change? 

Justin from Polygon highlights that they are paying a lot of attention to raising awareness of climate change in the Polygon community.

It starts with communication, providing information, and education, he says. It’s crucial to let people know that there are existing problems and there are resources available for web3 projects to tackle these issues. 

Polygon, as a big actor in the web3 space, uses its influence to help other brands to follow the green path. They are happy to share and promote the projects when their ideas align with Polygon’s vision for the environmentally-friendly future of the blockchain.

The next step to getting the community to tackle climate change is by building social pressure, says Marcus Aurelius. When everyone questions themselves if they are doing their part because they are seeing everyone doing something for the environment. 

Toucan is focused on incentivizing builders and educating builders to do all kinds of cool things around carbon emissions.

They are also offsetting carbon emissions of real-life events, which is another level of climate awareness. In the near future, all events will be carbon neutral or carbon negative, Ela says.

On the other hand, we need to focus more on reducing our carbon footprints rather than just offsetting them. 

However, it gets more complicated to incentivise climate actions on an individual level. Not because people don’t care enough, but rather because it is still a complicated process for many users.

We need to make it easy, automated, and fun to do something for the planet, says Ela. Unfortunately, right now the offset process is still a little bit of effort for people, and it’s not as natural as we would like it to be. 

Despite its importance to raise awareness of climate issues among web3 users, it’s not right to put everything on the shoulders of the individuals.

There needs to be a lot more climate actions embedded into everything in web3. Every transaction should be carbon neutral, a green tone standard should be introduced, and every DAO should have green assets in their treasury — that is the way to go. 

10 years from now, where will we be in regards to the net impact of blockchain and web3/4/5 technologies?

All speakers were quite positive about the momentum of the web3 movement toward being greener and better for the planet. 

In 10 years from now, we’ll be able to see the technology be leveraged for the good. Distributed ledger technology will be helpful in much more innovative use cases we can’t even think of now. We’re at the starting point of the ReFi journey. 

Blockchain can provide the accountability that is needed to change these things. In the future, it will be integrated into many aspects and accessible equally around the world. 

Most transactions will be on-chain and every transaction will have a regeneration fee for the planet in everything we do whether we’re shopping, playing games, or visiting real-life events.

The tech behind web3 is an important part of the movement, but in the end, it’s not what matters.

The tech should serve the cause, not be its own end goal. 

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