Published Fri Apr 14 2023
Carbonmark is a platform that taps directly into the millions of carbon tonnes available in the Polygon-based Digital Carbon Market (DCM). Through a familiar marketplace experience, it removes barriers to entry and improves overall market performance by complementing the existing infrastructure deployed in the DCM.
The DCM infrastructure that KlimaDAO has built brings unparalleled transparency and efficiency to the carbon markets. Built on top of public blockchains, the infrastructure inherits blockchain’s trust, security, and interoperability.
At the center of the KlimaDAO ecosystem is the $KLIMA token, which is deployed to provide liquidity for the market via liquidity pools (LPs). These LPs benefit from KlimaDAO’s long-termist vision of the Voluntary Carbon Market (VCM) – through protocol-owned liquidity, KlimaDAO is the owner of these LPs, and intends to continue providing liquidity as long as the DCM stands to benefit. The Carbonmark marketplace functions as the gateway to this infrastructure.
In this article, we explore how the launch of Carbonmark is crucial in enabling the long-term vision of a community-owned, permissionless DCM to be realized, as well as how such a marketplace can support the maturation of the market as a whole.
Carbonmark is the evolution of the infrastructure layer of the DCM, with the familiar marketplace user experience functioning as the gateway to the DCM technology techstack.
LPs themselves play an important role in the DCM by bolstering liquidity, reducing fragmentation, and revealing key market data such as price signals and supply availability to the market. However, they also require a degree of technical expertise to interact with and understand, and they may not always support the exact needs of sellers and buyers because of the way they pool together large quantities of homogenized groups of carbon credits.
In true Web3 fashion, Carbonmark’s marketplace is an interoperable technology that directly interacts with existing assets and infrastructure such as tokenized credits, LPs, and credit retirement and redemption infrastructure.
Hence, Carbonmark brings a new dimension of accessibility and user experience to the DCM, built directly on top of what already exists – it doesn’t compromise the benefits of the existing technologies within the DCM, but simply allows these benefits to be more easily accessed by the market.
Below, we discuss a number of the additional benefits that Carbonmark’s marketplace will bring to the DCM.
Digital carbon credits that do not fit into the existing pool gating criteria, or are perhaps deemed to have some specific characteristics that distinguish them from assets currently represented in a given pool, do not need to be left out of the DCM. With Carbonmark, they can be listed and presented to the market as a standalone product.
Individual project listings can be tailored by supply-side organizations, for example by adding qualitative data or project pictures and documentation that can inform the market about the specific benefits of a given project. Supply-side organizations can operate their own virtual carbon storefronts, leveraging Carbonmark as a marketing and distribution channel and making it easier to meet demand.
Carbonmark enables users to access the marketplace without any pre-existing blockchain or Web3 knowledge. Users can log in via email, socials, or even use the platform’s Circle integration to interact with the marketplace when only custodying USD and other government-issued global currencies.
Projects listed on the platform show the bid price and available supply. Carbonmark listings are subject to less volatility, no slippage, and more clarity for buyers than interacting with LPs – thus aiding the buying experience.
Different participants may have different preferences when it comes to trading platforms. By offering digital carbon credits via both LPs and a decentralized marketplace, market participants can choose the platform that best suits their needs, preferences, and risk tolerance.
There will be opportunities for market participants to respond to market dynamics between the marketplace and the LP itself, establishing a more liquid market with more efficient price discovery. The LPs can provide continuous liquidity for large volumes, while the decentralized marketplace can attract different types of participants, such as buyers looking for specific qualities or project types in the credits.
By having digital carbon credits available on multiple platforms, the market becomes more resilient to potential issues or failures on a single platform. This redundancy can help ensure that trading can continue uninterrupted, even if one platform experiences technical difficulties or other issues.
The coexistence of LPs and a decentralized marketplace can foster innovation and competition in the market. Different platforms can experiment with various features, pricing mechanisms, and user experiences, which can lead to better overall solutions for market participants.
Within a week of Carbonmark's launch, Vlinder listed over 2,000 mangrove carbon credits on the platform from the project “Reforestation and Restoration of Degraded Mangrove Lands, Sustainable Livelihood and Community Development in Myanmar”.
Although these carbon credits were tokenized over a year ago, none of the existing LP gating requirements or price and supply characteristics were deemed suitable to provide a route to market for these credits.
Mangrove carbon credits are considered some of the most desirable on the market for several reasons, including the co-benefits that mangrove reforestation and restoration can bring to local communities as well as the limited availability of these credits within the market. As a result of this, these credits typically sell at a much higher price than more abundant nature-based mitigation and avoidance carbon credits.
The holders of the digital carbon credits chose not to deposit these credits in an LP, instead waiting for a more favorable DCM solution that could be used as a route to market. Enter Carbonmark. Because users can determine the price at which they want to sell their credits, rather than being price-takers from the LP, the owners (Mangrove DAO) decided to list them on Carbonmark.
In practice this means that when a buyer is found on Carbonmark, the trade can be executed at the agreed list price. Furthermore, given that blue carbon credits are considered a hot commodity, this allows for tailored marketing around the mangrove credits as a standalone package available for immediate consumption, rather than the marketing of a set of carbon credits held within an LP.
Buyers also benefit from this arrangement. When a carbon credit, such as the Reforestation and Restoration of Degraded Mangrove Lands, Sustainable Livelihood and Community Development in Myanmar, is listed on Carbonmark, a buyer no longer has to go through the process of filtering through the supply in an LP and selectively redeeming the specific carbon credits they want. Instead, they can quickly search on Carbonmark for specific credits, immediately see the list price and the credit supply, and execute the transaction based on that list price.
The need to explain complex cutting-edge technology to buy-side participants is also removed; there is no need for discussions about what an LP is and why it's important for the DCM, or the steps required to practically access the benefits of the underlying technology on the blockchain.
For buyers, this can significantly improve market accessibility and reduce lead times from project origination to the consumption of the environmental benefit via offsetting. Thus, Carbonmark reduces friction and enhances the buying experience within the DCM.
Carbonmark is founded on one simple objective: to improve the DCM experience for all market stakeholders. As such, it has been launched with zero additional fees and essentially functions as a free expansion pack for the wider Digital Carbon Market.
KlimaDAO envisages an open system for carbon credits, where the true principles of Web3 can proliferate and bring benefits to the market. These include community ownership, interoperability, transparency, and permissionlessness. The launch of Carbonmark is fully aligned with this vision and is a key next step for the market to increase the accessibility and throughput of digital carbon from the producers of carbon credits to end consumers.
To participate directly in the development of KlimaDAO’s infrastructure rails for the DCM, visit our Forum and participate in our governance process.
The information provided in this blog post pertaining to KlimaDAO (“KlimaDAO”), its crypto-assets, business assets, strategy, and operations, is for general informational purposes only and is not a formal offer to sell or a solicitation of an offer to buy any securities, options, futures, or other derivatives related to securities in any jurisdiction and its content is not prescribed by securities laws. Information contained in this blog post should not be relied upon as advice to buy or sell or hold such securities or as an offer to sell such securities. This blog post does not take into account nor does it provide any tax, legal or investment advice or opinion regarding the specific investment objectives or financial situation of any person. KlimaDAO and its agents, advisors, directors, officers, employees and shareholders make no representation or warranties, expressed or implied, as to the accuracy of such information and KlimaDAO expressly disclaims any and all liability that may be based on such information or errors or omissions thereof. KlimaDAO reserves the right to amend or replace the information contained herein, in part or entirely, at any time, and undertakes no obligation to provide the recipient with access to the amended information or to notify the recipient thereof. The information contained in this blog post supersedes any prior blog post or conversation concerning the same, similar or related information. Any information, representations or statements not contained herein shall not be relied upon for any purpose. Neither KlimaDAO nor any of its representatives shall have any liability whatsoever, under contract, tort, trust or otherwise, to you or any person resulting from the use of the information in this blog post by you or any of your representatives or for omissions from the information in this blog post. Additionally, KlimaDAO undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed in this blog post.