Solid World DAO seeks to boost carbon forward market liquidity

Quantum Commodity Intelligence - Carbon-backed crypto startup Solid World DAO plans to launch a platform in early 2023 that will boost trading in forward carbon credits, a market that suffers from poor price transparency and lack of liquidity, its founders told Quantum on Thursday.

The startup was created earlier this year and already boasts a wide array of partnerships with VCM players such as SCB and Emsurge, and crypto initiatives including Toucan and Flowcarbon, as well as $2.7 million in funding.

Solid World says carbon projects are hard to finance because they take a long time to deliver credits, while forward positions are illiquid, which is a major impediment to bring the VCM to "hyperscale" - a goal often touted by carbon-focused crypto initiatives.

"It can take years to get revenue for credits because these credits are not generated until long after the climate-positive activity has taken place," said the company's white paper.

"Currently, there is no price and volume transparency in general in the pre-purchasing market, so projects do not know what they are worth. This is a bad situation to negotiate from. We want the terms to be clear."

The company, which will eventually operate as a Decentralised Autonomous Organisation (DAO) where decisions are shared by holders of its token, is busy recruiting funds and traders interested in its concept to ensure sufficient liquidity at launch.

It plans to create pools of individual types of carbon credits that can be financed by investors, with the first pool set to focus on blue carbon offsets and details on the other pools to be announced later.

"One of the good things with crypto is that it aligns incentives. We're all on the same team 'decarbonise the planet'," said Solid World founder Stenver Jerkku.

Solid World has already built a pipeline of 23.8 million mt per year of project emission reduction or removals, of which the majority is REDD+ but also 900,000 mt is blue carbon and 650,000 mt is reforestation.

To be allowed into the platform, projects need to be vetted by a panel of experts, which answer to an elected council of representatives from the DAO.

It said it has enough funds to last for two years without revenue and survive the "crypto winter" that has taken hold in recent weeks, with values for well-known cryptocurrencies and carbon-backed ones plunging in response to the tough economic situation.

"When the party ends and everyone leaves, the teams with real vision and a true product-market-fit continue to build, and their hard work finally sees its time to shine. These are the products that become the new blue chips during the next bull cycle," it said.