If you’ve been tracking climate action globally in the last couple years, you’ve probably noticed increasing attention on the voluntary carbon market (VCM).
And if you’ve been paying attention to the VCM, you’ve probably noticed blockchain technology entering the conversation…
Now if that makes you want to close your browser – read on! This guide is for you.
We’ve put together a beginner’s resource to give you everything you need to know to understand the basics of blockchain as it relates to the voluntary carbon market.
Thallo’s new guide, “Mythbusters: The Truth About Blockchain and Its Use in the Voluntary Carbon Market,” delves deeper into blockchain’s application in the VCM and seeks to demystify some common myths surrounding blockchain technology.
(Side note: if you’re looking for some background on the voluntary carbon market, we highly recommend this primer from our friends over at Climate Focus.)
Our resource guide includes:
> A brief on blockchain technology
> Blockchain 101: common terms explained
> Myths debunked, part 1: blockchain
> The VCM landscape today and its challenges
> How well-designed blockchain solutions can help
> Myths debunked, part 2: VCM + blockchain
Why is this guide important?
Blockchain technology’s application in the VCM is still very new. While some argue that blockchain technology is a solution looking for a problem in the VCM, others see it as a powerful tool that can address some of the VCM’s most pressing challenges. Specifically, using blockchain technology in the VCM can help increase transparency, traceability, and accountability, reduce transaction costs and risks, and help build trust between buyers and sellers.
Many dozens of companies are exploring the use of blockchain technology in the VCM, including exchanges, marketplaces, measurement and verification providers, and more. These companies have different approaches to using blockchain technology, with some focusing on creating blockchain-based registries for carbon credits, while others are creating blockchain-based marketplaces for buying and selling carbon credits.
What will I learn from the guide?
Here’s a sneak peek of what you’ll find in the guide:
> One of the most common myths surrounding blockchain technology is that it is a scam. However, blockchain technology and cryptocurrency are not synonymous, and blockchain technology has various applications beyond cryptocurrency. Decentralization also creates security, making it difficult for hackers to alter a chain, and the more people on a blockchain network, the more secure it is.
> Another common myth is that blockchain technology consumes a lot of electricity and has a negative environmental impact. While this is true for some blockchain designs that use the Proof-of-Work consensus mechanism, it does not apply to all blockchain designs. The Proof-of-Stake consensus mechanism consumes much less energy.
The VCM landscape today and its challenges:
> The VCM is an important climate tool, but has several challenges that need to be addressed. These include lack of regulation, verification taking too long, financing barriers, intermediaries taking a lot of value, limited liquidity, and opaque pricing information. The absence of a standardized global carbon credit trading framework has resulted in further issues.
How well-designed blockchain solutions can help:
> Well-designed blockchain solutions can help the VCM address its challenges by enhancing transparency, traceability, and accountability, reducing transaction costs and risks, and building trust between buyers and sellers. Blockchain-based solutions can also help ensure the integrity of carbon credits by providing immutable and transparent ledgers, decentralized verification, and smart contracts.
The potential for blockchain technology to enhance the efficiency, transparency, and trustworthiness of the VCM is significant, and it is crucial for stakeholders to collaborate in leveraging this potential to create a more sustainable VCM ecosystem.