Prior to the Proof-of-Stake platforms, blockchain
technology, and climate action all appeared to be bound for worlds apart. NEAR,
the world's first carbon-neutral PoS ecosystem, has become a hotspot for how
different worlds might collide and, in the process, help tackle climate change.
DeFi is currently reshaping money for millions of people.
Its inventive new solutions have disrupted the borrowing and lending
industries, providing much-needed momentum to one of Web3's — and NEAR's — core
pillars: giving people power over their money.
While NEAR's DeFi sector has recently thrived thanks to a
lightning-fast and secure blockchain, we're continually thinking about what
industries DeFi could transform and affect next. Even at this early level, we
can see the potential for DeFi to play a role in financing
climate-change-related initiatives.
Climate Change
Initiatives as a Resource
DeFi climate investment, according to Yessin Schiegg, Chief
Financial Officer of NEAR Foundation, would likely borrow some of the
industry's existing tools and adapt them to carbon credits and other
climate-related assets.
“Smart contracts could automatically retire carbon credits
when C02 exhaust is produced, and DeFi mechanisms could plug in directly,”
explains Schiegg. "Investors can hedge carbon offset obligations,
speculate on price movements, and earn yield on carbon offset measures that are
pre-financed."
When carbon credits are retired — that is, when assets
representing carbon emissions are removed from the market and can no longer be
exchanged – blockchain can give flexibility.
The method of retiring carbon credits is now primarily
manual and centrally managed, which means it is done in bulk. When matching
exhausts to the credits supposed to represent them, it also requires confidence
and isn't completely correct.
“Smart contracts could automatically retire carbon credits
at the same time they are created, and DeFi mechanisms could plug in directly,”
Schiegg argues. "Money is created, in a sense, by the burning of
energy" (melting rocks to get the gold out or mining bitcoin). It would be
fantastic to see more innovation in the area of money creation, such as through
CO2 offsets or other forms of social action such as tree planting or battling
hunger and disease.”
Kendall Cole, Head of Product at NEAR Foundation, predicts
that tokenized carbon credits will be utilised as collateral for loans,
derivatives, and other products throughout the DeFi space.
"The increased liquidity and utility of these products
should contribute significantly to market efficiency," he says. "It
will also introduce them to a new pool of investors."
In older, more established sectors, other DeFi climate
investments could be utilised. Raiz is employing NFTs to support its vertical
farms as an alternative to traditional agriculture, which is a major
contributor to global greenhouse gas emissions. Raiz is an NEAR and Mintbase
project that creates optimal growing settings for crops for local communities
and restaurants by establishing small, vertical farms in under-used urban
locations.
Not all DeFi climate efforts will aim to generate financial
assets. Hillridge, a software business tackling low rates of insurance for
extreme climate events, was awarded a US$200,000 grant by the NEAR Foundation
on November 1st to develop a blockchain-based parametric insurance platform for
tropical storms. The platform will be tested during typhoons in Vietnam, one of
many tropical countries where millions of people are covered by disaster
insurance.
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