With the launch of the first forward carbon asset pool on an automated market maker and backed by Polygon, Solid World is taking a step toward financializing carbon credits on the blockchain, the company announced in a press release today.
The liquidity pool essentially allows projects to pre-sell future carbon credits at a price set by an automated market maker, said Solid World CEO Stenver Jerkku.
A number of blockchain startups like Solid World that aim to provide financial and technical tools to mitigate the effects of climate change have grown in size in recent months. Entrepreneurs hope blockchain can bring transparency and increase financing for climate-positive projects.
The Solid World pool will focus on mangrove restoration carbon projects that aim to develop ecosystems of small trees and shrubs growing in brackish coastal waters. According to WWF, mangroves can store up to four times as much carbon as other tropical forests and can also protect coastlines from storms and sea level rise.
Liquidity pools in crypto markets serve a similar function to market makers in traditional finance. Users pool their money to enable the buying and selling of assets. Futures contracts specify the purchase or sale of an asset at a future date and are often tied to parameters such as price.
Such contracts are often used in hedging strategies, but in the case of Solid World, they can provide security for long-term carbon credit projects. The liquidity pool will provide critical funding to mangrove projects “while providing structured inventory to traders looking to sell high-value carbon credits,” the release said.
The Solid World pool will assess carbon credits based on an artificial intelligence-based risk framework that takes into account climatic, legal, political and economic factors when assessing the risks associated with financing carbon projects.
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