The Claim Accreditation Protocol's power must be turned from potential into material by harnessing the protocol to create a variety of impactful applications. CAP serves as a baseplate, a foundation upon which an entire ecosystem of carbon credit applications can be built. These applications can address a wide range of needs, from project financing to carbon credit verification, and can be created by a variety of players, from project developers to methodology designers to evaluating bodies.
The following document explores a series of potential applications that could be built on top of CAP. These are not prescriptive or definitive; they are illustrative, intended to spark ideas and inspire innovation. The actual applications built on CAP, and their success, will be determined by the creativity, dedication, and resourcefulness of the developers and organizations that build them.
Blockchain technology, at its core, provides a transparent and immutable record of transactions. CAP leverages this feature to enable an on-chain reputation system for both projects and evaluating bodies. One can imagine novel economies forming on top of this, such as reputation staking and slashing, paying for priority review, and more.
In the CAP system, every claim made by a project and every stamp provided by an evaluating body is recorded on the blockchain. This includes the details of the claim or stamp, such as the amount of impact, the time period, and the signer. Because these records are immutable, they provide a reliable history of a project's claims and an evaluating body's evaluations.
An on-chain reputation system can provide valuable insights for various stakeholders:
- Project Developers: A project with a history of making accurate claims and receiving positive evaluations can build a strong reputation. This could make it easier for the project to attract investors, receive stamps, and sell credits. It could also inspire the project to maintain high standards of performance and integrity.
- Evaluating Bodies: Evaluating bodies can also build a reputation based on their history of evaluations. If an evaluating body is known for its rigorous assessments and its stamps are trusted, its reputation could enhance the value of the stamps it provides.
- Investors and Offsetters: For investors and offsetters, an on-chain reputation system can provide a more transparent and reliable basis for decision-making. They can assess a project's reliability and an evaluating body's credibility based on their on-chain histories.
The transparency and trust provided by an on-chain reputation system could also enable the development of on-chain credit scores. These could provide a standardized measure of a project's reliability or an evaluating body's credibility, further simplifying decision-making for investors and offsetters.
However, it's important to remember that the reputation system only provides information based on past performance. Stakeholders should still conduct their own due diligence and consider a variety of factors when making decisions.
By fostering transparency and trust, an on-chain reputation system could contribute to the efficiency and integrity of the climate impact market. It could reward good performance and integrity, discourage overpromising and underdelivering, and help stakeholders make informed decisions.
sequenceDiagram
participant P as Project
participant EB as Evaluating Body
participant BC as Blockchain
participant I as Investor
P->>BC: Makes claims
EB->>BC: Provides evaluations
BC->>P: Records claims history
BC->>EB: Records evaluations history
I->>BC: Reviews on-chain reputation
In this sequence diagram, a Project makes claims and an Evaluating Body provides evaluations, both of which are recorded on the Blockchain. An Investor reviews the on-chain reputation of the Project and the Evaluating Body before making an investment decision. This sequence encapsulates the transparency and trust fostered by the on-chain reputation system.
CAP was designed with a focus on carbon impact, setting the principal dimension of value of impact to kg of carbon for the purpose of carbon accounting. This is due to the critical role that carbon credits play in the fight against climate change. However, the versatility and flexibility of CAP allows for the exploration of other dimensions of environmental and ecological impact.
The permissionless nature of Project and Methodology registration within CAP means that the 'axis' or 'dimension' of impact is not fixed or limited. It can be defined by the methodology creator. This opens up the potential for the issuance and management of other forms of eco-credits, such as biodiversity credits or economic impact credits.
Biodiversity credits, for example, could represent the impact of a project on local biodiversity. This might include the protection or restoration of habitats, or the reintroduction of native species. Economic impact credits could measure the socio-economic benefits of a project, such as job creation or income generation.
By allowing for the issuance of these diverse forms of eco-credits, CAP can support a more holistic approach to environmental and social impact. This also expands the potential uses and applications of CAP, enabling a broader range of projects and methodologies to be developed and recognized within the system.
sequenceDiagram
participant PC as Project Claims
participant CC as Carbon Impact Evaluator
participant BC as Biodiversity Impact Evaluator
participant EC as Economic Impact Evaluator
participant P as Purchaser
CC->>PC: Stamps verified carbon impact in kg
BC->>PC: Stamps verified biodiversity impact
EC->>PC: Stamps verified economic impact
PC->>P: Verified carbon, biodiversity, and economic impact
- The Carbon Impact Evaluator stamps the Project Claims with the verified amount of carbon reduction in kilograms.
- The Biodiversity Impact Evaluator stamps the Project Claims with the verified biodiversity impact (using units as defined in their methodology).
- The Economic Impact Evaluator stamps the Project Claims with the verified economic impact (using units as defined in their methodology).
As a result, the Project Claims, now verified and stamped by all three evaluators, help the Purchaser make a more informed decision based on the project's multi-dimensional impact across encompassing carbon reduction, biodiversity preservation, and economic impact.
sequenceDiagram
participant CAP
actor PD as Project Developer
actor I as Investor
actor EB as Evaluating Body
actor T as Trader
actor O as Offsetter
PD->>+CAP: Claim 20,000 tCO2e ex-ante
CAP->>-PD: Receive 20,000 claims
PD->>+I: Sell a 10,000 claims
I->>-PD: Capital
EB->>PD: Stamp 22,000 tCO2e
Note over EB,PD: Verified to be 10% higher than claimed
I->>+T: Sell 5,000 stamped claims
T->>-I: Capital
T->>+O: Sell 2,500 stamped claims
O->>-T: Capital
I->>+O: Sell 2,500 stamped claims
O->>-I: Capital
PD->>+O: Sell 5,000 stamped claims
O->>-PD: Capital
O->>+CAP: Redeem 10,000 stamped claims
Note over CAP,O: Redeemable upon delivery for pro-rata of stamped amount
CAP->>-O: Receive 11,000 certificates
In this flow, a Project creates multiple Claims. Each Claim represents a project developer's declaration of a certain amount of carbon credits. These could be used to tokenize batches, or tokenize tranches. The Claims hold information about the amount of carbon credits, the time period for which the credits are claimed, the signer (usually the project developer), and a URI to any off-chain data relevant to the claim.
The Claims can be evaluated by multiple evaluating bodies. In this example, they are evaluated by Verra and IETA, which register on-chain methodologies "Verra Methodology M" and "IETA Stamp S". Each of these bodies Stamps the Claim. The Stamp signifies that the evaluating body has verified the claim. Like Claims, Stamps also contain information about the amount of carbon credits, the verified time period of the claim, the signer (the evaluating body), and a URI to any off-chain data relevant to the Stamp.
Before a Claim is stamped it can be traded. This will likely require a lot of sound evidence in the Claim, after all, nothing's happened, it's a Claim. This should require due diligence. The ones that put in this effort can earn alpha. This process flow enables the following applications:
- A CDR developer like Charm Industrial stamping their claims with measurement data from their sensors
- A nature-based methodology designer can publish a methodology, review Claims, and Stamp them with his approval.
- A company like CarbonPath could empower anyone to apply their methodology and claim impact, then review claims and stamp them for credibility before letting them be converted into tCO2 tokens.
- A project like Electric Tree could sell forward DAC claims then verify them with their dMRV down the line
- Hyphen could connect their dMRV infrastructure to automatically stamp relevant claims with measurement
Fractional ownership represents an innovative approach to project financing that can be facilitated by the Claim Accreditation Protocol (CAP). When a Project is created within the CAP system, it mints a unique ERC721 Non-Fungible Token (NFT). This NFT represents the ownership of the Project, and it can be fractionalized to create shares.
This fractionalization of the Project's NFT allows multiple stakeholders to invest in the Project and own a portion of it. Each share represents a stake in the Project's success and its potential carbon credits. The concept is akin to shareholders in a company, where each share represents a fraction of the company's equity.
Fractional ownership opens up a new avenue for Project financing. Instead of relying on a single source of funds or taking on debt, Project developers can sell shares of their Project to raise capital. This can provide the necessary funds to get a Project off the ground or to finance ongoing operations.
The fractional ownership model is flexible and can be adapted to the needs of the Project. For instance, a Project could sell a small fraction of shares to raise initial funds for the first project. Then, as the Project grows and proves its viability, it could sell additional shares to finance further expansion. Alternatively, a Project could choose to sell a large fraction of shares upfront to secure substantial funding.
Fractional ownership could also create a secondary market for trading Project shares. Investors could buy and sell shares based on their assessment of the Project's potential. This could provide liquidity for investors and additional avenues for fundraising for Projects.
The fractional ownership model could also foster a more inclusive and diverse carbon credits market. By allowing for fractional ownership, Projects could attract a broader range of investors, from large institutions to individual investors. This could democratize access to the carbon credits market and spread the benefits of carbon offset projects more widely.
sequenceDiagram
participant P as Project Developer
participant N as Project NFT
participant F as Fractionalized Shares
participant I1 as Investor 1
participant I2 as Investor 2
P->>N: Creates Project NFT
N->>F: Fractionalizes NFT into Shares
F->>I1: Sells Shares
I1->>F: Provides Capital
F->>I2: Sells Shares
I2->>F: Provides Capital
In this sequence diagram, a Project Developer creates a Project ERC721 NFT, which is then fractionalized into shares. These shares are sold to multiple investors, providing capital to the Project. Each investor now holds a stake in the Project and stands to benefit from its success.
sequenceDiagram
participant P as Project
participant C as Claim
participant E1 as Evaluator 1
participant E2 as Evaluator 2
P->>C: Creates Claim
C->>E1: Presents Claim for evaluation
E1->>C: Evaluates Claim and provides Stamp 1
C->>E2: Presents Claim for evaluation
E2->>C: Evaluates Claim and provides Stamp 2
This sequence diagram illustrates the process of creating a Claim and having it evaluated by multiple evaluating bodies in CAP.
Project Creates a Claim: The process begins with a Project (P) creating a Claim (C). This Claim represents the Project's declaration of a certain amount of carbon credits. The details of the Claim would include information such as the amount of carbon credits, the time period for which the credits are claimed, the signer of the Claim, and a URI to any off-chain data relevant to the claim.
Claim Presented to Evaluator 1: The Claim is then presented to the first evaluating body, Evaluator 1 (E1), which in this case is Verra. This involves the Claim being sent to Verra for evaluation.
Evaluator 1 Evaluates the Claim: Verra evaluates the Claim based on its registered on-chain methodology. If the Claim meets the criteria set by Verra's methodology, Verra provides a Stamp (Stamp 1) to the Claim, which signifies that Verra has verified the Claim.
Claim Presented to Evaluator 2: Next, the Claim is presented to the second evaluating body, Evaluator 2 (E2), which in this case is IETA. This involves the same Claim being sent to IETA for evaluation.
Evaluator 2 Evaluates the Claim: IETA evaluates the Claim based on its registered on-chain methodology. If the Claim meets the criteria set by IETA's methodology, IETA provides a Stamp (Stamp 2) to the Claim, which signifies that IETA has verified the Claim.
This diagram represents the concept of multiple evaluations within the CAP system. It highlights the potential for a single Claim to be evaluated by multiple bodies, each providing their Stamp to the Claim. This process enhances the credibility and robustness of the evaluation process in the carbon credits market.
With this design, existing evaluating bodies like Verra and IETA will gain access to an ever-growing supply of claims they can evaluate. There will be a new category of "unverified claims" in the voluntary carbon market, and this can serve as pipeline for existing and new registries and methodology developers.
This decentralizes the market from centralized bodies like Verra, Gold Standard, and others, which are immensely valuable to trust in the system. It's just that they shouldn't be the gatekeepers to project developers accessing global financial markets.
The future of the carbon credits market lies in innovation, transparency, and inclusivity. The Claim Accreditation Protocol (CAP) provides a powerful platform for enabling this future. By facilitating a range of applications, from decentralized forwards to fractional ownership in projects, CAP can help democratize access to the carbon credits market, enhance trust in carbon credit verification, and accelerate the pace of innovation.
Yet, the journey is just beginning. The applications outlined in this document represent just a few of the possibilities. The true potential of CAP will be realized through the creativity and collaboration of the community that builds upon it. Whether you are a project developer, an investor, an evaluating body, or a methodology designer, there is a place for you in the CAP ecosystem.
So, let's embark on this journey together. Let's build, innovate, and transform the carbon credits market. Let's make a meaningful impact on our planet's future. If you're interested in building with CAP, reach out to me over email or Twitter.