9. CO2Fi NFT’s

CO2Fi adopting and adapting the Jpeg model, will support unretired carbon credits tokenised as 1155 NFT’s from projects with verifiable carbon registry trust-based architectures (thereby ensuring each credits is backed by a verifiable unretired carbon credit and giving the NFT inherent value).

Why support 1155’s in addition to ERC-20’s?

Whilst each carbon credit is equal in principle, each is created buy a unique project. Some projects may go above and beyond the basic climate action principals that produce the carbon credits, for example for benefiting a specific endangered species, or for having substantial co benefits such as children’s education and women’s equality. The ERC-20 token is brilliant for making carbon more fungible, however for those projects which have made the extra effort or are more unique, then ERC-1155 tokens represent the ideal balance between uniqueness and fungibility.

How do ERC-1155’s differ from ERC-721’s

ERC-721’s are each unique; put into plain English they are not stackable, think of it like a the user inventory in a video game, no more than one ERC-721 may be placed in the same inventory spots at a time, even if they are from the same project. ERC-1155’s on the other hand remain unique and so long as they are from the same series they can be stacked on top of one another. Essentially what differs between the two is the levels of uniqueness, think of ERC-721’s as single pieces of artwork, whereas ERC-1155’s represent identical screen prints from a unique print series.

How will CO2Fi support Carbon ERC-1155’s?

CO2Fi will enable collateralisation of ERC-1155 NFT’s which represent unretired carbon credits from specific projects. User’s will deposit their ERC-1155’s and be able to use them as collateral to borrow against them in USDC or ACC.

How will CO2Fi value Carbon ERC-1155’s?

CO2Fi will ultimately draw upon several sources. In the first phase ERC-1155’s will be valued in their equivalent tonnage of ACC. Each 1155 will represent a single carbon credit (1 tonne) as such on a volume basis it will be equvilant to 1000 ACC (each ACC represents a kilogram).

In this first phase CO2Fi support for ERC-1155’s will be whitelisted. This will ensure that the supported ERC-1155’s are worth more than their equivalent tonnage in ACC, allowing the platform to build trust in this innovative model. This first valuation will be known as the backstop reserve price (BRP) which will be calculated by translating each NFT into its same weight in ACC.

The second phase CO2Fi support for ERC-1155’s will draw upon oracles from CarbonsStack. For the largest carbon projects tokenised as ERC-1155’s CarbonStack will offer bespoke ERC-1155/ERC-721 Dex allowing for seamless transactions, (smaller ERC-1155’s will transact on the traditional marketplace). Smaller ERC-1155 projects which establish a clear pricing floor through trades on CarbonStack and other market places will be added to the whitelist on a case by case basis.

What sorts of projects would fall under the CO2Fi ERC-1155 support?

Initially the ERC-1155’s will support withdrawal of the GNT+ token, these tokens represent premium credits on AirCarbon’s Exchange. GNT+ withdrawn will be converted into a project specific ERC-1155 NFT. Each NFT will represent a single unretired carbon credit (1 metric tonne), as a result each NFT will be deliverable, enabling the user to claim the environmental benefit. On launch delivery will only be possible by depositing NFT’s back into AirCarbon Exchange.

Will other Carbon NFT projects be supported?

Yes, however they will have to meet strict conditions on the verifiability and deliverability of the carbon credits underlying the NFT. NFT’s which represent retired carbon credits will not be supported. External carbon NFT’s will have to demonstrate that their carbon is in fact deliverable, allowing the holders to claim the environmental benefit, in addition to ensuring that the NFT has underlying value held in unretired credits. NFT’s will only be accepted if they represent carbon credits issued by a trusted carbon registry such as Verra or GoldStandard.

What other benefits are there to CO2Fi NFT’s

One of the primary benefits for using CO2Fi’s NFT’s is to guarantee a defragmented carbon portfolio. The NFT’s less tangible nature ensures that users receive the same NFT portfolio they deposited when they go to withdraw their funds. ACC on the other hand is an entirely fungible, when a user goes to withdraw their 1000 ACC from an ACC USDC pool, in a worst case scenario they may find themselves with 1000ACC representing 1000kg from 1000 different carbon credits. Whilst ACC defragmentation doesn’t stop a user selling their ACC or utilising CO2Fi daps, it would make it difficult for them to take delivery of the environmental benefit of the underling the tokens, as a retirement minimum is 1 tonne i.e. 1000ACC from the same underlying project. ACC users in this case would have to use the CO2Fi Carbon Defrag protocol which would even out their tokens into suitably sized batches (for more information see ACC token page).

In short CO2Fi NFT’s do not run into defragmentation issues, however the price of this is the necessary higher safety threshold for collateralisation of NFT’s compared to the ACC token due to its lower fungibility.