🎛️Introduction

An array of project-based tokenized carbon credits are bundled in order to back a liquid index token.

Index Carbon Assets

Carbon credits are a heterogenous asset as each credit has a different set of attributes affecting the price of the credit. Moreover, the inconsistent nature of offsets in relation to vintage dates, location, type, and other attributes results in a highly differentiated market. As a result, treating carbon credits as a differentiated product will only result in a segmented market. Furthermore, the lack of price signals and transparency in the market disincentivizes investors to speculate on carbon projects.

The Carbovalent protocol will initialize index tokens that are backed by bundles of credits of the same type (blue carbon, forestry, etc.). With that said, the Carbovalent protocol will standardize those attributes in a common taxonomy. Thereby shifting the focus of the market on the quality of credits. Bridging to index tokens incentivizes developers to fund carbon projects as they don't have to worry about project differentiation and can rely on a market with deep liquidity.

Index tokens enable scaling by aggregating liquidity to a collection of carbon assets bound by the same carbon type. Carbovalent is designed with the vision to align incentives between investors and developers, which will in turn create an inclusive carbon-neutral economy, a goal that is crucial to the health of capital markets long-term.

"The pace of global warming is accelerating and the scale of impact is devastating - the time for action is now." ~ Eliot Spitzer (Former Governor of New York)

Every index token is backed exactly by 1 SCT in the pool smart contract ~ equivalent to 1 carbon credit.

Segmented Liquidity

The current state of the voluntary market lacks sufficient liquidity to facilitate efficient trading, mainly because interoperability doesn't exist in Web2 Carbon Marketplaces. Furthermore, the Web2 marketplaces are in a state of segmented liquidity, which means that the marketplaces do not share liquidity and cannot satisfy buy/sell orders on other marketplaces. The Carbovalent protocol solves this issue by aggregating the liquidity locked on-chain by hosting a DEX on Solana's central limit order book, also known as Project Serum.