Why Carbon and Money Will Converge
These are uncertain times where everything is shifting around us. From climate change to our financial systems, everything is under stress. As my partner Adrian pointed out in his recent article, while we often think of fragmentation as a negative result or a sign of an immature or nascent market, when ecosystems are under stress they to fragment with the intention of creating functional redundancy. This ensures a better chance of survival in the long term.
Crytpo and web3 are creating redundant financial systems
We are all currently living through extreme stress on our global financial system. You could view the rapid adoption of crypto and the rapid iteration of the crypto ecosystem as the creation of redundant functionality and value. While Bitcoin has set out to recreate a decentralized store of value, we see other prominent blockchains like Ethereum, Solana, Cardano, Avalanche, and Polygon creating their own robust financial ecosystems where many if not all aspects of the traditional financial systems are recreated and improved upon by providing increased transparency, traceability, and speed.
Cryptocurrency is also proving its utility and benefit over the traditional finance system during current global political stress. CNBC recently did a test where they sent bitcoin from a location in Texas to a Ukrainian refuge in Poland and she was able to withdraw local fiat currency. The total transaction time was less than 3 minutes at a cost of pennies. As the economy becomes increasingly global, the need for a faster, lower cost, and more transparent financial system becomes more and more vital.
Commerce and energy are converging
One of the current main criticisms of blockchain technology is energy usage. Many blockchains and web3 companies have already started purchasing carbon credits to offset their impact. Going beyond that, we see both traditional fossil fuel energy and sustainable energy companies beginning to mine cryptocurrency because they can do so at a high-profit margin, and on the traditional energy side they can also hedge against waning demand. One notable example is the recently announced partnership between Tesla, Block, and Blockstream to create an entirely solar-powered bitcoin mining operation in Texas.
Once cryptocurrency addresses the concerns around energy usage, it will be another advantage it has over the current financial system.
While people are quick to point out crypto's energy usage, it's still far less than the impact of the traditional financial system. If crypto sets a new standard for sustainable commerce it will put pressure on the traditional financial system to clean up its act, creating even more demand for carbon-neutral energy solutions.
It's interesting to consider the value the cryptocurrency and sustainable energy sectors bring to one another. For cryptocurrency to truly be embraced by younger generations it needs sustainable and carbon neutral energy solutions, while next-generation energy needs the transparency and traceability that blockchain technology can provide.
We believe carbon transformation is vital to the future of energy
Carbon and carbon transformation will be a vital part of all of our lives moving forward. The reason we can say this with confidence is simple: In order to make real progress, we need closed-loop systems. Carbon transformation provides the most efficient closed-loop systems with a source, carbon dioxide, that is ubiquitous and available everywhere. Once the carbon-neutral fuel that is created through carbon transformation is burnt, the emitted carbon can be recaptured and fed back into the system. This is why we believe carbon transformation will be a vital part of the next-generation energy system.
A carbon marketplace that unites energy and commerce is imminent
We are theorizing that there is some necessary digital infrastructure for next-generation energy to move at the speed of business and culture.
We will need energy to be instantly "transferrable" in the same way that money with crypto can be today. More cultural pressure arising from a more pressing need for climate action will accelerate real-time exchanges of carbon instead of carbon being purchased after the fact like carbon credits are today. The most obvious technical infrastructure to make the fuel transferable and traceable will be the blockchain, and it will be mere moments before someone tokenizes this exchange. In fact, Nori is a carbon marketplace that is already working with the Avalanche blockchain to create a tokenized version of carbon credits.
As the carbon market evolves, we also see a need stronger certification, transparency and tracking as it becomes more and more vital that all parts of manufacturing, industry, supply chains, data, etc. are closed loop systems or are carbon neutral.
We see Carbon-neutral and Carbon-positive become ubiquitous badges and certifications on all types of products and experiences–movies, sports, concerts, hotels, vacations, you name it. Every industry is going to be participating in this marketplace and we will need a universally understood and accepted standard.
Thoughts for investors
We are just at the beginning of the impact carbon is going to make on business and our world. Look out for breakthrough concepts that will play vital roles in the growing carbon ecosystem.
If you have other financial services companies in your portfolio, are they preparing for carbon to be a part of their future?
Will next gen energy follow the path of carbon credits and be available in an instantly accessible markeplace?
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