$272Bn Carbon Credits on Cardano

[IMPACT]

Hello, Catalyst community, 

We appreciate your time in reading our proposal and look forward to your feedback. Thanks to the versatile and energy-efficient toolkit made possible by Cardano, CarbonNo has a carbon-negative coin and NFT system that creates a direct incentive to remove carbon from the atmosphere. We believe that our plan has the potential to dominate the $272Bn carbon credits market and bring that value into the Cardano ecosystem! We have worked hard to bring a carefully thought-out proposal to the Catalyst community and hope you enjoy participating in this journey. The full white paper is attached below; here we present a summary of our plan.

Our solution is the CarbonNo ecosystem, a Cardano-based carbon-credit market with three unique qualities:

1. Strict requirements for only digitally measurable, independently verifiable offset sources.
2. An innovative dual-token ecosystem solution:
3. CNFTs represent individual sources of offsets with immutable, traceable metadata in a stable, practical marketplace for functional carbon credits.
4. CNC fungible utility coin powers the marketplace, allows speculation without disrupting the industrial utility of the carbon credits, and fuels development incentives that create more carbon offsets in a virtuous cycle.
5. An initial launch pre-loaded with millions of tons of confirmed, validated carbon credits from our existing partners.

We will describe the impact of each of these three key qualities.

1: The most reliable, verifiable carbon credits

Current voluntary carbon credits are “minted” according to verification methodologies implemented by paid auditors. Some of these are rigorous and reliable; some are questionable; and some are bordering on fraudulent. Even if a credit is generated by a reliable auditor and a meaningful methodology, how do you know, for example, that if someone saved trees from logging, or planted new mangroves, that they will still be there in 100, 10, or even 2 years? For that matter, how does a purchaser of carbon credits really know whether that auditor is reliable? The answer is that they can’t.

UNLESS — there is a decentralized, immutable record of the facts necessary to allow truly independent verification. 

When you apply these requirements, it becomes clear that the best sources of carbon credits are the ones that can be digitally traced all the way back to the source — not necessarily the ones that are most “fashionable” right now.

For example, if a factory or office building upgrades to more efficient lighting, the energy savings can be documented by smart meters that talk directly to a blockchain-based dapp. Those records can then be verified by anyone in the world, with all the trustworthiness and transparency that blockchain structurally guarantees. 

In contrast, there’s not much you can do to put agriculture or forestry directly onto the blockchain. (yet?? Check back with us in a few years, maybe we will have a way by then!) And if you can’t put direct- or close-to-source metrics directly into the chain, you can’t close the verification loopholes that invite fraud.

Our founders have been working in the energy efficiency and utility-based incentive-related industries for years, and they have deep insight into the kinds of changes that can generate measurable and provable carbon credits. In fact, we’ve already signed on some of the best. (#3 below) 

The CarbonNo marketplace will sell carbon offset credits NFTs (CNFTs). These are generated directly from a wide range of energy-savings projects and are automatically and electronically minted, directly from the source data. These NFTs have enough comprehensive metadata to allow complete independent verification – right down to the street address and the minute they were generated. 

Additional strength of our system comes from our use of the Investor Confidence Program (ICP) protocols, which are the energy-savings validation mechanisms that utilities use today to both verify, and make bankable, energy improvement infrastructure projects. These protocols have been used to validate billions in savings, for far longer than carbon markets have been in existence. These well-established protocols are the groundwork for increasing the scale and reliability of voluntary carbon markets to the level necessary for their eventual merging into the extreme requirements of global compliance or “cap-and-trade” markets.

All of our credits are independently verifiable thanks to their comprehensive direct-from-source metadata, and also meet the strict auditing requirements of ICP protocols, which make them the most reliable credits on the market. Since they are digitally generated directly into the chain, they’re also faster, more efficient, and more liquid than credits that come from paperwork or laborious, time-intensive land surveys. 

Together with our full-stack dapp, our marketplace will have enough throughput to serve the needs of today’s B2B customers and enough reliability to meet the needs of future compliance market customers, while also making B2C sales easily accessible to individuals who wish to offset their own carbon footprint or make speculative investments. 

2: Dual-token ecosystem optimizes for stability and growth

Some previous attempts at blockchain-based carbon markets ran into trouble when enthusiasm for the project drove up prices of carbon-backed tokens to such a degree that they no longer had any meaningful relationship with actual carbon credit markets… and then because that relationship was broken, they crashed. Our simple, elegant solution is a dual-token system: a carbon-backed NFT (CNFT) which records the precise, verifiable details of the carbon offset source, and a fungible token CarbonNo Coin (CNC) that gets minted in a certain carefully-calculated proportion to the CNFTs (see white paper for details). 

CarbonNo NFT CNFT:

• NFT metadata securely and permanently stores traceable source of carbon credit
• Fast and liquid marketplace
• Carbon data directly accessible to dapps and smart contracts
• Also independent validators and public-interest researchers
• Expiration and retirement of credits can be done programmatically and immutably
• Rising prices will incentivize other carbon credit sources to join marketplace if they can meet our strict verifiability requirements
• This also makes CNFT tend toward equilibrium prices, improves market stability

CarbonNo Coin CNC: 

• Minted in proportion to new carbon credits so they are backed by physical-world value
• “Reality-linked coin”: required for CNFT marketplace trade, also maintains minimum value
• Speculative value increase is possible without destabilizing carbon credit price
• Value from fees, speculation and/or carbon-backed minting creates fund for incentives
• Incentives used to fund new efficiency projects, which puts more credits into market
• A virtuous cycle!

The CarbonNo End-to-End Ecosystem:

1. Carbon credit sellers (aka Project Developers) build verification tools into a new upgrade project which feeds verification data into the minting dapp.
2. The code mints new CNFTs to that seller’s account and places them in the marketplace.
3. Upon sale, seller receives payment in CNC. They can hold or exchange it for USD.
4. Meanwhile, prospective buyers exchange USD for CNC to participate in the market.
5. They use their CNC to purchase carbon credits as CNFTs.
6. The CNFTs reside in the buyer’s wallet and can be retired (used as offsets) at any time.

There are three mutually-supporting critical emergent features of the economics of this system that make it superior to any other carbon marketplace. These 

1. As long as there is demand for carbon credits, there will be a steady flow of exchange transactions between CNC and USD, which maintains value in CNC.
2. The movement of carbon credits through the system creates funds for incentives for Project Developers, which drives the creation of more carbon credits, so the whole economy is a virtuous cycle where increasing environmental benefits and increasing value in the marketplace mutually reinforce each other.
3. Since the entire ecosystem is implemented on Cardano, this virtuous cycle also drives more and more value into the native Cardano ecosystem as well, through basic transaction fees. In addition, reserve funds of CNC can be used as non-native stake thanks to this feature of Cardano, which also feeds value into the community.

3: Ready-to-go carbon credits from our longstanding industry connections

The final ingredient of our “special sauce” is that thanks to our partners, our marketplace will launch already pre-populated with millions worth of carbon credits. As mentioned above, our founders have been working in the energy efficiency and utility-based incentive-related industries for years, we’ve already signed on a number of partners who have already generated (but not listed or sold) carbon credits that meet our strict verifiability requirements. This means that right from the start, the marketplace will be active and the CarbonNo coin will have utility value, which will bring value and engagement, and positive sentiment to the Cardano community collectively.

Practical example of CarbonNo-quality CNFT project

For a detailed technical description please refer to our white paper:

https://carbonno.org/wp-content/uploads/2021/11/White-Paper.pdf

In the meanwhile, to give you an idea of how this would work in practice, here is an example with realistic figures derived from a real energy efficiency project our founders worked on.

A CNFT carbon credit holds metadata that include the following:

• Location
• Implementer 
• Credit type (infrastructure)
• Technology type (HVAC)
• Installer
• Customer
• Proof of upgrade (pictures, invoices, ICP verification by 3rd party engineer)
• Usage before (Therms) 
• Usage after (Therms)
• Operation verification
• Maintenance verification
• Monitoring 
• Cryptographic hash key

We arranged an LED lighting retrofit project performed at a hospital in a disadvantaged HUBZone, which lacked funding to pursue carbon offsetting measures.

The proposed project was verified first through the utility, and then through a 3rd party engineering firm. After a few rounds of verification data requested and provided from the engineer/contractor and the end customer, the project is approved as bankable under the ICP (Investor Confidence Project) set of protocols and is then financed by the utility and implemented by the engineer/contractor. The ICP verification data includes everything from invoices, pictures, transactions, to verification site checks and usage data tracking.

Monthly Electricity usage data for the project (in kWh):

3/11/2020 - 1,589,490

2/10/2020 - 1,656,695

1/9/2020 - 1,554,935

12/10/2019 - 1,572,891

11/11/2019 - 1,832,095

10/10/2019 - 1,773,002

9/11/2019 - 1,832,014

8/12/2019 - 1,862,470

7/11/2019 - 1,628,540

6/11/2019 - 1,600,747

5/12/2019 - 1,636,039

4/11/2019 - 1,541,385

Total Electricity Consumption Lighting Usage and savings:

• Total Electricity Consumption BEFORE (kWh): 20,080,303
• Lighting Electricity Consumption BEFORE (kWh): 2,245,574
• Total Electricity Consumption AFTER (kWh): 18,740,553
• Lighting Electricity Consumption AFTER (kWh): 905,829
• Electricity Reduction (kWh) 1,339,750

These data will be linked to the project in the ledger and after the "validation period" the credit will be automatically minted as an NFT through an oracle.

The portion of our overall project in scope for this proposal is a Minimum Viable Product that could be built on Cardano. 

What does success look like? In brief, success for CarbonNo means becoming one of the primary dominant marketplaces for voluntary carbon credits and establishing a reputation for having the highest quality credits. Success for CarbonNo specifically would be reflected in these top-line metrics:

• High market price per tonne relative to other marketplaces
• Ease of use reflected in high growth rates of B2B and B2C users
• High volume of trade relative to other marketplaces
• Widespread trust in CarbonNo reflected in market price of CarbonNo Coin

CarbonNo’s success would also most likely drive Catalyst program KPIs:

• # of Cardano dApps supporting business solutions:
• CarbonNo itself is such an app. In addition, the large amount of carbon-related data available transparently on-chain would open up new possibilities for other dapps to be built that feed on that data.
• # of existing companies proposing Cardano-based solutions
• Success of the marketplace would bring positive sentiment to the Cardano community and motivate more developers to use it for their solutions
• # of partnerships / joint ventures created between companies
• Every carbon-credit developer/generator participating in the marketplace represents one more company forming a partnership with the Cardano community
• $ additional funding from other sources for the funded proposals
• Catalyst is only a small portion of the funding we are seeking from multiple sources. In addition to this, the incentive-creating system of the CarbonNo ecosystem is similar to Catalyst and in theory could be used to fund ecosystem development in addition to carbon projects.
• $ projected cost savings
• This entire project is based on cost-saving projects based on energy efficiency, which have established principles of validation via the ICP as described above
• $ projected revenue increase
• Current voluntary carbon markets are roughly $1Bn/year, growing as much as 58% year-over-year. This leads to our own revenue estimates of $10-50M/year depending on whether we capture 10%-50% of that market. Our revenue would grow at the same rate as overall market volume, plus growth in our market share, plus a superlinear factor based on speculation and staking value-generation driven by positive sentiment. When voluntary markets eventually merge with compliance markets, as they are likely to do, we would then be able to capture some portion of what is likely by then to be a $500Bn/year market.
• % growth in mainnet / testnet activity due to business solutions
• Each transaction on the marketplace, and each transaction on the CNC-USD exchange, represents additional mainnet activity. So CarbonNo’s success would drive growth in mainnet activity roughly in proportion to our own growth. In addition, there will again be a superlinear factor due to ongoing increases in the level of detail included in CNFT metadata (such as finer spatial and temporal resolution). 

We need to be relentlessly transparent and strictly rigorous about our project verification. We need a zero-fraud solution before carbon credits can be game-changing.

One of the key challenges we see is teaching people to change their thinking about carbon credits to recognize that forests and agriculture are not the best, most reliable sources of offsets. Right now those are the most popular sources for voluntary markets, but we need to raise awareness that reducing energy consumption, upgrading to cleaner and "greener" technologies is a better approach. Both because it is more reliable and trustworthy, and because it’s a necessary part of shifting our industry and infrastructure to be inherently more environmentally friendly. 

A related challenge is that we need to work on linking awareness of offsets to the need for real fundamental improvements. Sometimes carbon offsets take a bad rap for just shuffling the cards around from one place to another, but they can be a real force for driving actual improvements in energy efficiency through linked incentives as we have designed in CarbonNo. 

Finally, as with any crypto venture, there are regulatory risks. Right now the landscape is highly favorable for utility tokens with an emphasis on transparency, so this is positive for us, but this could change. It will continue to be important to raise awareness of prosocial and environmentally beneficial uses of blockchain technology to mitigate this regulatory risk.

[FEASIBILITY]

The CarbonNo minimum viable product is an open-source marketplace with functionality to:

• Back end:
• Link data sources from project developers for minting CNFTs
• Mint CNFTs on-chain
• Release the corresponding calculated amount of CNC coins for a CNFT
• Execute CNFT-CNC trades as well as CNC-USD transactions
• Track metadata and make it available to additional dapps and APIs
• Front end:
• Maintain user accounts and profiles
• Allow registration of projects to create new data sources
• Operate trading market
• Link to bank accounts, credit cards, etc. for customers

CarbonNo already has a functioning prototype, and a team of developers to build it. Some of this labor is free, so much of the funds needed will go to making the project useful and getting it out into the wild.

6-9 month timeline and deliverables:

• Q2 2022:
• Dapp backend working on testnet, data structures implemented
• Frontend user account management working
• Frontend trading system mockup/demo
• 10 seller partnerships
• 3 buyer partnerships
• CNC coin noncirculating reserves minted on mainnet
• Begin legal/regulatory/tax compliance reviews
• Q3 2022:
• Alpha-level product
• Soft launch of marketplace to alpha users
• Collect feedback
• Choose hard launch date and begin full marketing campaign
• 20 seller partnerships
• 6 buyer partnerships
• Legal/regulatory/tax compliance reviews complete
• CNC coin listed on one major exchange
• Q4 2022:
• Advanced beta-level product
• Intensive pre-launch user reviews to finalize
• Full launch of marketplace
• 30 seller partnerships at time of launch
• 10 buyer partnerships at time of launch
• ICO or ISPO
• CNC coin listed on many exchanges

To read more about our dapp development including detailed information about current progress please see our other proposal in the Dapp category here

Budget Breakdown:

Project funds requested: $59,000.

Note that our coding/dapp/contract/etc engineering is already supported by other means, so this proposal focuses primarily on building out the business infrastructure which is necessary for a strong launch and full success. This is why there is a relatively large percentage for business development and marketing.

• $0 – Founding members’ engineering hours, 700 hours. 
• $7,500 – outsourced specialized overflow engineering.
• $5,000 – user testing, external QA, security testing
• $20,000 – Business development and marketing, specifically:
• $10,000 – Demand-side generation, specifically:
• $5,000 - Phone sales to enterprise customers interested in purchasing carbon offsets.
• $5,000 - Online marketing and advertising to retail customers interested in purchasing or investing in carbon offsets.
• $10,000 – Supply-side generation, essentially phone-based outreach and sales to energy services companies that are currently creating energy improvement projects under bankable, ICP, and utility-approved protocols, including a small online marketing lead-generating funnel for sales.
• $3000 - Frontend/Backend alignment, connecting reservoir of NFT carbon offsets with the online marketplace
• $10,500 - Ecommerce component of the marketplace
• $5,000 – UX design for website
• $5,000 – Treasury / NFT minting data entry (ICP-bankable energy project data needs to be reorganized in structure to fit with our carbon-offset NFTs)
• $3,000 - Copywrite/content for carbonno.org (user-related FAQ, privacy policy, etc etc).

Team Member Details needed to complete the project:

Website: http://carbonno.org

CarbonNo has a team of multiple cryptographers, seasoned entrepreneurs with multiple raises/exits, Haskell engineers, a front-end developer and designer, graphic designer, social media marketeer, multiple full-stack developers, multiple PHDs, a data scientist, and 20-plus years of industry experience with utility-based incentives for renewable energy and energy incentives. 

Please see attached CarbonNo.org team image for reference.

Nikos Karagiorgos

Nik is passionate about innovation and reform that minimizes the carbon footprint. He has widespread experience working in the energy sector and was involved in billion-dollar solar projects such as the Genesis project in California and the Solano project in Arizona. Nik co-founded EverWatt, a leading Energy Service Company that provides energy-efficient lighting upgrades for commercial projects. Nik oversees the design, engineering, and manufacturing of energy-efficient products. Furthermore, he drives strategic partnerships, guides new opportunities, and manages the licensing relations in Asia and the United States. Nik first got involved in crypto in 2010 and Cardano specifically in 2017.

Konstantinos (Koss) Kleftogiorgos

Computer Science Ph.D. researcher / Software engineer. Koss has worked on security projects for The Defense Advanced Research Projects Agency (DARPA) and the Office of Naval Research (ONR). Koss has studied cryptography and has a Master’s degree in distributed systems/ networks. He has a passion for blockchain, while his main research focus is operating systems, cyber/ systems security, and reverse engineering.

Dave Llorens

The CEO of EverWatt Lights and an electrical engineer. Before EverWatt, started One Block Off the Grid and raised $6MM from NEA, which sold to NRG in 2014 for $120 million. Before that, had started solarpowerrocks.com, which sold to Solar Reviews, Inc.

Cyrus Liu

Haskell/Plutus developer, second cohort Plutus pioneer, computer scientist lifetime. Cyrus holds a master’s degree in information security, and he is now pursuing his Ph.D. with a research focus in programming languages, formal verification, and program analysis. He developed a sensitive API monitor for the Android mobile network and a binary de-compilation toolchain, the first automatic verification tool that combines binary analysis with formal methods. His ultimate goal is to help the world with secure and fair systems, and blockchain technology is bringing his goal closer to reality.

Dr. Ioannis Agadakos

Ioannis is experienced in both academic and corporate environments. He served as an Advanced Computer Scientist in SRI International, tackling hard cybersecurity problems during his three-year tenure. He is currently a research scientist in Khoury College of Sciences at Northeastern University, working in neural binary analysis and software hardening. He holds a U.S. patent, and his research is published and awarded in top-tier conferences in software hardening, system security, deep learning, and the Internet of Things. He is well-versed in all phases of software development and has worked with a plethora of teams with diverse backgrounds. He holds a Ph.D. from Stevens Institute of Technology, a B.Eng, and an M.Sc in Electronic and Computer Engineering from the Technical University of Crete.

Dr. David Perlman

Worked in information technology and database development for many years before joining the University of Wisconsin-Madison, where he leveraged behavioral economics and game theory to study attention, emotions, and identity in the neuroscience of mindfulness. Subsequently, he worked in the User Research team at Twitter, and as a data scientist and consultant on emerging information threats at Leviathan Security Group. He has presented on social media and influence campaigns at SOCOM SOFWERX, the Black Hat conference, Naval Postgraduate School, CDANS, Lawrence Livermore National Labs (LLNL), and has been interviewed in publications including the Wall Street Journal. He is also the lead author of the first discussion of social media and influence campaigns in the Strategic Latency book series published by LLNL, and published an article on the mathematics of modern big-data marketing in Cyber Defense Review. In 2021 he combined his knowledge of incentive-compatible economic systems with the principles of social engineering in information security to develop the technology of Validated NFTs (VNFTs), which he brings to the team at CarbonNo.

Nataka White

Nataka is an engineering consultant for the Arup group and is focused on the built environment. His diversified skill set involves focuses on the realm of energy efficiency audits, commissioning building systems, new construction commissioning, retro-commissioning (RCx) of facilities, measurement and verification (M&V), renewable alternative energy feasibility studies, benchmarking activities, energy master planning, and general sustainability consulting. He has worked in the field for over 15 years and has analyzed and verified the avoidance of a million-plus BTUs of energy for clients. He works to design engineering solutions that will positively impact the environment and show clients the financial benefits of sustainable and energy efficiency solutions.

[AUDITABILITY]

Our key metrics for progress will be:

• Business development metrics:
• Number of partners committed as carbon credit sources/sellers
• Number of partners committed as carbon credit buyers
• Metrics of marketing and awareness campaigns
• Additional funding sources
• ICO/ISPO interest
• Legal and regulatory compliance reports
• Growth of team size
• Number of exchange partnerships
• Product development metrics:
• Achievement of functionality requirements described above
• Achievement of timeline milestones described above
• Amount of test user feedback collected
• Number of test CNFTs minted
• Number of coins successfully linked to CNFT minting
• Number of user accounts
• Rate of transaction processing in marketplace

"Definition of done"... there's always more work to be done! However, within the scope of the Catalyst project funding time period for this proposal, success looks like a beta-quality working carbon credit marketplace that's near ready for launch, with a number of buyers and sellers already signed up. For more detail on what "done" looks like for our MVP, please see the detailed plan and timeline above.

This is not a continuation of a previously funded Catalyst project. However, we have a second proposal in the Fund 8 DApps and Integrations category here.

SDG Rating

SDG goals:

Goal 13. Take urgent action to combat climate change and its impacts

SDG subgoals:

13.2 Integrate climate change measures into national policies, strategies and planning

Key Performance Indicator (KPI):

13.2.2 Total greenhouse gas emissions per year

#proposertoolsdg