Argument for a carbon-backed cryptocurrency: can investors drive decarbonization using block-chain technology?

Vote Earth Now Commentary:

In theory incentivising not-burning carbon is how the world will succeed at the sustainable transformation. The only way any carbon credit system can work is if the decarbonisation (AKA carbon credits, carbon assets etc etc) is highly verified. In other words carbon is confirmed to be stored rather than burned. The verification system around this is generally thought, so far, to be unproven.

There are several carbon-backed currencies (only a tiny fraction the size of Ethereum or Bitcoin so far) that explicitly aim to tackle climate change, often by linking new coins to the issuing of carbon credits. So, for example, every coin you buy represents real world carbon assets, such as forests. The World Economic Forum recently launched a Crypto Impact and Sustainability Accelerator to explore their potential benefits.


From: World Economic forum online journal

How a carbon-backed cryptocurrency is tackling climate change

Sy Zygy  Product Lead, KlimaDAO
  • The exponential growth of cryptocurrencies has come at the expense of the environment.
  • A carbon-backed, algorithmic currency aims to change that by driving climate action.
  • The responsible development and regulation of digital assets will be crucial for a green economy.

Over the last decade, cryptocurrency has exploded in growth, onboarding around 300 million new users. This exponential growth has been accompanied by serious environmental side effects stemming from energy intensive activities such as Bitcoin mining – which by some estimates, consumes as much electricity as a small country each year – and transacting on proof-of-work networks, including Ethereum. Of course, outside of crypto, many activities we engage in every day, such as transacting within the traditional financial system, all have a carbon footprint, reminding us that carbon dioxide knows no borders.

For our community, we should not just point out the discrepancies in attention and outrage directed at cryptocurrency energy consumption – for context, Bitcoin uses 62 terawatt hours of energy each year, while household tumble dryers are responsible for 108 TWh in the United States alone – we also need to highlight the utility that blockchain protocols are providing.

Cryptocurrency that offsets carbon

At KlimaDAO, for example, we are aligning economic incentives for a green regenerative economy, making on-chain carbon retirement accessible to all. KlimaDAO’s native token “KLIMA” can only be minted when tokenized carbon credits are locked away in its treasury. This is achieved by offering incentives to users to exchange tokenized carbon in return for KLIMA at a discounted price. The KLIMA token is itself backed by carbon. As the KlimaDAO treasury acquires more carbon over time through its incentives, any newly minted KLIMA tokens are distributed to those who hold KLIMA themselves.

Anyone can acquire KLIMA or through the open, transparent, and fairly priced markets that are hosted on Decentralized Finance (DeFi) exchanges such as SushiSwap. This means for the first time, anyone can participate in the carbon economy without needing to use a third party broker to source, or offset, carbon. In the current voluntary carbon market (VCM), it takes several months for an organization to source carbon credits, work with a brokerage, and retire those credits – often in over-the-counter exchanges that occur in private and result in price opacity and market inefficiency.

However, KlimaDAO’s retirement aggregator tool, part of the Klima Infinitysuite, allows any individual or institution to select their preferred carbon credit, choose the number of credits to match specific offsetting needs, and then retire them – all on-chain, recorded on a public ledger on the blockchain, and in a matter of minutes. Founded in October 2021, KlimaDAO has already brought over $100 million worth of VCM liquidity on chain. In addition to allowing anyone, anywhere to purchase a desired number of credits and retire them, KLIMA holders can also personalize a love letter to the planet to commemorate their climate-positive actions.

Looking under the hood, KLIMA is backed by a variety of different carbon assets that are held in KlimaDAO’s treasury, including Moss’s MCO2 and Toucan Protocol’s BCT. The KLIMA token itself is instrumental for the Klimaconomy; it doesn’t just act as an incentive for users to lock carbon in the DAO’s treasury, it also acts as a “trading pair” within the DeFi markets. This means that KLIMA is used to facilitate market trades across different types of tokenized carbon assets.

By using KLIMA as the dominant trading pair for transacting carbon, and with KlimaDAO responsible for providing the liquidity in these markets, we are now seeing an efficient, liquid and transparent market for carbon emerge. As users transact, trade, and offset carbon assets at market prices, the utility of KLIMA scales. Through the growth of diversified carbon assets, KlimaDAO intends to create the best experience to source and retire carbon assets.

How will regulation change the industry?

Regulation has long been a hot topic in crypto. However, President Biden’s recent Executive Order calling for the responsible development and regulation of digital assets, specifically refers to exploratory efforts to investigate the environmental benefits of distributed technologies. This landmark Executive Order shows that governments are beginning to recognize that the debate around cryptocurrency and the environment should not focus just on energy consumption, but on positive projects like KlimaDAO that are bringing much needed transparency and liquidity to carbon markets.

We welcome the opportunity to engage with regulators as we aspire to bridge the gap between real-world carbon consumption and crypto, thus bringing us closer to the truly regenerative economy the world needs.

This blog is part of an Agenda series led by the World Economic Forum’s Crypto Impact and Sustainability Accelerator (CISA) which explores issues at the nexus of policy, sustainability, and social impact to help bring about a systemic, inclusive, and effective approach to governing distributed ledger technology.

Introducing: Klima the world’s first carbon currency

The perfect currency should be regenerative for our planet by pricing in the cost of carbon.

This letter is time-sensitive: the deadline for participating in the fair launch of KlimaDAO is September 17, 2021. Read on to learn why you might consider doing so.

Klima DAO will demonstrate how a new monetary system — powered by decentralised governance and smart contracts — can be built that explicitly prices in carbon and generates value creation opportunities for its users. The economies of the 21st Century have to figure out how to reward and build on pro-climate activity and investment, not penalise it.

This is our contribution.

The chief problem with cryptocurrencies is the learning curve. The technology is both immensely complex and quickly evolving. To grok crypto in late-2021, you’ve got to understand blockchain and smart contracts and basic DeFi and then you have to keep up with onslaught of innovations. None of this is easy, so most people don’t bother.

Crypto has traditionally attracted those whose chief motivation is financial rewards, technological challenges or both. Lately, artists too have found a place in the crypto community with the rise of NFTs.

But there is one community that has consistently been left out: activists, organizers, protesters and all those whose primary passion is transformative social change. Not motivated to learn about crypto, most activists haven’t bothered to.

Until now, that is.

A decade since the birth of Bitcoin, there is now a cryptocurrency that demands the attention of every activist (today and right now!) to make an effort to understand it.

That’s because this cryptocurrency—Klima—is the apex of environmental activism.

Meet Klima: The Perfect (Activist) Currency

Klima is the world’s first “carbon currency” — a cryptocurrency backed by carbon offsets. Moreover, thanks to the technomagic of smart contracts, Klima algorithmically incentivizes locking more and more carbon offsets into the protocol’s treasury. The end result is a virtuous circle: a currency that absorbs carbon.

In their words:

Klima DAO argues that […] the perfect currency should be […] regenerative for our planet by pricing in the cost of carbon. Centuries of not pricing in the cost of carbon have meant that we are in a dangerous position ecologically, moving the dial on climate action is now our ultimate priority.

It is an ambitious goal that should excite any activist dreaming of a solution to the ecological crisis.

Now, at this point, I hope you’re overflowing with questions about how KlimaDAO works. I know I was when I first learned about it. But there is really no way I can explain it all in this brief letter. (Plus, my larger point is that activists need to start taking time to understand crypto for themselves!) So I urge you to dive into their documentation—I’ve included the most important links below—your effort to grasp KlimaDAO will be rewarded!

And above all, if you’re reading this before September 17, 2021 then you may want to consider participating in KlimaDAO’s fair launch on Crypto tends to reward early adopters so if you believe KlimaDAO is viable then now is your opportunity to stake a claim.

Links for doing your own research:


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