Flowcarbon welcomes the Biden Administration's EO on March 9, 2022 that directs U.S. government agencies and regulators to work together to identify the benefits of digital assets and their underlying technology, pointing to further mainstream adoption of innovative technologies like blockchain.
Flowcarbon’s vision is to use the power of web3 and blockchain to solve issues of illiquidity and opacity in the Voluntary Carbon Markets (VCM) to rapidly scale it. Scaling up the VCM can fund natural climate solutions around the world.
Flowcarbon and the broader ReFi community already recognize the significant promise of this technology, and use it to expand access, transparency, and efficiencies in the VCM. Blockchain technology can be adopted by carbon markets worldwide, and is currently being piloted by the World Bank.
In addition to applauding the government’s recognition of the opportunities provided by blockchain technology, we would like to address the EO’s perspective that blockchains are inherently energy intensive and environmentally destructive. This is not the case, and we are eager to demonstrate otherwise.
Much has been publicized about the overall energy consumption of the Bitcoin network and its Proof-of-Work (PoW) consensus mechanism. However, unlike PoW, a Proof of Stake (PoS) consensus mechanism does not require huge consumption of energy. In PoS, the integrity of transactions on the network are secured by network participants staking collateral and running more standard servers to do similar calculations that require less energy. Compared to PoW where the network is secured by specially designed hardware competing to solve complex calculations.
The trend in digital assets has largely been a move away from PoW towards a PoS consensus mechanism, which is substantially less energy-intensive. This trend can be seen by looking at some of the most popular blockchains, such as Ethereum (which is undergoing a shift from PoW to PoS,) Polygon, and Celo.
Flowcarbon is committed to working with stakeholders in the VCM to ensure a smooth transition to a market that is blockchain-based, open, transparent, and accessible.
We hope that US regulators and agencies ultimately arrive at the same conclusions that we and the broader ecosystem have already come to: that open, permissionless blockchain technology has enormous potential in unlocking markets like the VCM, and in accelerating climate action.
Why? Because of the stage of the climate crisis that we’re at. The steep rate of emissions reduction required this decade to stabilize global temperature rise within relatively safe boundaries is daunting, to say the least. Digitization of carbon offsets can be a rapidly scaling and empowering force for people, that helps us tackle one of the planet’s greatest challenges.
