Tracer applications
Tracer as market infrastructure technology
Tracer's approach to creating a transparent, liquid, and efficient carbon removal market lays the foundation for the development of sophisticated financial instruments and services. By leveraging the unique features of the Carrot smart contract, such as the ERC1155 token standard and the grading system based on carbon sequestration persistence, Tracer unlocks a wide range of possibilities for financial instruments.
Carrot token futures: a key driver of adoption
One of the most significant applications of Tracer's technology is the development of Carrot token futures, which play a crucial role in driving the adoption of carbon removal projects. Carbon removal credit suppliers face challenges in securing funding to start and scale their projects. This is particularly important because carbon removal credits are currently more expensive than carbon credits derived from reduction and avoidance initiatives.
Tracer's strategy is to address this challenge by enabling the creation of financial instruments that allow sellers to sell carbon removal credits before they are delivered. This approach provides several key benefits:
Guaranteed price for buyers: By purchasing Carrot token futures, buyers can lock in a guaranteed price for their carbon removal credits, potentially securing a discount on the final market price when the credits are delivered.
Funding for sellers: Sellers can use the commitment from buyers to obtain financing for their projects, providing them with the necessary capital to start and scale their operations. This is crucial for bringing down the costs of carbon removal credits and making them more competitive with other types of carbon credits.
Risk mitigation: Futures contracts help to mitigate risks for both buyers and sellers by providing price certainty and reducing exposure to market volatility.
Market efficiency: The trading of Carrot token futures contributes to improved price discovery and market efficiency, as market participants can use these instruments to express their views on future supply and demand dynamics.
Baskets of Carrot tokens
Another promising application of Tracer's technology is the creation of "Baskets of Carrot Tokens." These baskets are essentially collections of Carrot tokens that are grouped together based on specific criteria, such as their persistence grade or the used technology to remove carbon dioxide. This enables managers of carbon credit portfolios to easily access and trade a diversified mix of carbon removal credits, without having to manage multiple contracts or navigate the complexities of each underlying project. It also provides project developers with access to capital by offering their (future) carbon removal credits on Tracer technology.
The benefits of Carrot token baskets include:
Diversification: By holding a basket of Carrot tokens, investors can spread their risk across multiple projects and persistence grades, reducing their exposure to any single project or carbon removal method.
Liquidity: Baskets of Carrot tokens can be easily traded on carbon credit exchanges or DeFi platforms, providing investors with a high degree of liquidity and the ability to quickly enter or exit positions based on market conditions.
Customization: Baskets can be customized to meet the specific needs and preferences of different investors, such as those who prioritize long-term carbon sequestration or those who want to support specific types or technology of carbon removal.
Price discovery: By creating a market for baskets of Carrot tokens, Tracer enables more efficient price discovery for different grades and types of carbon removal credits, helping to establish benchmark prices and improve overall market transparency.
DeFi applications
The combination of Carrot token baskets, futures contracts, and other advanced financial instruments creates the foundation for the development of fully decentralized carbon removal exchanges. These exchanges can leverage Tracer's technology to provide a secure, transparent, and efficient platform for the trading of carbon removal credits, enabling market participants to access a wide range of financial products and services.
Key features of decentralized carbon removal exchanges include:
Accessibility: By leveraging blockchain technology and DeFi protocols, decentralized exchanges can provide access to a global pool of investors and project developers, regardless of their location or financial status.
Transparency: All transactions and market data on decentralized exchanges are recorded on the blockchain, providing a high degree of transparency and immutability.
Security: Decentralized exchanges utilize smart contracts and other blockchain-based security measures to ensure the safety and integrity of user funds and transactions.
Last updated