Bonding $EWD to Carbon Credits
The plan for EWD is to become the hub of decentralized Carbon Credits trading on EnergyWeb Chain. To do so, there needs to be a concentrated effort to build a pool with deep liquidity.
Carbon Credits are still pretty novel and it might be hard for market participants to correctly price different types of carbon credits. Moreover, trying to build liquidity for a plethora of projects might result in thin liquidity in each pool and poor trading experience. On top of this, Carbon Credits might come in different forms like the standard ERC-20, but also NFT tokens like ERC-721 and ERC-1155, which aren’t well suited for a liquidity pool.
The proposed solution:
Create a protocol that enables locking in Carbon Credits of different type and form and mints a new generic Carbon Credit token (let’s call it $CARB) that represents 1 metric ton of CO2.
That protocol would be a converter between Carbon Credits <> $CARB.
Users would need to bond $EWD token to the Carbon Credit in order to create the new $CARB token that can be pooled and fractionalized. When un-bonding $CARB, users would get back both the Carbon Credit and the $EWD tokens. The amount they would get back would be determined by a specific formula that takes into account the total $EWD in the protocol and total Carbon Credits locked.
This process would effectively lock $EWD tokens with C02 credits and as the liquidity pool grows, it would also create extra demand for $EWD token.
The bonding/un-bonding from traders capitalizing on arbitrage opportunities would generate tax revenues for the EWD DAO.
To decide which Carbon Credits are accepted in the $CARB protocol, the DAO would need to vote on proposals. The idea is to start with $CRC tokens from CarbonLand Trust. There would be a basic $EWD premium on top of that $CRC credit bond in order to create a $CARB token. Say a 1% fee is the standard fee the DAO has decided is needed to bond and create a $CARB token.
$CARB token is 15$, and let’s assume $CRC credit are also valued at 15$.
Users need to bond 1% of that value in $EWD in order to create $CARB.
1 $CRC + 0.15$ worth of $EWD = 1 $CARB
If another project comes along with a different token representing 1 Metric ton of Carbon Credit and wants to be integrated to the protocol. That new type of Carbon Credit is of a lesser quality, but could still be integrated if the DAO votes for a higher premium to bond.
$RUX token want to be integrated to the protocol, but is of a lesser quality than $CRC. DAO decides $RUX token requires a 15% $EWD bond in order to create $CARB. $CARB is still trading at 15$.
1 $RUX + 1.5$ worth of $EWD = 1 $CARB.
As more types of Carbon Credits are onboarded and with different premiums, it creates a dynamic environment for traders. On top of that, Liquidity Providers in a CARB-USDC pool for example, can make decent returns on the trading fees generated. For investors looking at long-term exposure to Carbon Credits, this can generate extra yield from trading activity.