Bridging

An introduction to the tokenization of carbon credits.

Carbon credits traditionally exist in offchain registries, which are often provided by the certifying standard that issues the credits. Using Toucan's bridge, holders of carbon credits can bring them onchain. In doing so, the credits enter a tokenized (i.e. "locked") state in the offchain registry, ensuring that they cannot be claimed more than once. The credits remain in this state until the onchain assets are either detokenized, which "unlocks" them in the source registry, or retired, at which point the tokenized asset and its underlying offchain counterpart cannot be further exchanged or claimed.

Benefits of tokenization include:

• Liquidity and Market Efficiency: Compatible tokenized credits can be deposited into Toucan's carbon pools, which serve as automated brokers for the purchase or sale of carbon credits, available 24/7.

• Enhanced Transparency: Tokenized credit movements and sales are fully transparent.

• Programmability: Tokenized carbon credits can be integrated into new software applications for automated climate action.

• Reduced Fragmentation: Standardizing carbon credits onchain can increase interoperability across fragmented registry systems.

• New Use Cases: The onchain ecosystem offers new use cases to drive climate action, such as integrating tokenized carbon credits in decentralized finance (DeFi), games, social experiences, NFTs, and more.

• Fractionalization: Tokenized credits can be exchanged and consumed in sub-tonne amounts.