Solid World, a blockchain startup, has launched the first forward carbon asset pool on an automated market maker with the support of Polygon. This move is a significant step towards the financialisation of carbon credits on the blockchain. The project operates on a liquidity pool where future carbon credits are pre-sold at a price set by the automated market maker. The goal is to utilise financial and technical tools to help mitigate the impact of climate change by increasing transparency in funding for climate-forward projects.
Solid World Pool will primarily focus on mangrove restoration carbon projects, projects aimed at developing small tree and shrub ecosystems in coastal brackish waters. Mangroves can store up to four times more carbon than other tropical forests, protecting coastlines from storms and rising sea levels. By utilising the liquidity pool, Solid World can bring certainty to long-term carbon credit projects, whereas futures contracts are often associated with conditions like price and frequently used in hedging
Liquidity pools function similarly to market makers in traditional finance. Users can pool their funds to buy and sell assets. According to the press release, the liquidity pool will provide structured inventory for distributors looking to sell high-quality carbon credits, resulting in significant funding for mangrove projects. Solid World Pool uses an artificial intelligence-powered risk framework to score carbon credits. It assesses the risks associated with financing carbon projects on the grounds, considering factors such as climate, legal, political, and economic vectors when evaluating the project.