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DeepMarkit Corp is building an NFT factory for the carbon credit market

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The production of almost anything on earth, be it goods, machines, houses or even food, creates a carbon footprint. As long as industry exists, there will be a need to offset carbon emissions.

Accordingly, trading in carbon credits has exploded over the last few years as the US, Europe and China try to meet their net zero targets by mid-century. The carbon trading market reached $260 billion in 2020 and a global valuation of $851 billion in 2021 (Source: Refinitiv) and, as the push to global ‘Net Zero by 2050’ intensifies, the value and volume of this asset class is expected to grow even faster.

Hedge funds with trillions of dollars in assets under management have become interested in carbon credits, however, what are usually on offer are relatively old-fashioned financial products in illiquid and opaque markets. Therefore, there is a lot of room for innovation and new ideas. One such idea is minting carbon offset credits into non-fungible tokens (NFTs), which is an idea being prepared for imminent launch by DeepMarkit Corp. (TSXV: MKT) (OTC: MKTDF) (FRA: DEP).

Proprietary carbon credit NFT minting

Any company or project generating carbon offsets can use their proprietary MintCarbon.io platform to mint carbon credits into NFTs that can then be traded peer-to-peer directly on blockchain via an NFT marketplace like OpenSea, for instance, or in some other format. Token originators can also collect a royalty every time their token is sold in the secondary market. This royalty is shared with DeepMarkit in a potentially lucrative perpetual revenue model. In keeping with its green credentials, MintCarbon uses the lower emission Polygon network, which consumes less electricity than other blockchain networks.

Eric Entz, DeepMarkit’s Director of Corporate Development, explained further: “The platform helps carbon offset projects to reach buyers of their credits, and get their stories out there. There is a space with a whole range and spectrum of carbon credits. Projects can be very different and this gives them the chance to showcase their stories.”

Before being admitted to MintCarbon.io, a company needs to prove their carbon offset credentials. The platform can be used by businesses of any size, from tree planting co-operatives to wind farms to carbon sequestration projects. The legitimacy of their projects, and consequently the carbon credits used in generating carbon offset NFTs, is validated by independent carbon registries. In March, it was announced that DeepMarkit was registered on Gold Standard and Verra – two of the world’s top carbon credit registries. DeepMarkit also has plans to register with Climate Action Reserve later this year.

Maintaining a strong relationship with Gold Standard and Verra will keep DeepMarkit in touch with the offset market, thereby enabling the company to have an open dialogue with existing and new carbon credit project developers as potential onboarding candidates to the MintCarbon.io platform.

Minted carbon offset NFTs are expected to be interesting to both institutional and retail buyers of carbon credits. Retail buyers may be interested in the NFTs not only because of their carbon offset credentials and their potential upside as an investment, but also potentially as collector’s items depending on their artwork. The owner of the NFT will be linked to the project developer and all the information about the project will be available and provided by MintCarbon.io.

Who is interested in carbon offset NFTs?

A significant portion of the retail community interested in NFTs and carbon offsets communicates using social media and in forums, which DeepMarkit sees as a good place for broadening the discussion about various projects and carbon offsetting, and about the actual minting of NFTs, including the potentially collectible tokens.

But the larger portion of trade will likely come from institutional buyers due to their sheer size and scale. For them, or for companies that need to buy carbon offset credits, the value will be in the transparency and liquidity of the offset projects as well as their traceability on the blockchain. This latter group will be in the position to demonstrate their ESG credentials to their customers by being able to point to specific projects that have created the carbon offsets, on top of the benefit of the credits themselves.

“Right now, sustainability committees in corporations come up with the idea, and then it goes to the finance committee that says it wants to go net zero and this is what we are looking to do. The finance committee says the compulsory tokens are really expensive and in limited supply. However, that is not the case in the voluntary market,” said Entz. “This is where we can add value.”

“Corporates are still in a very early stage in getting to net zero. The whole marketing piece behind this can really leverage this opportunity to showcase further what companies are doing. Instead of just writing a blank check just to claim they are net zero, Mintcarbon.io can provide an additional story about exactly how a company is getting to net zero,” Entz added.

What next for DeepMarkit?

DeepMarkit is currently working on a convertibility feature that will allow users to convert tokens back into carbon offsets. Once the volume of NFTs being created becomes large enough, NFTs could become very interesting to buyers who need to use large carbon offsets for their businesses.

DeepMarkit is also developing a function that will allow the bundling of different credits together to improve the utility of the product and increase the attractiveness of the credits to purchasers. While a lot of the projects minting NFTs could be fairly small, once they are bundled together they can represent a significant amount of carbon credits, which would make them very appealing for a large buyer like an airline.

“We are an early mover in this space and we have a product that is solid,” said Mo Yang, CEO of DeepMarkit subsidiary First Carbon Corp. “Companies like airlines that consume carbon credits will notice that this is something with utility, something that is really practical. A number of large companies have already expressed an interest in onboarding a sizeable amount of carbon credits via our platform MintCarbon.io.”

Unlimited project scalability

As MintCarbon.io uses blockchain there is unlimited scalability to its project, with the scope to create thousands of separate NFTs backed by real, planet benefitting projects. Once an NFT is in a blockchain wallet, the user can move it around, transfer it from wallet to wallet and, due to the decentralised nature of the exchange, its flexibility and scalability are virtually unlimited.

DeepMarkit is currently focused on the voluntary carbon market, whose value surpassed $1 billion for the first time in November 2021.  Morgan Stanley provided Article 6 summaries in a recent COP26 update noting “Voluntary carbon markets could direct $1 trillion per year of transition capital toward developing countries by 2050”, and Credit Suisse estimated that global carbon markets could grow 15-fold to 2030 and 100-fold by 2050.

Given DeepMarkit’s early-mover advantage in a market that is destined for the blockchain, combined with its robust revenue-sharing model and growing pipeline of interest from the corporate sector, it seems there could be a bright future for investors positioning early.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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