Established in 2021, Flowcarbon has secured $70 million in funding to expand its platform and team. $38 million was garnered through the sale of their Goddess Nature Token (GNT). This token has not been made freely available for private investors, but the tokenization procedure itself deserves to be analyzed.
Minting GCO2 tokens
The GCO2 token is an ERC-20-compatible token that represents a verified removal or reduction of one tonne of carbon dioxide equivalent. To mint GCO2 tokens, it is necessary to have an account at a carbon credit registry and a Celo account controlled by a compatible wallet.
Flowcarbon handles the entire GCO2 token creation process. Once you submit a tokenization request, Flowcarbon verifies the information with the registry and transfers your carbon credits to a bankruptcy remote special purpose vehicle (SPV). A new smart contract is then created, which contains information about the batch of carbon credits, such as the name, symbol, methodology, credit type, and vintage. A unique token is created for each project and vintage of a project. The GCO2 tokens are then transferred to the account of the original credit owner.
Retiring GCO2 tokens
GCO2 tokens can be retired on-chain without the need to interact with the registry of the underlying carbon credit.
To retire tokens, the token holder initiates a retirement request to Flowcarbon, specifying the quantity of tokens they would like to retire. This decreases the token holder’s balance and increases their retirement balance. The retired tokens accumulate in the contract until they reached a certain threshold. Once the threshold is met, the bankruptcy remote SPV retires the corresponding carbon credits in the underlying registry. A UUID (universally unique identifier) is generated to record the retirement event, and a tamper-proof checksum is created as proof of existence for auditing purposes. The retired tokens are then burned.
Redeeming GCO2 tokens
GCO2 tokens can be redeemed for the underlying carbon credits at any time. The redemption process is initiated by the token holder, who submits a request to Flowcarbon. Flowcarbon verifies the request and confirms that the token holder has an account at the appropriate registering body. Once the request is approved, the GCO2 tokens are burned by the GCO2 smart contract and the physical carbon credits are transferred from the bankruptcy remote SPV to the token holder’s account.
There is a standard 2% fee for redemption. This means that if a GCO2 holder requests to redeem 100 GCO2s, they will receive back 98 off-chain carbon credits.
Bundle tokens
Bundle tokens are a type of token that can be created by depositing GCO2 tokens into a bundle. Bundle tokens are issued on a one-to-one basis with GCO2 tokens, meaning that if you deposited 50 GCO2 tokens into a bundle, you will receive 50 bundle tokens in return.
To create a bundle, you first need to deposit GCO2 tokens into the bundle contract. You can do this using Flowcarbon’s dApp. Once the GCO2 tokens are deposited, the bundle contract mints an equivalent number of bundle tokens, which will be sent to your wallet.
Bundle tokens can be withdrawn from the bundle at any time. When you withdraw bundle tokens, the GCO2 tokens that were used to create them will be transferred back to your wallet.
Bundle tokens could also be retired or redeemed. When you retired or redeemed bundle tokens, the GCO2 tokens that were used to create them would be retired or redeemed from the underlying registry.
Flowcarbon Goddess Nature Token (GNT)
Goddess Nature Token (GNT) was the first bundle token that was issued by Flowcarbon.
The acceptance criteria for the GNT bundle were:
- The project must use a nature-based methodology.
- The project must have a five-year vintage period, inclusive of the current year.
- The project must be backed by credits from market-recognized standards.
Conclusion
In this case, we have a two-way bridge scheme. The same scheme was later tested by the Toucan protocol.
Flowcarbon only used this scheme once when issuing GNT tokens. This scheme may be used in the future when leading carbon programs develop principles for tokenizing the carbon units they issue.
As for the GNT token, its original owners were institutional investors. They had options to do nothing with the tokens, dispose of the tokens or the underlying carbon credits. We do not know anything about this.
