Discovering Toucan with GigaHierz

Get ready to spread your wings and explore Toucan with me — And don’t worry, this read is carbon-neutral, so you won’t have to account for it. But you’ll learn how to anyways…

GigaHierz
9 min readApr 1, 2023

If you have been following my journey into Web3 in the past couple of years, you know the underlying purpose of my work has been to diversify infrastructure and enable impact-full projects, so that we avoid the array of bias that has been built into Web2. Entering the space, I loved learning about topics of governance and Regenerative Finance, because they felt very tangible, and, in my experience, this makes them one of the best topics to onboard people (especially blockchain-skeptical people) into Web3. In this realm, Toucan has become one of my favorite examples.

Much has been said about Blockchain, regarding the environmental impact of blockchain technology due to its energy-intensive nature. Toucan has been an antagonist in this narrative, establishing a Web3 infrastructure for carbon markets, building a technology that will unlock climate action at scale. Their digital infrastructure is helping the voluntary carbon market (VCM) grow with transparency and high integrity.

Over the past month, two very good things happened that brought me to write this article. I got the opportunity to work for Toucan as a Developer Advocate (huge shoutout to my friend Doris Hernandez who introduced me to this amazing team), which brings together so many areas of interest of mine, like the environment, education, infrastructure and building. Parallel to that, I got accepted as a Scholar to the DevRel University program, founded by Bianca Buzea an absolute Developer Relations Hero.

One of our exercises is to do an overview of a protocol we like. So here you go, my sweet readers. Enjoy getting to know Toucan.

Disclaimer: In this article, I will use terms specific to ReFi and specifically decentralized voluntary carbon markets (DVCM). If you are new to Web3 and Carbon Markets check out this guide provided by Toucan, where they explain the key terms.

What is Toucan?

Like many great projects, Toucan was born out of a hackathon idea. (So kids, in case you never participated in a hackathon, this is your sign. Especially if you have a great idea like this). The aim of the protocol is to create infrastructure to make carbon markets more transparent and efficient. Among Toucan’s achievements, it has become a true conference hero, offsetting 1,400 tonnes of nature-based carbon on-chain for ETHAmsterdam emissions¹. And at ETH Barcelona they were offsetting the whole event, to make the conference carbon-neutral².

ETH Barcelona’s announcement, being carbon neutral

But more on its glory and fame later. Let’s get to the nitty gritty. Toucan has three main infrastructure tools:

1. Toucan Carbon Bridge

2. Open Climate Registry (OCR)

3. Toucan Carbon Pools³

Apart from that, there is an emerging ecosystem of projects building on top of or with Toucan’s infrastructure, like Neutral, Return, Spirals and Senken.

What problems is Toucan trying to solve with these products?

  • prevent double counting of carbon credits: through tokenizing the carbon credits, it is transparently visible for everyone which credits have already been retired (used). This makes fraudulent double-claims or reselling of retired credits more difficult.
  • fragmentation, lack of price discovery, confusing standards, numerous different registries and poor liquidity in carbon markets: The innovation of Carbon Pools solves problems intrinsic to conventional carbon markets⁴.
  • Shortening time of credit retiring² : Toucans infrastructure tools make it easier to retire, as well as to retire small amounts (“fractional” retirements), and to automate retirement.

What chain is Toucan built on top of?

Toucan launched on Polygon, but the goal is to create a multi-chain carbon future. Last year in April, they announced their partnership with Celo⁵, in August they deployed their protocol on Celo⁶. And since last week you can also retire carbon credits on Celo⁷. 🎊

“Celo is the carbon-negative, mobile-first, EVM-compatible blockchain ecosystem leading a thriving new digital economy for all.”

Going deeper!

Great. We now have an idea of what Toucan does. But how does this work in detail?

going deeper

1. Tokenizing credits

Toucan provides infrastructure to tokenize carbon credits from traditional registries onto the blockchain. This makes access to buying, selling and trading of them way easier to people that are not carbon-brokers or traders. So now it’s way easier for us to account for our carbon-footprint if we would like to. More in the section below. But tokenisation not only makes carbon credits more accessible but also more transparent and efficient in comparison to traditional VCMs⁸.

2. Pools

Carbon markets have had some intrinsic problems: fragmentation, lack of price discovery, and poor liquidity.Toucan’s Carbon Pools address these. Here’s how: Most carbon certificates are very specific to the project they were created for. Which means that only the ones from the same vintage & project are identical. This results in poor liquidity so it’s harder to trade. As a solution Toucan introduces carbon pools, and categorizes the certificates by clustering them according to similar attributes For example, the Nature Carbon Pool only accepts carbon tokens that are created with nature-based methodologies — tokens held in this pool back NCT, the Nature Carbon Tonne⁸.

3. Open Climate Registry

The TCO2 contracts deployed on-chain create a standardized meta-registry of carbon credits. It enables carbon markets to scale faster, standards bodies to able to monitor market activity better, credit developers to have a better basis for negotiating prices, and buyers to make informed purchase decisions³.

In a long-term vision, this opens the possibility of introducing new ways to verify carbon credits.

And what can I do with it?

I learn best with practical examples. So here is the simplest way you can use Toucan. For example you can calculate your carbon footprint for your last travels or your current energy consumption and then very easily retire amount of carbon certificates that is equivalent to that.

For best results and less frustration, I highly recommend having this glossary at hand!

Retiring credits on-chain has the following benefits:

  • Publicly verifiable
  • No double-counting of credits
  • Immediate³

Learn how to purchase pool tokens, redeem and retire them in this video.

Additionally, other projects have expanded on Toucan’s infrastructure — for example by building freely accessible carbon credit marketplaces, transparent climate impact reporting dashboards, or software that automatically compensates for a companies’ or individuals’ emissions³.

Controversy:

When introducing Toucan, it is important to address certain controversies that were discussed last year. Wired¹⁵ and Bloomberg¹⁶ wrote about several points that led them to question the impact of bringing carbon offset certificates on-chain.

General Blockchain energy efficiency

One of the blockchains, that Toucan is built on, is Polygon isn’t as carbon neutral as advertised, as it is a L2 to the Ethereum blockchain and through that would still have higher pollution. This problem has first been solved by Ethereum switching from Proof of Work (PoW) to Proof of Stake (PoS). And as mentioned earlier Toucan is now also building on Celo, a carbon-negative Blockchain.

Cheap/old certificates

Another topic raised in Wired¹⁵ and Bloomberg¹⁶ was that a lot of the carbon Credits that have been bridged from Verra are low quality and/or old.

It is important to highlight here that Toucan is an infrastructure provider for tokenizing carbon credits and creating carbon credit pools. And the standards for these are being developed by other entities. Through providing these infrastructure tools, Toucan supports these entities in enforcing them, like providing a filter to prevent the tokenisation of HFC-23 (link to docs) or zombie credits.

Toucan has developed a mechanism to consistently clean up the pools. When redeeming for example NCTs for TCO2 (which you need for example when you want to retire carbon credits) the user can choose between auto redeeming, in which case the lowest tokens form the pool will be redeemed or the user can choose which one they want to redeem. For the second option Toucan takes a fee out of which a percentage is used to retire the lowest quality carbon credits. You can read more on this in the Toucan Burn Reports and Toucans Documentation.

Tokenization of Carbon Credits has been halted

In April 2022, Verra prohibited tokenizing carbon credits from their registry, with one of the arguments being that buyers and sellers can remain anonymous. Another one was concerns with double-counting and price-fluctuation Over the last year, a discussion has happened around this and, in January 2023, Verra published a 170-page document outlining the results of a consultation of over 70 other organizations, with formulated opinions and questions that Toucan summarizes in this article the keypoints, with topics including, a focus on safety and compliance, KYC measures and “de-bridging”.

To the claim that on-chain markets have been killed through this ban, Toucan responded that while new on-chain certificates are not being issued, the use of the ones that are already on-chain has been growing. Additionally, these events have brought on-chain carbon markets into focus and kickstarted the launch of numerous working groups aiming to identify the best way forward¹².

I want to finish this blog post off with a quote from Toucan’s Blog about the current state of the carbon market which also gives a little outlook to what’s to come:

“In the past years, experts with the right intentions and understanding of the complexities of the market have started looking at solutions to key challenges, like lack of transparency and integrity, as well as accounting issues, such as double counting. So far, the market has been lacking technologies that can help address these issues and reduce integrity risks. But this is changing rapidly. Some organizations, like ourselves at Toucan, focus on building infrastructure for more efficient, open and transparent markets. Others are working on carbon credit integrity ratings (ie. BeZero, Sylvera, Gainforest), or drive the implementation of digital Measurement, Verification and Reporting (DMRV) forward (ie. Pachama). We are also excited by the growing role of claims label certifiers for well-intentioned corporates — these add extra scrutiny to net-zero claims.”¹²

So looking forward, I am excited for the next month to be working with Toucan. Seeing how much is happening in the carbon credit space right now, and being part of making this crucial infrastructure accessible will be very fulfilling.

The energy used to write this article has been offset. You can find the transaction on Celoscan.

retirement certificate

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