EARTH Token and the NAE: Market Dynamics

Like any exchange, the Natural Asset Exchange (NAE) will consist of buyers on the demand side and sellers on the supply side. With the NAE the buyers and sellers will be trading natural assets and all trades will be settled in the exchanges native EARTH Token. In this post, we take a closer look at the market dynamics as they will play out on the exchange.

The NAE, being blockchain based and having its own native EARTH token, will have the following advantages over the existing trade in natural assets:

• Provide a free, open, transparent and universally accessible platform connecting producers of Natural Assets with buyers
• Eliminate fraud, counterfeiting, and double counting of Natural Assets
• Provide sellers with flexible pricing mechanisms, and offer real-time price discovery
• Reduce complexity related to fiat currency exchange rates with cross-national trades via the EARTH Token
• Eliminate registration fees for both buyers and sellers
• Eliminate the need for external 3rd party registries for buyers and sellers
• Eliminate the requirement for buyers to fund escrow accounts
• Eliminate minimum transaction volumes
• Vastly reduce transaction fees
• Reduce lead times through simultaneous fulfillment and settlement
• Enable embedding of Natural Assets directly into products and/or services at any stage of the product’s supply chain
• Enable all to invest in Natural Asset projects, creating sustainable, risk-adjusted, long-term returns for all participants

The Supply Side of the NAE

The supply side of the NAE will be made up of Natural Asset providers who essentially convert actions that have a net positive for environmental impact into tradeable instruments. Sellers will have flexible pricing mechanisms.

Natural assets are broadly represented in the following categories, Waste to Energy projects, Solar projects, Windfarm projects, Carbon sequestration projects and Avoided emissions projects.

It is important to note that the NAE is set to open up the market to new supply-side participants and support new technologies and innovations that enter the space, be they new asset classes, innovations in the Internet of Things (IoT) or environmental assets that have yet to be invented, they will all be able to participate on the NAE.

The Demand Side of the NAE

Natural assets are primarily purchased by corporations that have a negative impact on the environment that seek to mitigate their environmental impact. These corporations are either mandated to purchase such assets while some corporations and organizations may also buy these assets voluntarily.

The NAE will democratize the demand side of the market. Features like no registration fees or minimum buy-ins which means that the market will no longer be confined to corporate buyers making it viable for the first time for small organizations, businesses, and even individuals to purchase natural assets.

All natural asset buyers but especially voluntary ones want to know that their money is making its way to the intended natural asset providers without being diluted along the way. The openness of the blockchain based NAE will give them the needed confidence, and this can then attract more organizations that value transparency such as charities, non-profits, and individuals that want to contribute to natural asset custodians.

Tokenization for Market Modernization

The NAE and the EARTH Token can be considered a disruptive upgrade to the current trade in natural assets. Tokenization of these assets in and of itself allows them to be priced coherently across borders eliminating foreign currency exchange friction.

Modernization also implies lower costs, and this is a real value proposition. When an artist sells a song to a fan directly, it is usually at a fraction of the cost of what a record label would charge — while the artist gets equally rewarded for the song. Likewise, when the middlemen are removed from the trade of natural assets, you can expect the price of the assets to be closer to their real value, and not many times inflated. The equivalent would mean that a buyer’s budget would get a whole lot more natural asset for the same spend. This can have a huge direct impact on environmental sustainability efforts — for the same cost.

IoT-Ready Functionality

Advances in IoT and AI technologies and solutions will mean that intelligent sensors and monitoring devices will increasingly be embedded in the technologies that make up the parts of our daily lives, such as vehicles, appliances, entertainment and communication systems and more. These networked devices will be able to monitor, collect and self-report on a host of data that they collect, and in particular, data that is relevant to environmental impact or carbon footprint of a ‘thing’. In the foreseeable future, it is entirely conceivable that environmental impact will be measured across all activities meaning that the mitigation cost can be automatically embedded within the costs for the services and products we use daily.

Blockchain-based exchanges will be a critical part of the infrastructure needed to enable this.

Modernizing this market with the disruptive nature of the blockchain can spark a massive impact on the environmental sustainability industry — and this is one industry where such a disruption is sorely needed.