Former WeWork CEO Adam Neumann popped up again earlier this year with a new company in a young and vibrant industry aiming to use cryptocurrencies to combat climate change.
● The day after Adam Neumann: What has happened to WeWork in recent years?
A few months later, this company, Flowcarbon, as well as several similar start-ups, slowed down the activity and pace of product presentation – the newest consequence of the fall of the markets.
Flowcarbon, one of a group of companies issuing carbon-backed cryptocurrencies, has decided to “wait for the markets to stabilize” before launching its products, said CEO and co-founder Dana Giber. Other companies such as the Toucan Protocol Association and KlimaDAO have practically frozen business New because the collapse of crypto is happening in parallel with actions against the trend of issuing cryptocurrencies backed by carbon credits.
Flowcarbon and the like combine cryptocurrencies, a type of digital asset traded on distributed computer networks, with another financial instrument that is mostly volatile and has no regulation: carbon credit.
Such credit points are issued by projects aimed at removing carbon dioxide from the air or preventing the production of new emissions, through afforestation or conservation, for example. Each credit point represents a cubic ton of carbon dioxide that is removed from the world or avoided. Corporations and individuals buy the credit points and utilize them to balance emissions Greenhouse gases Their, when investors and others demand to work for a fight against climate change.
An opaque, cumbersome and long process
Most carbon credits are sold through brokers or directly by developers, a process that critics claim is opaque, cumbersome and time-consuming. Flowcarbon and the like say they can change this by bringing credit to their networks as cryptocurrencies – Flowcarbon’s currency is called Goddess Nature Token – and can be traded as digital money or “burned” and destroyed when their owners want to balance greenhouse gas emissions.
“As someone who has bought credit points from brokers in the past, buying and burning currencies is much, much easier,” he wrote in response to questions from Mark Cuban, a technology billionaire and crypto investor. Cuban used Klima coins to offset emissions from its companies and its 1,100-tonne delayed personal uses, according to KlimaDAO data.
Venture capitalists have invested about $ 267 million in climate and carbon-related cryptocurrencies in 2021 and another $ 156 million this year as of early July – an increase in investment over previous years but still only a fraction of the billions invested in cryptocurrencies in total, according to research firm Pitchbook Data Inc.
A large portion of this funding went to Flowcarbon, of which Neumann is a co-founder. Neumann is best known as the CEO who was fired from the company he founded, WeWork. WeWork’s spectacular collapse, which included the cancellation of an IPO and an agreement to save the company in 2019, became the subject of an Apple TV series.
Neumann has invested in several start-ups as well as in real estate, the journal reported. He did not respond to a request for comment.
Growing industry
This young industry took off after Toucan and KlimaDAO began selling their own currencies in October, causing a lot of money to flow into the carbon market. At its peak in late October, the total value of all Klima coins in circulation was greater than $ 1 billion.
In the six months ending in March, more than 23 million coal credit points were transferred to crypto networks. This was about 28% of the credit points removed from the prescriptions that were recorded during this period, according to an analysis by the data company Trove Research. Meanwhile, less than 2% of these credit points were used to balance carbon emissions, and the majority were traded, according to KlimaDAO data.
In the last three months of 2021, hundreds of millions of cubic tons of coal were traded through cryptocurrencies, totaling more than $ 3 billion, according to KlimaDAO data. This is a volume similar to the coal trading activity conducted throughout the past year outside the crypto markets, according to data on carbon markets compiled by the company Ecosystem Marketplace.
Many viewers of the carbon market are still unsure how much carbon-backed coins will help, or if they Will improve In general the carbon balance market, given the speculation that often accompanied cryptocurrencies.
The goal of carbon credits is to balance emissions, said Guy Trent, CEO of TroveResearch. “If people now buy these coins because they see them as a money-making machine … I think it might be unhealthy,” he said.
There are those who see the hijacking of credit points for investment as actually healthy. “For carbon credit to significantly impact the climate crisis, their market needs to grow by several orders of magnitude,” said a group that says it represents KlimaDAO’s core team and that its members maintain their anonymity. “Speculation plays a vital role in enlarging any market” because it brings in enough money to promote easy and liquid trading and accurate prices, they said.
“We think it’s okay if people can make money from investing or hedging against higher carbon costs,” Toucan CEO Julian Somer said. “But that should not be the only use scenario.”
The value of crypto is plummeting
In May, Flowcarbon announced that it had raised $ 70 million from early sales of its currency, as well as money from funds run by well-known venture capitalists such as Andreessen Horowitz and General Catalyst, and other investment houses.
But until then, cryptocurrencies have been in freefall and have lost about a trillion dollars in total value since November.
Meanwhile, in May, the largest carbon credit listing company stopped using its credit points to back up new cryptocurrencies, explaining that it fears the current method of producing those currencies is causing confusion in the carbon markets. The listing company Verra, has announced that it is exploring new methods for creating the coins.
Flowcarbon expected to launch its currency by the end of June, but froze that plan until an unknown date, Giber said. In recent weeks, the company has announced collaborations that will help it with services like calculating the carbon footprint of credit buyers and loans for projects that give credit.
“We invest with a long-term perspective and are still very confident about the market,” said Ariana Simpson, general partner at Andersen Horowitz, who manages the investment in Flowcarbon. General Catalyst declined to comment.
At Toucan, Klima and other crypto and carbon startups say they are waiting for Verra to introduce a new way to bring credit points to crypto networks, and lower their profile until the crypto market crash is over.
“When everything’s in the air and everyone’s celebrating, everyone’s, of course, women’s carbon money, ‘” Somer of Toucan said. “Not everyone has to survive.”