Tokenized carbon offsets from reforestation projects are becoming an increasingly sought-after commodity. However, there’s an ever-present risk to both reforestation projects and carbon credit holders that the forest could burn down and their certified carbon offsets are reversed. Due to this risk, carbon credit certification agencies usually require carbon credit projects to have ~10% excess carbon offsets readily available to replace such losses. However, there is more that can be done to help mitigate this risk. Providing insurance against wildfires, floods and storms could enable reforestation projects to replant the lost trees and replace reversed carbon offsets, thus helping to unlock idling assets and create a more capital-efficient carbon credit ecosystem.
We’re excited to announce that Etherisc is integrating Chainlink — the industry-standard Web3 services platform — on Polygon to help power the world’s first on-chain decentralized insurance protocol. This gives us access to Floodlight’s weather data on-chain, enabling us to create natural disaster insurance smart contracts for our users. Ultimately, this empowers reforestation projects that provide carbon offsets, such as Coorest, to better protect against the financial risk of wildfires, floods, and storms and improve capital efficiency.
Outlining the World’s First Carbon Offsets Parametric Insurance Product
Etherisc’s decentralized insurance protocol is EVM compatible and is currently deployed on various blockchains, including an instance built on top of the Polygon network. We provide developers with the Generic Insurance Framework (GIF), an open-source suite of smart contracts and tools that they can use to build insurance products that are fully automated end to end. Investors can then stake assets in risk pools to receive premiums and payout specific insurance contracts when necessary.
In order to create insurance products that cover reforestation projects, we needed geospatial weather data to help detect and verify whether their forests had been impacted by a wildfire, flood, or storm. Floodlight, a data collection and analysis company, has a vast array of geospatial satellite data that is ideal for creating natural disaster insurance smart contracts. However, we need a way to access this real-world data on the Polygon network, where our insurance smart contracts live.
The Chainlink Network solves this problem by delivering Floodlight’s geospatial weather data on-chain in a tamper-proof, timely, and reliable manner. This data can then be used by Etherisc’s natural disaster smart contracts to help determine when the contract conditions are met and claims are paid out.
“Etherisc’s carbon offsets insurance product has the potential to provide greater asset certainty and reduce the need to over-collateralize carbon projects. This will attract new and larger investor participation in the space, and propel growth in new climate finance programs. By using the Chainlink Network to help power this type of parametric insurance, this innovative product shows how effective blockchain technology can be in transforming financial market infrastructure.” — Charlie Moore, Head of Carbon and Sustainability Solutions at Chainlink Labs
Coorest is an ideal policyholder for this decentralized natural disaster insurance product. As part of its NFTrees initiative, Coorest provides a platform for farmers, forest preservation organizations, and other entities to tokenize ongoing capture of CO2 from their trees in the form of CCO2 tokens, which can be traded or burned to compensate emissions against a proof of carbon compensation certificate (PoCC).
As an initial use case, this natural disaster insurance will cover NFTrees on the Coorest platform. Specifically, policies will payout USDC to cover the cost of replanting each tree destroyed by a wildfire, storm, or flood and the replacement of CCO2 tokens will be covered by a second risk pool containing CCO2. Tree losses will be verified by satellite data, and all transactions and value transfers will be visible on-chain.
“We’re excited to help advance the tokenized carbon offset ecosystem by providing users with natural disaster insurance that helps mitigate the financial risks for reforestation projects. Together, Floodlight and Chainlink play a key role by providing highly reliable climate data on Polygon. Without doubt, this insurance product wouldn’t be possible without them.” — Christoph Mussenbrock, Co-Founder of Etherisc
Etherisc revolutionises insurance. By harnessing the power of blockchain technology, Etherisc innovates to make insurance cheaper, faster, more transparent and accessible while unlocking new investment opportunities. On Etherisc’s Generic Insurance Framework (GIF), external parties can build decentralized insurance projects. Its open-source common infrastructure, product templates, and insurance license-as-a-service enable the seamless and efficient creation of fully automated insurance products with increased transparency and fairness for all parties. Reach out to us, or visit our website etherisc.com.
Chainlink is the industry-standard Web3 services platform that has enabled trillions of dollars in transaction volume across DeFi, insurance, gaming, NFTs, and other major industries. As the leading decentralized oracle network, Chainlink enables developers to build feature-rich Web3 applications with seamless access to real-world data and off-chain computation across any blockchain and provides global enterprises with a universal gateway to all blockchains.
Coorest focuses on building decentralised carbon compensation solutions. Coorest has build a 100% on-chain CO2 sequestration system that utilises Floodlight satellite via the Chainlink DON. The certified Coorest Carbon Standard (CCS) allows green projects / farmers to get onboarded by Coorest to generate CO2 tokens that can be converted into Proof of Carbon Compensation (PoCC) certificates via the Coorest Dapp.
Floodlight is a data company focused on moving ESG and Sustainability data from fluff to facts. Through our cutting-edge approach to data from satellites, ground sensors, and other empirical instruments, Floodlight is able to serve as a verification layer for key activities like GHG Scope 1 & 2. Clients use us to easily verify key behaviors around carbon, methane, ground cover, and climate risks that are growing in materiality to businesses worldwide in addition to increasing regulatory requirements. Our tools and dashboard enable our clients to see trends in their investments, hard assets, and geographic areas of focus that help them intelligently plan for the future.
Polygon is the leading blockchain development platform, offering scalable, affordable, secure and sustainable blockchains for Web3. Its growing suite of products offers developers easy access to major scaling solutions including L2 (ZK Rollups and Optimistic Rollups), sidechains, hybrid, stand-alone and enterprise chains, and data availability. Polygon’s scaling solutions have seen widespread adoption with tens of thousands of decentralized apps, unique user addresses exceeding 174.9M and $5B+ in assets secured. The network is home for some of the biggest Web3 projects such as Aave, Uniswap, OpenSea and well-known enterprises including Robinhood, Stripe and Adobe. Polygon is carbon neutral with the goal of leading the Web3 ecosystem in becoming carbon negative.
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