This is an excerpt from our new eBook,
This is an excerpt from our new eBook,Engineering a smarter and greener financial world with Tokenovate. This free eBook will be available for pre-order until November 17, 2023.
Companies worldwide are awakening to the urgent need for sustainability and environmental responsibility, not only as a moral imperative but also as a strategic imperative. This shift is driven by a convergence of factors, including mounting pressure from stakeholders, the looming threat of climate change, and the growing realisation that sustainable practices are not only beneficial for the planet but also for long-term business viability and success.
As we approach the 28th Conference of the Parties (COP28) on climate change, the importance of green initiatives has never been more pronounced in the corporate world – specifically when it comes to carbon trading. Carbon trading is a market-based mechanism designed to mitigate the impact of greenhouse gas emissions on our planet’s climate. At its core, carbon trading is a regulatory approach that seeks to limit the total emissions of greenhouse gases, such as carbon dioxide (CO2), from industries, organisations, and nations. Here’s how it works:
Governments or regulatory bodies set an overall cap on the total amount of greenhouse gas emissions that are permissible within a specific time frame. This cap is usually allocated in the form of emissions allowances, which represent the right to emit a certain amount of carbon dioxide or other greenhouse gases.
Companies and entities subject to these regulations are then issued a portion of these emissions allowances, which can vary based on factors such as historical emissions, industry benchmarks, or government policies. These allowances effectively serve as a limited and tradable resource.
The problem with carbon trading – and how Tokenovate can help
Greenwashing occurs when companies neglect to give precedence to internal emissions reduction, engage in double-counting of carbon credits, or invest in credits that lack verification. These practices constitute greenwashing as they mislead the public, creating a false impression of these companies’ dedication to carbon emissions reduction.
Tokenovate, a UK-based financial services technology company, aims to address these issues by providing distributed financial market infrastructure, and smart legal contracts, enabling programmatic lifecycle event management of the pre-trade to post-trade workflow for OTC and exchange-traded derivatives, including Voluntary Carbon Credits (VCCs).
Recently, the group forged a strategic partnership with GMEX Group, leading to a successful demonstration of a high-calibre, smart legal contract for waste-to-energy VCC trades, built on the BSV blockchain. These trades have their origins in the Bio-CNG Project AJS Fuels, situated in Gujarat, India, where cutting-edge biogas technology captures methane from animal waste.
This accomplishment was realised by seamlessly integrating Tokenovate’s dFMI into the ZERO13 Hub, a distributed orchestration layer that digitally links participants in the carbon market, as well as registries and exchanges across various jurisdictions. This interconnected ecosystem enables the trading, clearance, and settlement of VCC spot and derivatives contracts.
Notably, these trades were executed on the SECDEX exchange, a regulated marketplace intricately tied to the Universal Carbon Registry for voluntary carbon credits, all of which are seamlessly registered through the ZERO13 Hub.
How the BSV blockchain powers Tokenovate
Tokenovate explained that the BSV blockchain assists in preventing greenwashing by eliminating any double-counting or selling credit multiple times, as the data is all stored on-chain.
In addition to the BSV blockchain allowing for each credit to be validated and verified, the technology’s inherent scalability and low cost means that companies can record every single trade on the chain without the data cost concerns of existing legacy technologies.
The BSV blockchain stands out as the only public blockchain with the ability for limitless scalability. This capability is evident in its consistent expansion of transaction throughput, driven by regular advancements in the maximum block size. Enlarging these blocks directly translates into a higher number of transactions processed per second, resulting in increased transaction fee rewards for miners.
This distinctive feature sets the BSV blockchain apart from other blockchain protocols that artificially restrict block sizes. As a result, it maintains low transaction fees and swift processing times while simultaneously enhancing miner rewards as the network gains wider adoption.
Its robust underlying protocol ensures stability and reliability, facilitating the seamless implementation of such performance enhancements through straightforward adjustments to the maximum block size.
Interest swap solutions and other offerings
While Tokenovate has a strong focus on carbon trading and other green initiatives, its powerful platform, powered by the BSV blockchain, means it can offer assistance to enterprises in several financial sectors.
The group explains that some of the biggest benefits can be seen in improving the trading lifecycle. The trade lifecycle is typically a sequence of steps set in motion by specific events, requiring participation from various parties. Unfortunately, these steps often rely on manual processes, resulting in costly inefficiencies and incomplete or inaccurate information gathering and reporting.
Tokenovate’s platform, designed for decentralised financial market infrastructure and intelligent legal contracts, tackles these issues by facilitating automated management of the trade lifecycle, spanning from pre-trade to post-trade processes for both over-the-counter (OTC) and exchange-traded derivatives.
An example of this is Tokenovate’s interest swap solutions that help financial institutions manage interest rate risk. With its powerful platform, customers can customise their interest rate swaps and hedge against interest rate fluctuations. Its cutting-edge technology offers efficiency and transparency, ensuring optimal risk management.
This includes providing a digitised alternative to traditional interest rate hedging products, enabling customisation of interest rate exposure management, and offering flexibility in terms of tenor, currency and underlying benchmark rates.
The group said that its ambition is to support the industry to move physical assets to become digital representations (digital twins), in a secure way through smart legal contracts, that also increase efficiencies while improving accuracy and timeliness of reporting. By digitising and automating the trading lifecycle, Tokenovate can help governments and enterprises create a sustainable economic future.