Thread by @ToucanProtocol

Everyone in #ReFi has been talking about #CarbonBridges since the @VerraStandards announcement came out last week

Bridges connect the legacy carbon market with #Web3 carbon market infrastructure

How does an ideal bridge look, and how do we get there?

Let’s dive in 🧵

@VerraStandards 1/
An ideal bridge is a two-way bridge where carbon credits can freely flow between the off-chain and the on-chain world

Whatever is bridged on-chain can be bridged back, anytime and autonomously ↩️

The bridge should be deterministic and won't need a custodian

@VerraStandards 2/
This has a few key benefits

- Everyone can take advantage of arbitraging opportunities
- This creates more trading volume in carbon markets
- Bridgers feel more comfortable bridging because the tokenization isn't irreversible

@VerraStandards 3/
A non-custodial carbon token model is also the best way to protect against double spending of carbon credits

Essentially, this type of bridge allows everyone to transfer the "source of truth" of a credit from one registry to another

@VerraStandards 4/
We believe that a two-way bridge is more of a short-term need

Longer term, the majority of carbon market trades is bound to happen on-chain, where traders have access to deep liquidity, open marketplaces, multiple demand sources, verifiable retirements and much more

@VerraStandards 5/
There is one key requirement for a deterministic two-way bridge: Legacy registries need to allow a "tokenized" or "immobilized" state of carbon credits - so it is clear which credits are bridged on-chain and which ones are permanently taken out of circulation

@VerraStandards 6/
Introducing this state is something @VerraStandards and @CarbonRegistry looking into right now

verra.org/verra-addresse…

@VerraStandards @CarbonRegistry 7/
An alternative to the deterministic two-way bridge model is the custodian option - which is what @weareflowcarbon is pursuing right now

In this type of two-way bridge, all credits sit in a special purpose vehicle (essentially a central entity) off-chain

@VerraStandards @CarbonRegistry @weareflowcarbon 8/
The entire bridging system is based on this central entity

Ie if you want to retire your credits, you’re essentially making a request to that entity to do a retirement in the Verra registry - something that requires trust in that central entity 👀

@VerraStandards @CarbonRegistry @weareflowcarbon 9/
We think the deterministic bridge model is more in line with the values of #Web3 - openness, decentralization and trustlessness

But to achieve a fully functioning two-way bridge, we need to work closely with existing actors to get the system right

@VerraStandards @CarbonRegistry @weareflowcarbon 10/
Legacy registries and standards bodies need to implement practical and legal guidelines that allow us to catalyze the movement of carbon on-chain

And we need to be ready and willing to iterate and adjust our infrastructure, so we can together shape healthy carbon markets 🌿

@VerraStandards @CarbonRegistry @weareflowcarbon 11/
We're excited about this - we've always believed in cooperating instead of competing

This goes for fellow bridgers as well as for actors like @IETA and @VerraStandards

@VerraStandards @CarbonRegistry @weareflowcarbon @IETA 12/
We've been talking about the ideal bridge model here:

Questions? Jump in our Discord (toucan.earth/discord) and ask away - or join our office hours!

Here are the next ones: discord.com/events/7061148…