DigFin Green is our series profiling leaders in fintech companies addressing environment, social, and governance (ESG) solutions, using technology to power financial services towards sustainable outcomes. Contact us if you would like to be included.
Bree Yek is co-founder and CEO of carb0n.fi, a Singapore-based startup using blockchain technology to create better incentives in carbon-trading markets.
Yek cut her teeth trading bunker fuel (oil for ships) before pivoting to launching startups trying to recycle plastics. She launched carb0n.fi in July 2021 with Florian Bohnert, chief marketing officer (ex-Cardano blockchain marketing) and “0xenon”, chief technology officer, a full-stack developer.
Venture firm Antler.co incubated the business, and carb0on.fi recently closed a seed round of $600,000 led by Owl Ventures, a crypto-focused VC.
What problem are you addressing?
Bree Yek: We need to create a new incentive system for carbon markets in Southeast Asia. There are very few projects to go to net carbon zero among smaller enterprises because these companies get punished for trying to do the right thing. This is the core problem we’re addressing.
SMEs have a hard time quantifying what they’re doing when it comes to carbon offsets, particularly in financial terms. If they try to be sustainable, it’s usually on a pro-bono basis. They can’t add headcount to this because no one, including the big multinationals they serve, can put a value on what they’re doing. Proving you’re sustainable requires an audit and a lot of expenses around restructuring your business.
What does carb0n.fi do?
The thing that unites me and my partners is a passion for tree-hugging and what blockchain can do.
We’re making a new framework for ESG for small enterprises by using decentralized finance on blockchain to create transparency around data for authentication and trading carbon offsets.
SMEs are going to need an ESG plan because their anchor customers – the global multinationals – are now putting ESG policies in place. Those ESG requirements are going to flow down the supply chain. Small suppliers that can’t meet those are going to lose out on business opportunities.
But there’s a lot of FUD [fear, uncertainty and doubt] about crypto and pricing in DeFi. We want to alleviate FUD by letting small businesses stake a deposit in crypto assets that lets them participate in carbon offsets. This will let them generate projects, as well as create frameworks for big companies that can scale.
What does this look like in practice?
Companies won’t bother with trying to be sustainable without a financial reward or other incentive. What actions can we quantify so that they can be acknowledged by a broader community? Like with Kickstarter, what projects can companies back? How do we match SME actions with the needs of bigger companies in order to create transparent supply and demand?
Blockchain adds accountability. We want to integrate with other databases to ensure there’s no double-counting of carbon offsets, and use DeFi to generate financial rewards for sustainability projects.
We’re operating a two-token system. There’s a governance token, $ZRO, used to buy and sell carbon offsets on both our digital exchange and in the real world – that is, on the voluntary carbon-trading exchanges around the world. $ZRO is meant to protect users from the fluctuations in the prices on those carbon projects.
Second are the carbon offsets themselves, which are structured as non-fungible tokens. We’ll have a variety of NFTs for each project that trade on our exchange, which serves as the secondary market for carbon offsets. Each one is unique, and we manage the supply and demand through the usual burning and liquidity mechanisms used in DeFi.
Governance tokens represent participation, and holders can enjoy discounts on transaction fees and other rewards. The NFT is the secondary market that represents a company’s own carbon offset.
What else do we need to know?
There are two metrics to determine how well we succeed. First is just getting people like Owl Ventures to believe in what we’re doing. Second is the number of carbon-offset projects we can support. We want to provide as many SMEs in Southeast Asia as possible.
We’re exploring whether our NFTs can exist in other systems and metaverses. We’re playing around with this. It’s an exciting time.
Florian’s built a member community of 25,000 people in just three months, which will give us traction for when the project goes live at the end of January.
We’re building this on the Ethereum testnet. We avoid bitcoin because it’s too energy-intensive. We tried Cardano, because my partners have experience with that blockchain and it’s energy-light, but we found it couldn’t support the smart contracts we require. Ethereum has a huge developer and user base, and it’s transitioning to a new consensus model that is supposed to use less energy.
But the gas fees on Ethereum are high, and we still need to see how well it transitions to Ethereum 2.0. So, although we’re testing on Ethereum, we are actually launching on Polygon’s ledger, and that’s where users will be able to access us.
We generate revenues from transaction fees on our exchange so we want as many buyers and sellers as possible. Over time we want to interoperate with other databases in carbon trading, because this is the only way to achieve true transparency. It means more blockchain-based data that can’t be duplicated, and market scale for better price discovery.
It also means we can create a framework, a standard, for Southeast Asia. Right now the US and Europe have their own ESG frameworks and infrastructure, but these don’t fit the needs of small companies in Southeast Asia. We want to develop this so Southeast Asia can become a prominent region in the global ESG market.