Why Carbonable Opts for Semi-Fungible Tokens

6 min readMar 14

TL;DR

Carbon removal projects and carbon credits are semi-fungible by nature
Improved user experience and features
Allows granular accounting and reporting

Semi-fungible by nature

Carbon removal projects have semi-fungible characteristics. Indeed, real-world projects have unique features that distinguish them from one another: some projects focus on reforestation while others may involve agroforestry and have a local social impact. On the other hand, all projects share at least one fungible quantity, the total carbon absorption, and also have other fungible properties: land area, sea area or the total financing amount.

Voluntary carbon credits should be traceable back to the Carbon removal project that created them. Carbon credits are thus semi-fungible, two different carbon credits aren’t born equal when they come from different projects and/or do have not the same vintage (year of emission).

Previous standards allowed only one of the two following properties:

Fungibility: assets of the same type are interchangeable (think ERC20 balance)
Non-fungibility: assets are uniquely distinguished by their features (think ERC-721 Metadata)

Enter SFTs, the perfect asset to reflect both properties as they:

can distinguish between types of projects
can denominate shares of a project to a given size.
add features to handle those extra capabilities while remaining backward compatible.

A more detailed walkthrough of SFT benefits is provided in a previous article.

From Non Fungible Tokens (NFTs) to Semi Fungible Tokens (SFTs) in Carbonable context

The previous iteration of Carbonable protocol used ERC-721 (NFTs) for all users-related interactions: minting, farming, accounting. The shift to ERC-3525 (SFTs) simplifies, and sometime enhance, most of those interactions. Why? Because most use-cases needs fungibility that had to be emulated in the 721 context. Let’s show some of the benefits this shift provides from a user experience point of view.

1. Tailored buying experience

Users will now have the flexibility to chose the very amount of $ they wish to invest in each specific project. You will not be constrained by the size of the NFT as such, as was the case in the first mints.

This will then have an impact on two pages of the dAPP: the launchpad and the mint page.

LAUNCHPAD

NFTs/ERC721: Display the information of the NFT, based on its sizing (m2 and Carbon absorption capacity corresponding to the NFT itself )

SFTs /ERC3525: Display the information of the entire project (entire hectares being regenerated and entire Carbon absorption capacity)

MINT

NFTs/ERC721: User can only mint one size at a time, multiple sizing need multiple ERC-721 collections.

SFTs /ERC3525: Mint the exact value you want to invest.

2. Better asset management

Users will also have much more flexibility as to how to manage their assets, both from a farming perspective, as well as resale perspective. They will also have a much more elaborate view at the portfolio level.

FARMING

SFTs / ERC-3525:
Users lock assets by transferring value to the farming contract’s token_id, whose total value is the TVL.
Users can set the very percentage they wish to allocate to Yield and to Offset

NFTs / ERC-721:
Users lock token_ids by transferring ownership to the farming contract, the accounting needs additional storage and computations.
Each NFT is either set as Yield or as Offset. To diversify your allocations for a single project, you need multiple NFTs. The percentage options are guided by the number of NFTs you have.

PORTFOLIO

NFTs / ERC-721. The user experience is NFT-centered.

SFTs / ERC-3525: The user experience is asset-centered instead.

RESALE

For a given NFT, users have only one choice: sell it or keep it. There is no splitting option.
For a SFT of equivalent value, users can now decide to keep a part of it and sell the other part.

3. On-chain Accounting

SFTs offer the opportunity to split and merge tokens to decimal-point values. It allows to create and manage assets granularly on-chain. Assets can be re-allocated and managed according to smart contract logic and thus be auditable.

Bringing SFTs potential to the masses

Carbonable is working towards making the most of ERC-3525 compatibility, and this goes beyond 721-compatibility. Key features pushed by Carbonable are on-chain dynamic metadata and easing marketplace integration.

Dynamic metadata are needed to display the correct information to users about the token value. We experimented in that direction by allowing deployers to separate the Metadata from the token contract. That way, the metadata can be linked to NFT contracts and have on-chain logic be dynamic. This will be documented in a separate article. We also recommend marketplaces directly integrate the transferValue feature to allow users to sell or buy a part of their SFT. Such a feature could fit with current protocols based on (decentralized) orderbooks or even liquidity pools with minimal work thanks to the fungibility of SFTs.

Bringing SFTs to the masses has the potential to revolutionize the carbon credit market (for the best) and facilitate greater participation in carbon removal projects. The shift to SFTs represents an innovative step forward in creating a more accessible and efficient system for carbon credits, empowering individuals and organizations to take meaningful action against climate change.

Credits

This article was written by Tekkac with editorial help from Guillaume

Carbonable

Carbonable leverages Web3 technology to empower anyone to drive climate contributions in the most straightforward and effective way. From cost saving, to risk diversification, portfolio management, and digital project monitoring, Carbonable’s turnkey and end-to-end solution provides unparalleled benefits to retail investors and companies.*

Carbonable Labs is a research laboratory that explores the potential of blockchain and Stark technology to tackle carbon-related challenges. Our objective is to create tools and standards with the outmost level of ethic, transparency, and traceability, while also avoiding conflicts of interest in the carbon credit value chain. Further, we aim to make these tools and standards public goods (open source) so they are available to everyone.