3 minutes

Bringing Liquidity to Climate Markets

Published By
Wes Geisenberger
May 24, 2022

As introduced last year, Automated Regression Market Makers (ARMMs) (terminology recently updated) are a new price discovery mechanism for semi-fungible assets. Today we’re proud to announce the next stage in that journey in our partnership with Object Computing Inc. (Object Computing) and BlockScience as part of the HBAR Foundation’s investment in open source infrastructure through the Sustainable Impact Fund, alongside other infrastructure solutions such as Meeco

The global energy-as-a-service market size is expected to surpass $106.6 billion by 2026 and with the growing importance of CORCs and RECs; these markets are ripe for innovation. The ARMM mechanism could have huge implications for energy credit markets, and open a new world of possibilities by tying the technology of automated market makers to real world variable assets represented on-chain. This enables efficient price discovery for highly complex arrangements of attributes, such as (for energy credits) the type of energy generation, geographic location, etc.

Through this partnership with the HBAR Foundation, Object Computing and BlockScience will build the first open source ARMM and ARMM Sandbox. When implemented, this will improve liquidity for carbon offsets and removals that are unique to the metric tonne and maintain full auditability of all attributes, roles, and actors throughout their lifecycle. Today, carbon offsets are commoditized and in nearly all scenarios are traded without this level of veracity available.

This builds upon fast scaling efforts by the Hedera ecosystem for the Guardian, an open source policy workflow engine that tokenizes climate assets, such as offsets and emissions leveraging token standards. These standards were previously defined by the Interwork Alliance Sustainability Business Working Group and W3C DID Methods. This open source exchange architecture will leverage Hedera’s recently released Smart Contracts 2.0 with improved scalability to enable the facilitation of these trades. This process will be powered by machine learning algorithms that enable better price discovery. ​​

These developments will allow for massive scaling and expansion of energy markets and trades, making it easier for businesses to meet jurisdictional / legal requirements for energy assets. In turn, this will improve market resolution, bridging carbon/energy markets with Web3 and new finance mechanisms and will provide better access to financing for smaller energy producers and cooperatives while localizing carbon markets.

“Object Computing shares Hedera's commitment to making a meaningful impact on our environment. Through this partnership, we look forward to creating more trust and transparency in the trading of carbon offsets and credits. We are excited to innovate with BlockScience in order to activate the emerging breadth and value of tokenized ESG assets at scale," said Bob Elfanbaum, CEO of OCI.

“In today’s fast-paced market, widespread adoption is best achieved through open systems. It is great to see the work of Object Computing around open automated regression markets and associated sandbox to help organizations accelerate their decarbonization initiatives," said Justin Atwell Developer Advocate at Swirlds Labs.

“Object Computing is a leader in building open source software and has a proven track record in DLT and machine learning. The team’s strong understanding of unique properties on Hedera, including fairness, improves the quality of markets for these real world assets. We’re excited about building next generation liquidity for fully auditable carbon markets that maintain traceability down to the metric ton," said Wes Geisenberger, VP of ESG and Sustainability at The HBAR Foundation.

“The market that we are building with Object Computing will create practical liquidity for carbon offsets and removals. These semi-fungible assets have auditable attributes which characterize their market value. The ARMM will work within the market to estimate prices corresponding to attribute profiles. By directly integrating with the market and making its own trades, this market maker can improve efficiency and aid in price discovery of these assets," said Michael Zargham CEO of Blockscience. "By building the ARMM and leveraging the high throughput capabilities of Hedera, we can maintain qualities of specific assets such as durability, leakage, and additionality down to the signature of the assets’ origin while trading in a liquid manner. We’re excited to join Object Computing and the HBAR Foundation on this innovative endeavor.”

About the HBAR Foundation

Founded in 2021, the HBAR Foundation fuels the development of the Hedera ecosystem by providing grants and other resources to developers, startups and organizations that seek to launch decentralized applications in DeFi, NFTs, CBDCs, ESGs, gaming and other sectors. In addition to providing funding through a streamlined grant process, the HBAR Foundation acts as an integrated force multiplier through expert support across technical, marketing, business development and other operational functions that are required to scale. For additional information, please visit www.hbarfoundation.org or follow the Foundation on Twitter at HBAR_foundation.

About BlockScience

BlockScience ® is an engineering, R&D, and analytics firm specializing in complex systems. Our focus is to design and build data-driven decision systems for new and legacy businesses leveraging engineering methodologies and academic-grade rigor.

With deep expertise in Blockchain, Token Engineering, AI/Data Science, and Operations Research, we are able to provide quantitative consulting to technology enabled businesses. Our work includes pre-launch design and evaluation of economic business and ecosystem models based on simulation and analysis. We also provide post-launch monitoring and maintenance via reporting, analytics, and decision support tools.