Nori uses blockchain technology to make all transactions on its marketplace traceable and transparent. The pertinent, real-world data produced throughout the NRT lifecycle is logged on-chain as NFTs. More info on this data recording dynamic is provided further on in this subsection.
Nori has used both Polygon, a scaling solution for the Ethereum blockchain, and Ethereum itself at various points over its existence. The Ethereum blockchain is a ‘layer one’ solution, i.e., the blockchain itself. Polygon is a ‘layer two’ solution, an aggregator of transactions running on top of the layer one (Ethereum, in Polygon’s case).
At present, Nori is transferring its operations to Polygon. Now that Ethereum has converted to proof-of-stake, Nori may also use a solution that sits 'in between’ Polygon (the layer two) and Ethereum (layer one). Nori also uses the blockchain to host its crypto token, the NORI.
Why use blockchain? There are a variety of reasons:
Auditable and transparent: Blockchains are immutable. Historical data posted on them can't be changed. The blockchain also offers an auditable log of all activity, not just the final data. These qualities help Nori ensure its historical marketplace data is highly transparent.
Nori's blockchain integration helps verify who purchased and retired which NRTs and at what time. This data prevents entities from claiming credit for carbon removal more than once.
Real-world data from NRTs are also recorded on-chain so Buyers have insight into which projects produced their carbon removal and can review project data and verification.
Trustworthy and reliable: Blockchains distribute the roles of storing data and providing uptime, meaning there's no single point of failure or entity responsible for maintaining records in a database. Public databases come with higher risk of data loss.
Combining the above factors, using a blockchain is one of the best ways to address carbon market concerns around accounting and double counting. For an introduction to these concepts, refer to this whitepaper's Challenges in carbon markets subsection. Further, for more about why Nori uses blockchain, refer to this Medium post from Paul Gambill, CEO.
Why a crypto token?
Blockchains and the applications built on top of them offer pre-existing infrastructure to make a market for carbon removal. On-chain exchanges facilitate order matching and the creation of liquid markets for the NORI token to trade. The depth of these markets will ideally help the NORI token gain sufficient trading volume to support prices that move primarily based on relevant market information, such as heightened demand for carbon removals.
Ideally, the NORI token will be listed on other brokerage and crypto marketplaces as well. Making the NORI token tradable on many exchanges would increase its trading volume, helping make its price a more reliable reflection of changes in carbon markets.
The Ethereum blockchain features a variety of established token standards that developers have vetted and used for other applications. These token standards come with significant documentation. Creating a token in accordance with these standards is much simpler than creating and making a market for a financial derivative on an exchange like the NASDAQ.
The NORI token will follow the ERC-20 standard. The ERC-20 standard is one of the most commonly used for crypto tokens. Using the standard, users creating new tokens have flexibility to toggle their own specifications for things like total token supply. Had Nori engaged traditional financial index providers to develop a product to track carbon removal prices, the process would have been much more restrictive, cumbersome, and, perhaps most importantly, less accessible.
All NRTs issued to Suppliers in Nori's marketplace are represented by NFTs on-chain. NFTs are bits of code on the blockchain that are provably unique. Since NRTs are fundamentally unique assets – each NRT is accompanied by unique data about its provenance, date of sale (if applicable), and the Buyer who purchased and retired it (when applicable) – NFTs are the right technology to represent them on-chain. Turning NRTs into NFTs on-chain preserves their data and their non-fungibility.
Specifically, the Ethereum standard used to mint NRTs as NFTs is ERC-1155. Each NFT has a unique token ID. Each unique NFT also corresponds to a unique Supplier and reflects the total number of NRTs issued to them. Each unique token ID also encodes information about the source and location of the carbon removed by that Supplier. Verifiers who verified Supplier data are considered oracles in Nori's marketplace; they send the real-world data to the blockchain.
Nori has a publicly available registry where anyone can view the volume of purchased NRTs. Records will persist in this blockchain to enhance the transparency and availability of Nori operations via an immutable chain of records.