It was an exciting week for Microsoft. On Tuesday, it was overtaken by Nvidia as the world's most valuable company, but after Nvidia shares fell Thursday, Microsoft closed the week as the number one again. It will prove to be a temporary position, as Nvidia's advance is unstoppable for now.
More interestingly, Microsoft signed a record-breaking deal this week in which it committed to purchasing eight million carbon removal credits, representing the largest ever carbon dioxide removal transaction.
In my not so humble opinion, it is the start of a race in a new billion-dollar market; the CO2 removal market. I hope to be able to contribute to this myself through the Tracer project, which could be an important tool in the fight against global warming. I would like to invite you to make a contribution as well!
It is about CO2 removal, not just avoidance or reduction
The record purchase was a notable action by Microsoft because the reduction of one ton of CO2 emissions, commonly described as a carbon credit, is used by airlines, among others, for the worst kind of greenwashing. The lack of transparency and control in the market led to projects that often fail to deliver the promised environmental benefits and gave carbon credits a bad reputation.
The interesting thing is that Microsoft has not only set a goal of being climate neutral by 2030, but actually carbon negative. This means Microsoft will reduce greenhouse gas (GHG) emissions by more than half, remove the rest and then aim to remove the equivalent of its historical emissions by 2050.
In doing so, Microsoft recognizes that carbon dioxide emissions are so high that emissions reductions alone are no longer sufficient to achieve "only" a degree and a half of warming, the goal of the Paris climate accord COP21; this will require actual removal of CO2.
Tech giants embrace carbon removal credits
Microsoft is not the only tech giant focused on carbon removal credits, because along with Google, Meta and Salesforce, companies that rarely play together nicely, it recently announced the formation of the Symbiosis Coalition, a signal that the world's largest companies are willing to invest in high-quality carbon removal credits.
The tech giants' move toward carbon removal credits obviously also has an economic consideration. The economic potential of the carbon removal sector is enormous. McKinsey estimates the size of this sector by 2050 to be as much as $1.2 trillion, or $1,200 billion. This is based on increasingly stringent government taxes on carbon emissions and rapidly improving technology.
But 2050 is still a long way off. It is therefore relevant that Morgan Stanley estimates that the market for carbon credits, most of which will be based on CO2 removal, will reach $100 billion as early as six years from now, in 2030. Now I always distrust forecasts with nice round numbers, but in this case, due to global warming, there is an undeniable need for companies to invest heavily in CO2 removal. After all, without a livable planet, it's hard to make money.
What is unique about Tracer?
Since Hans Tobé and I founded Blue City Solutions in 2016, after our visit to COP21 in Paris, we have been looking for projects that can accelerate CO2 removal in a cost-effective way; that is, without subsidies or donations. With Tracer, we think we have found an extraordinary solution that, without, false modesty, benefits the world.
Tracer is the answer to the question: how do you scale the carbon credit market from small, opaque and without liquidity, to huge, transparent and liquid? This is extraordinary, because so far the solutions have been either liquid or transparent. Either efficient, or reliable.
Tracer's solution is based on a smart contract, a blockchain application, by Chief Technology Officer Philippe Tarbouriech. For enthusiasts, the "secret sauce" is the combination of a fungible and a non-fungible token in the same smart contract making it possible to offer buyers a single portfolio with multiple projects as the source of the carbon removal credits.
Compare it to a "basket" of stocks among fund investors. Buying carbon removal credits that way from different sources was not possible until now, which made this market hell for companies like Microsoft, Amazon, Apple etc who buy large amounts of credits. How can they ensure quality of carbon removal credits, especially if they buy from various projects worldwide where the removal at each project varies per year? This is so far unfeasible and complicates the growth of the market.
More details about Tracer's solution to this are in the tech white paper. The entire outline, from a summary of a few pages to the entire white paper, is in the, yes, Tracer Knowledge Center.
But rather than summarize all of Tracer's documentation, I think it would be more useful to share my own analysis.
Market and solution are clear
For nearly two decades, I have tried to assess every innovation through Guy Kawasaki's lens , which reduces every startup to ten slides. When Philippe explained his idea of Tracer to me, the problem that Tracer solves (the poorly functioning market of carbon removal credits), the value it brings users (transactions of higher quality carbon removal credits at lower management costs) and the "underlying magic" (an open source smart contract that documents the entire life cycle of a carbon removal credit) were quickly apparent.
What always helps to spark my enthusiasm: a huge market potential with solid customers (Microsoft & Co have budgets) and a pressing problem (climate change). What I find special about Tracer is that it offers a solution to large buyers such as Microsoft and Salesforce by providing complete transparency, through an assessment model based on "persistence"; by this is meant the duration of carbon removal.
Choosing that persistence as the most important factor - because some projects provide 100-year removal and others over a thousand years - also ensures right away that large amounts of CO2 removal credits are more easily comparable and thus tradable.
Real world assets new phase in crypto, pardon me, Web3
As an old man, I have long been very skeptical about the lack of underlying value components of crypto projects. In short, there was nothing more than supply and demand.
With Bitcoin, that is precisely its strength, but with many companies that tried to profit from Bitcoin's success with obscure tokens, a smokescreen was actually erected about possible value the token would represent.
At the same time, a simple analysis did show that the biggest crypto funds outperformed the biggest tech funds by far over the past year. And the market is always right; the only question is over what period of time.
I think the nice thing about Tracer, from a business perspective, is that there is continuous influx of capital from the "real" world. Boston Consulting Group has done a fascinating study on the kind of "asset tokenization" of which the Tracer project is an example.
Because a percentage of each carbon removal credit "tokenized" through the Carrot smart contract is used to purchase the Tracer governance token. This reduces the number of Tracer tokens in circulation and creates a deflationary effect, as is the case with Ethereum. Simply put: upward price pressure. And people both outside and inside crypto, or Web 3 as we have to say these days, are very keen on that.
Tracer is open source and decentralized
Once upon a time, Finn Linus Torvalds, with the open source operating system Linux and a group of volunteers, destroyed a billion-dollar industry of closed operating systems, making cloud computing many times cheaper. In short, without Linux, there would be no Amazon, social media or Netflix and certainly no AI.
Linux became an inspiration for other open source projects such as Ethereum, which does struggle with the image of being run too centralistically. An alternative governance structure is the Decentralized Autonomous Organization (DAO), which Tracer uses.
I won't go through the legal details of this, but at its core it comes down to the owners of Tracer tokens making the most important decisions. There is no corporate ownership of the software.
American investment firm Andreessen Horowitz, known for investments in Facebook, Twitter and Airbnb, among others, has written a legal framework for DAOs, but especially the Europeans will recognize many elements of the old-fashioned association structure.
In my opinion, this decentralized approach is a basic part of blockchain technology, which is still used too rarely.
The difference between tokens and shares
As a former investor in startups, I have experienced firsthand how long it usually takes even the successful startups to get some return to shareholders. Waiting five to 10 years is not unusual.
In Web3, I see the advantage of being able to start for relatively little money and quickly see if a product catches on, so that money doesn't disappear into a bottomless pit for years. So you try something, you adjust something where necessary, but then it's also: either stop, or a success.
In doing so, as with Tracer, there is often the possibility of getting at least the initial deposit out within a few months of launch. Tracer is funded through a phased token sale, with prices rising at each stage. This model is designed to reward early buyers as the project becomes less risky.
The advantage for early buyers is that they could trade ten percent of their tokens immediately after the public sale, while their remaining tokens are subject to a one-year vesting period. Such an approach shows long horizons and professionalism in Web3.
Dedicated team
This long-term vision is also evident in the tokens that the team itself bought early on. Almost twenty percent of the tokens are reserved for the team, with a so-called cliff of one year applying. This means that those tokens are only released and can be traded after a year, with this also applying to only a third of these tokens; the vesting period for the team tokens is thirty-six months.
Without wanting to portray them as superheroes who really deserve a cape, it is relevant to point out my personal involvement. I have no formal position at Tracer, but I have been instrumental in putting together the international team as an advisor.
For example, I introduced CTO Philippe Tarbouriech to Gert-Jan Lasterie, the Chief Business Officer (CBO) of Tracer, whom I knew from the days when I was a small shareholder in his company Flabber, which he sold to American media company Vice. Gert-Jan once gave me the excellent book he wrote about on cryptocurrencies and played an important role in accelerating my learning curve about crypto and blockchain.
I once introduced CFO Hans Tobé, who managed the international offices of the Dutch Center for Trade Promotion (NCH) for many years, with energy and sustainability expert Andrew Barbeau, who became our U.S. partner and strategist.
Notable names also include Hubert Shio-Hsien Tai, once one of the first hundred employees at eBay, who was later involved in the IPOs of two Chinese Internet giants as CTO and COO; not to mention Dr. Alberto Pace, Tracer's scientific advisor, who in daily life works at CERN as head of data management. I always joke that it must be nice for Alberto that at Tracer, he finally gets a chance to deal with a serious challenge.
All people with long and outstanding track records, each in their own field, and not types who will soon be offering a so called 'Masterclass' on "how to get rich quick by dropshipping crap". More key collaborations, team members and advisors will be announced in the coming months.
Join us and ... and what?
Nothing I say or write is advice, it is just my opinion. I do not own Bitcoin myself. Many people start drooling while staring at Bitcoin's 113% rise, Solana' s nearly 700% rise or even memecoin Pepe' s over 20,000% rise, all in the last year, but my advice is: only do this with money you can afford to lose, and for peace of mind, assume you've lost it too.
But if Tracer becomes successful, you will probably get back many times more than you put into it. In addition, I personally think it is important that Tracer is a governance token, allowing you to vote on the important decisions with your tokens. The fight against global warming is important enough to think seriously about and contribute seriously to. If you are interested in Tracer, click here.
And any comments, questions or other feedback I would love to hear!