Startup Series: Toucan

Written By FRINGE22 Studio

Today's guests are Raphaël Haupt, Co-Founder & CEO, and James Farrell, Co-Founder & CTO, of Toucan Protocol.

Toucan aims to build a regenerative financial system — one that nurtures the beauty of the Earth rather than exploiting it. They are leading the way in discovering how the open internet can help tackle climate change. Earlier this year, Raphaël and James rebranded and launched Toucan Protocol, public infrastructure for carbon markets running on open blockchains. While the co-creators plan to start with carbon markets, their vision is much bigger: they intend to kickstart a regenerative finance ecosystem based on Web3 technologies and values to make DeFi work for the planet (DeFi stands for “decentralized finance”, it’s a new global financial ecosystem running on public blockchains like Ethereum). In February 2020, Raphaël and James hacked together CO2ken, a prototype carbon offsetting system for Ethereum. Since then they joined the Blockchain For Social Impact incubator and were awarded a grant by Polygon to deploy the Toucan Protocol on the network.

In the episode, Raphaël and James explain what ReFi is, the origination of Toucan, and a brief overview of Web3. We also dive into why they are applying ReFi's key principles to carbon markets, the existing carbon market and the problems associated with it, and the role Toucan plays in addressing the climate crisis. Raphaël and James are excellent guests with a wealth of knowledge about Web3 and ReFi. 

Enjoy the show!

You can find me on twitter @jjacobs22 or @mcjpod and email at info@myclimatejourney.co, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.

Episode recorded December 1st, 2021

In Today's episode, we cover:

  • An overview of Toucan

  • The distinction between ReFi and DeFi and the key regenerative elements of ReFi

  • Toucan's focus on ReFi principles and applying them to carbon markets

  • What led Raphaël and James to co-create Toucan and what initially piqued their interest in working on this project

  • The existing carbon market landscape and the problems it has

  • The dominant stakeholders and players that Toucan interacts with, what sets Toucan apart from other startups, and Raphaël & James' vision for the company

  • An overview of Web3, how to capture value with this system, and how the founders see Toucan as a company

  • Key differences between Toucan and other Web3 companies

  • How the founders think about the core team and resourcing for Toucan

Links to topics discussed in this episode:

  • Jason Jacobs: Hey everyone, Jason here. I am the My Climate Journey show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey or MCJ, as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but they were longing for a peer group as well. So we set up a Slack community for those people that's now mushroomed into more than 1,300 members. There is an application to become a member. It's not an exclusive thing, there's four criteria we screen for. Determination to tackle the problem of climate change, ambition to work on the most impactful solution areas, optimism that we can make a dent and we're not wasting our time for trying and a collaborative spirit. Beyond that, the more diversity, the better.

    There's a bunch of great things that have come out of that community, a number of founding teams that have met in there, a number of non-profits that have been established, a bunch of hiring that's been done, a bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there, as well as a bunch of events and programming by members and for members and some open source projects that are getting actively worked on that hatched in there as well. At any rate, if you wanna learn more, you can go to myclimatejourney.co, the website, and click the Become a Member tab at the top. Enjoy the show.

    Hello everyone. This is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.

    Today's guests are James Farrow and Raphael Hout from Toucan. Toucan is bringing carbon as a new money-lego to Web3. They're kick starting an open and decentralized climate finance ecosystem and they're doing so by building a suite of modular tools and products that make it easy for others to integrate climate finance into their products and reduce the barrier for climate action. Now, I was a little intimidated to have this discussion because I've been focused on climate the last three years, as you know, and that's been a lot and continues to be a lot for me to learn about.

    Well, Web3 is a whole other beast and it's one that I've spent far less time on, but there's some interesting things that are starting to happen at that intersection and that's exactly where Toucan lives, so I was appreciative that Raphael and James took the time to come on the show. This is a longer episode than usual, partly just because I had so little context about Web3 coming in that there was a lot to talk about.

    We cover some Web3 basics, for my benefit, we also get into some of the things that are happening at the intersection of Web3 and climate. We step outside of that and look at carbon markets in general and what's working well about them, what some of the gaps are or some areas for improvement. We'll also talk about what a well functioning carbon market could look like and then we get into where Toucan fits because that's exactly what they're trying to do.

    At any rate, I greatly enjoyed this one and I think you will as well. James, Raphael, welcome to the show.

    James: Thanks, Jason.

    Raphael: Hi, Jason.

    James: Nice to meet you.

    Jason Jacobs: That was in unison, that was awesome. [laughs] Is it gonna go that way the whole discussion?

    James: [laughs] Hopefully not.

    Raphael: I mean, we spend way too much time together, so yeah, that might very much happen.

    James: We're pretty much one brain at this stage, like finishing each other's sentences in this kind of stuff.

    Jason Jacobs: Well listeners weren't privy to the, the little small talk we did before we started recording, but you are actually both using this virtual software, but from the same physical location.

    James: Exactly. Adapting to the new reality of the virtual reality.

    Jason Jacobs: Awesome. Well, gentlemen, very excited for this discussion. I have been very focused on climate across sectors for the last few years and that's been keeping me more than busy, but I can't help notice that there's a lot happening in Web3. And it feels like an area that at the very least we should be paying a lot more attention to. And, and you guys happen to be focused right at the intersection of both of those things, which makes this a really exciting discussion and a timely one for me to have.

    James: Absolutely. I mean, it definitely feels like we said, at the intersection between Web3 and climates, and that's often something we say. And we even have a bridge between those two worlds. So yeah, absolutely. I mean, it's definitely a great [crosstalk 00:04:52].

    Jason Jacobs: That's even like that's like part of the product name, right?

    James: Somehow. Somehow-

    Raphael: It is. Yeah, it is. I mean, I personally believe that these two things are gonna like solve a lot of the coordination problems around the climate crisis. So I, I'm, I'm very optimistic about that personally, I have to say. But obviously I'm biased, you know, spending a couple of years and down that rabbit hole specifically.

    Jason Jacobs: Well, to set the stage for listeners and for me, maybe we should just take things from the top. So what is Toucan?

    Raphael: So Toucan is open infrastructure for the decentralized web. So, you know, what you refer to as Web3. And we're like kickstarting what we call the regenerative finance ecosystem. And, you know, regenerative finance is short... Or like is the long version of ReFi, which is kind of a, a game of word play with of DeFi. So, you know, DeFi is, you know, the craziness that's going on on chain, blockchain based finance systems. And we do think that we need a DeFi, a decentralized finance ecosystem that essentially is aligned with the planetary boundaries and we called it ReFi. And I don't wanna [inaudible 00:05:59] we coined the term. It's very much a term that is, you know, there's multiple actors at the intersection of crypto climate and this is kind of the, the meme that we're gravitating towards. And I really like it.

    Jason Jacobs: Now, what is the difference between ReFi and DeFi?

    Raphael: I mean, decentralized finance is, you know, essentially the idea of building a financial ecosystem that is, that is always on that is, you know, censorship resistance. Like there's no barriers to entry. And essentially a lot of the coordination that happens within the financial system is, is done by smart contracts, right? Which reduces a lot of barriers and makes it easy for people to create very complex financial applications out of their bedrooms, right? Without asking for permission.

    And I think what this has created, this like lack of barriers creates like incredibly strong force of innovation, which is why the space is moving so quickly and that it's almost impossible to keep track with. Right? And the ReFi part of this now is essentially saying, you know, like DeFi is copying a lot of the things that we have in traditional finance, just like replicating a lot of these models and bringing them, you know, what we call on chain. So, you know, they're powered on blockchains basically, built on blockchains.

    And, you know, it makes sense to copy things that already exist because it's easier, you don't have to reinvent the wheel. But I personally believe that our financial system is broken and has contributed a lot to, you know, the point that we are in history right now with like, like ecological crisis. And so ReFi is essentially the approach to create a regenerative finance ecosystem and a financial ecosystem that has regeneration at its core. So, you know, regenerative principles by design.

    And just to give you an idea, like if we, if we use money as, you know, our medium of exchange every day, today money is, you know, backed by the power of the US military or by oil, or essentially just the social contract that we all believe that money is real and worth something. But, you know, we can back money by things that we care about like by diversity carbon and like natural resources. So this is an example. Like if we did that, if we had money that is backed by, by the things that we actually care about, without even noticing people just transacting in this clean currency or whatever you wanna call it, it would create like regeneration without people even noticing. So I think we have a, essentially we have the power to create systems that align incentives in a way that, you know, planet earth as like the stakeholder that has always been forgotten is part of the equation essentially.

    Jason Jacobs: And I mean, a lot of what you're saying in terms of traditional fiat currency and the military complex and oil and things like that, Web3 by definition in is an alternative to that. And so when you bring in these regenerative principles, what are the elements for ReFi that are not included in DeFi?

    Raphael: The term ReFi is very young and funnily enough, we're actually launching a podcast that is gonna be called the ReFi podcast. And part of this podcast is to define the term properly. So, you know, whatever I say here should be taken with a grain of salt or whatever James says, 'cause like, this is something that is emerging. James, I don't know. You know, maybe you wanna take a shot at this, I just wanted to like point out that this is all nascent.

    James: Yeah, totally. Decentralized finance itself has been very good at sort of removing middle people, right? And incentivizing actors to act without the need to be essential controlling body of profits. Right? I mean, the minors who do the mining on the blockchains, they're incentivized for the ensuring of the security of the blockchains. And so if we kind of map this over to ReFi, it's kind of, well, how do we incentivize all actors within a regenerative financial system to benefit all of the participants in the system itself, right? Including mother nature as Raphael pointed out.

    So I mean, blockchains in and of themselves allow for the creation of these incentive mechanisms, right? That token economics can be used to encourage behaviors by making it something that everybody wants to do. And through the designing of these token economical systems, it really is possible to align incentives and have everybody come out as a winner. So I would say ReFi as a concept is definitely nascent and we're definitely figuring it out and at its heart, it's about creating something sustainable of an economy that doesn't repeat the mistakes that we've made previously. And yeah, I mean, getting us all, pulling in the right direction, I would say.

    Raphael: Yeah, we can use terms like sustainable finance or then in the context of carbon markets, often we use the word climate finance, which, you know, the idea of how do you finance some of these climate projects that, you know, are reforestation projects or renewable energy installations, et cetera.

    So, you know, at its core, the climate crisis is, is also very much a, a money problem, right? Like we have to allocate a lot of resources to places to mitigate the, the damages that already happened and prevent more from happening. So I think the idea is how do we make capital flow to the places that they need to go in a manner that is very effective and doesn't require middle man or that extract value typically in, within this system? And this is, you know, this is why we focused on carbon markets specifically because it's, it's also one of these markets that are still in their infancy, if you want. And it's a market that is historically, there's a lot of middle men and women taking, extracting value. And I think it's not a very efficient market. So this is why we chose to focus on there.

    Jason Jacobs: Okay. So what I've heard so far is that there are issues with the current global financial system that are intertwined with the planetary issues and that Web3 addresses some of those in terms of removing middle men and women and bringing more transparency and more decentralization. And I don't know if egalitarianism is the right word, but, but that you envision a world where we can take it even a step further and take Web3 principles and essentially factor in the externalities in a more explicit way. And that you think that the carbon market is one area that is ripe for that philosophy to be imparted. And so I assume, and we haven't talked about where Toucan fits into this specifically yet, but that that's where Toucan focuses, taking ReFi principles and bringing it to carbon markets. Is that right?

    Raphael: Totally. Yeah. That's our, that's like our first, first step. And I mean the sustainable finance, you know, space right now is like, is hot and everybody's talking about ESG and everything like that. But the reality is that a lot of people don't know how to get there, how to get to a sustainable finance ecosystem. And we believe that this shift from like a, you know, from the status quo to a financial system that is in line with our planetary boundaries, this shift can and should go hand in hand with a shift towards a decentralized system.

    So I had a really cool chat with [Wun 00:13:13] for ACDA who was like, "You know, leapfrogging and having these two technologies kind of... Or like these two things going hand in hand." So yeah, I, I believe in that, like similar to how countries that never had like mobile, you know, telephone lines, just jumped straight to mobile. I think that with their regenerative finance ecosystem they can just jump straight to blockchain essentially.

    And you know, you named some of the principles which are decentralization, but also, you know, governance is a big one. I think that some refer to it also as, you know, the ownership economy, the idea that the users should also be owners in the systems to kind of distribute ownership in systems more broadly and like align the incentives across all stakeholder groups and, and at its core it's how do we build technology that is a commons? Right? Technology that, that is collaborative by nature and not, not competitive. And I think Web3 offer a lot, offers a lot of these and we are probably gonna talk about DAOs later, I guess, but you know, this idea have autonomous organizations that are governed by, by people from the community and that can, you know, that align incentives between these users and still provide infrastructure that is like a commons essentially.

    James: Yeah. I mean, there's several, like that's definitely a big part of it, right? I mean, there's several characteristics that, you know, are quite specific to blockchains, right? And like one of the biggest questions Raphael and I continued to ask ourselves, especially in the earlier days was why blockchain? Right? Like why are we doing this? Like why is it gonna be better? And there's certain core principles or fundamentals of blockchains, like characteristics that they have that are really in our opinion, what make them the perfect home for what needs to happen. Right?

    So first of all, the transparency of it, that everything is on chain, that everyone can see what's happening. All of these transactions represents every piece of value and it's not just monetary value, right? It's also the exchange of impact. I mean, it's about, you know, money getting to the people who do the good work and also like getting that impact back to those polluters who pay or whoever else is going to, right? So that transparency is one aspect, right?

    The other aspect is this trustless nature that everyone talks of, right? That the innovation of blockchain is really that you no longer needed to trust a central party to make sure that you actually took that electronic money out of your bank and actually sent it to somebody. You know, like that was necessary in a world where we had to make sure that it wasn't sent to different people at once. Right? And so, you know, proof of work with Bitcoin was the first to solve this issue where we didn't need a trusted central authority anymore, that we could trust the network itself, essentially. And I think in carbon markets, it's clear that, you know, on the one side we have polluters who wanna pay and on the other side we have doers who wanna do. And currently, all paths between these two important key stakeholders in the system are through a sort of central body of actors who play a very important role.

    First of all, in educating companies about water quality, what do they want to choose to have on their book or choose to offset with? And this is all for companies about, you know, mitigating risk, right? Like none of these companies wanna get caught with their pants down in 10 years where they had spent a million dollars a year offsetting themselves only to find out 10 years later that this project was a scam and it's in all the newspapers. And so companies are fearful of this. And we know this 'cause we spoke to them, we've done a lot of customer development with all kinds of big companies all over the world. And so these companies are prepared to pay a premium on top of what they could pay for these credits, right? Like in order to mitigate that risk.

    But ultimately, this creates for an inefficient market, right? Like the value capture in the middle is value that doesn't go to the projects and it's definitely the case that this affects pricing. And it's definitely the case that there's plenty of projects that just don't happen as a result of this. Right? So it's an important job in education, educating people and also, you know, ensuring that, you know, these assets are of value. However, with blockchain and transparency, like we have the ability to design the systems that can play this role, that can really remove the need of trust because it's completely clear and obvious and anyone can validate and verify that credits are of quality, that actors can be independently incentivized within the system to make sure of quality and to, to reassure and put an extra value layer or an extra validation layer on top of this.

    And like these kind of things come from the first principles of blockchains, right? Like this like transparency, this trustless nature. And yeah, I mean, all of this is important. I mean, efficient markets consume and produce more, right? Like when value can flow unhindered, then more value can flow. Like this is kind of an underlying first principle of philosophy I would say.

    Jason Jacobs: Taking a step back before we get too far down the Toucan path, can you talk a bit about both the origin story of the project, I don't know if you call it a project or, or a company, but also the origin story... Like your own origin stories that led you to coming together and to doing the work that you're doing.

    Raphael: Toucan started as CO2KEN actually, which was a hackathon name actually. So it started as a hackathon project at East London in February, 2020. So right before the pandemic. And essentially it was born out of a, out of a couple things. Like first of all, it was, I've been in crypto since 2017, like so many people. And so I'm, I'm an engineer by training. My focus is energy systems actually. So when I discovered blockchains and like Bitcoin through one of my roommates and I was like immediately kind of fascinated about the impact of, of blockchains for the energy sector and kind of focused on this peer to peer energy use case that everybody was, was talking about a couple of years ago.

    And then I, I got really excited about DAOs, that was in 2019. And I looked at the climate crisis and was like, "This is a governance problem." Right? Like the reason that we fail to solve climate change is because we, we don't have the governance systems in place to address it. And like governments are just not incentivized to do the right thing. Right? The incentives are not aligned. So that's what made me really curious to look at the intersection of DAOs and climate essentially. And then I wrote my bachelor thesis back in the day about carbon markets. And then I think like all these bubble pieces came together.

    And I went to East London with the idea of building a DAO that tokenizes carbon credits. Right? So pretty much what we are doing now already, but back then, obviously the idea was not as ripe. And I was very naive about carbon markets, I would say also, also still at that point. You know, it's, it's one of these rabbit holes... I use that term, which often, but carbon markets is one of these rabbit holes where you think it's quite simple, but it's actually extremely complex.

    So we went to East London, we hacked together the first version of, of CO2KEN. And then I joined a venture builder out of London called Deep Science Ventures, which, you know, [Don 00:20:21] was on the show a couple of months ago. So you should know him. And that was really a place where we could think, you know, and we could learn. And really, you know, that's where also James and my, and my path cross. You know, James I'll let you talk about how that happened. But essentially we spent more than six months in one room with, I think it was 12 whiteboards or 13 whiteboards. And we were basically just going up and down the carbon value, the carbon value system. And we're trying to find, okay, where does crypto and climate actually... You know, where does it fit? And how can we... Where does this really solve a problem that needs to be solved?

    And it feels like it was really challenging because it felt like we had to build every piece of the puzzle ourselves, right? Like there's not... Every part of the value chain like needs to be disrupted in my opinion. It was really hard for us, for like a young, you know, young project to find the place that you could actually, you know, find the building blocks that you could build upon. And ultimately, we decided... We had a lot of... You know, our main focus has always been the projects underground. As you know, James alluded to earlier, we were trying like, how do we get finance to the project? And we tried to convince them to come to Web3 because, you know, it was easier for them to, to find buyers or because it was more transparent and removed the middle end. But honestly, nobody, nobody really cared because there was no clear demand signal coming from, you know, on chain.

    And so we decided to focus on, on the demand side. And you know, this sounds like it was very straight line. It was not. Like it was really frustrating. We took a break and James and I got back together after this break and like just finished basically what we started with CO2KEN because it, it was more built on an intuition than, than like a... You know, obviously we learned a lot, but we decided to, to finish it. And we started working together with KlimaDAO, which is a carbon-backed currency and which really, you know, gave us a very clear goal to work towards as well. So yeah, and then we launched in October this year and since then we moved... I didn't check. I think it's like something like 13 million carbon credits on chain. And yeah, more every day. So it's pretty much boggling to be honest. And it's been quite a ride since then. Both before the launch and now after the launch.

    James: I mean, for me, like we didn't start at exactly the same time, right? Like CO2KEN happened at a hackathon in London first. My backstory is I'm over 20 years a software engineer and I spent most of that time as a consultant. You know, doing contract work for all sorts of different companies, generally trying to make as much money as possible and then save up that money, take some months off and then work on my passion projects. And this became a very dry empty world. And everything changed me one day when I went to a hackathon, a different hackathon, with a team here from Berlin. And I took part in the Scaling Wildlife Protection track there that was very much focused on blockchain.

    And that was with [Birdchain 00:23:14] is the name of the group. And the hackathon was the Odyssey Hackathon. And we ended up winning that track and it sort of really changed the trajectory of my life in that I realized I could really u- use all of these skills and experience that I've developed over the years to, you know, do something meaningful, something like close to the heart. And so this for me was really a game changer. And after this time, me and Alex, one of the other team members, like we basically spent our life savings and dedicated ourselves to trying to figure out how to solve what for us was one of the trickiest problems like we thought, which was all around, like, you know, how do you validate and verify impact? Right? Like how do you make sure that someone's actually done something? You know? We're very familiar with someone walking around with a hat and throwing money in there, but we totally trust them to do the best thing with that and we don't really know what they end up doing. Right?

    So in the hackathon we glossed over like solving this problem because all we actually wanted to do was allow NGOs to issue a kind of badge to people who gave time or people who gave money. And we wanted this badge to be a live data-driven badge, right? That like was driven by the impact that was created by this work or whatever. And you know, you click on it and you'd see the KPIs that were behind this, the data that was behind this beautiful badge or whatever, but we glossed over this, you know, validation of impact or verification of, of impact. And it turns out like that's the trickiest part. And thousands of people have banged their heads against the wall o- on that one and continues to do so for, you know, quite a long time.

    But when I was watching Twitter one day and Raphael like came across like a, a shooting star, I immediately recognized that carbon credit solved this problem. That, you know, even though they're not perfect, and even though they are what they are, right? They actually are a kind of, you know, validated, verified impact. You know, someone may have gone and hugged a tree there. And so by abstracting that out to, you know, people like that are at world standard that we could actually build what we really wanted to build in the first place. And I could get my head out of these scientific papers about remote sensing and machine learning and all this stuff and actually go ahead and build what I would like to build. Right? So got in touch with Raphael here. It turned out he was in Berlin also, and we met, met for a coffee and yeah, the two of us wouldn't stop talking for quite a long time.

    I think for both of us, it was really the first time we had met someone else who really, that we could talk to. Right? Because like, when you think about this stuff, like for so long, you go down so many of these rabbit holes, like there's very few people who can really understand you. Right? So serendipity had it that we were very close by. And since then, yeah, as Raphael said, we locked ourselves in, in a room for six months with 13 whiteboards, you know, mapped out many different companies or like entities or organizations that would need to exist to make this new economy. And yeah, after a break, went back to the beginning and said, "Okay, well look, what is the lever that we can pull?" Like what can we do that would have the biggest impact?

    And for us, what was clear is that there, there would need to be like some kind of way to like transmit value between all of these actors, like a kind of mycelium that allows value to flow. And there's certain particular primitives. In this case, we had three primitives that would enable that value to flow. Right? And that's, that's really where we started. And that's why we went back to the origin idea of tokenized carbon. Because that really is the kind of like the building block with which everything else can be built. Right? I mean, so far we've built a kind of carbon bridge as we call it. And we also have built what we call carbon reference pools.

    So the first of which is called the Base Carbon Tonne, which is what is used as the underlying value in KlimaDAO. And this is because, you know, carbon projects are what we call semi-fungible. So it's like there's fungibility, which is a term that's simply means that things are the same as each other, like dollars. You can exchange $10 for 10 single dollar coins. Right? And it doesn't matter 'cause they're all the same thing. And then you have non fungibility, which is essentially unique items that generally have some unique identifying characteristics. So that's a non fungible item.

    And carbon projects, like there is fungibility, right? Like at the level of project and at the level of vintage, there is fungibility, but in terms of building markets and in terms of building, you know, really deep systems that can allow value to flow, like we really need deeper liquidity. So the purpose of these pools, well, in this case, the Base Carbon Tonne pool, really is to create deep liquidity and fungibility. So, so this is kind of the two pieces of infrastructure that we've, we've started with, I would say.

    Jason Jacobs: Well, that, that was super helpful. So now what it might be fun to do is putting aside Toucan and even putting aside Web3. Now we're just outside of ourselves and we're looking at the carbon markets. Carbon markets get a lot of shit. You know, lack of transparency, incentives are all screwed up, you know, lack of quality, lack of additionality. Right? And I, I just led you, which I try not to do. So I wish I could take back everything I just said, but I don't wanna talk about solutions for a moment. I just wanna talk about the problem. If you step outside of yourselves and look at the carbon markets today in a world that Web3 does not exist, in a world that Toucan does not exist, what do you see? What's the state of the state and what's wrong with it?

    James: I mean, like we did six months of deep research on a grant, right? Like, so, uh, part of this was a lot of customer development, hundreds of calls. And the conclusion that we came to is that there's kind of two, you know, two types of actor on the buy side, right? There's generally speaking, and like I'm generalizing, this is opinion, I'm not saying it's fact, but this is my opinion on the matter. Like there's generally two types of actor. The first is sort of bigger corporates. And these bigger corporates are kind of more interested in numbers. So they care less about quality and they just care about balances and ticks and this kind of thing. And then there's other types of companies that are more interested in the ability to tell stories.

    And in this kind of way like we see, you know, some companies prefer to give their money to like tree planting organizations or to buy diversity charities or like something that allows them to tell the story. Right? In the case of Stripe, they decided to make their own technological based approach, for example. Right? And that's, that's also about story to some extent. And so there appears to be these two different types of actors. And so generally speaking, like this is like at a very high level, I would say somehow.

    But quite frankly, the biggest problem as far as I see it is that we are measuring things in terms of tons of carbon, right? Like we're really looking at it as if like this is a sensible thing to do at all. And if that was a sensible thing to do, and you wanted to just, you know, produce carbon assets, then you should get like the fastest growing monoculture trees, plant them and as quickly as possible, you know, certify them or whatever. Right? But this doesn't help biodiversity, this doesn't help community, this doesn't help anything around permanence or any of the other business. Right?

    And so, I mean, for us, it's super clear that the whole thing is super problematic because if you don't create opportunities for jobs and improve health, improve education, gender equality, all of these things, like it's not really gonna solve the problem for very long anyway, even if you are successful in producing carbon assets, right.

    Jason Jacobs: If I can stop you, I just... So I think what you're saying, so point, issue number one is that the criteria for what makes a carbon credit is to, one, track and not robust enough to make sure that that credit is of sufficient quality. Did I get that right?

    James: Yeah. Sort of. I mean, I wandered around a little bit there and pulled you left and right. But I mean, at the end of the day, it's simply that like, we're trying to actually measure this impact and we're measuring it in terms of carbon and in reality, like it's not, in my opinion, the best way to create the best impact, right? Like we need to look after human beings and people and social wellbeing and it goes hand in hand with environmental wellbeing. Right? But it's super difficult to quantify that and measure that and create a market for that as such.

    So the only sort of asset that's actually got a market or like there's an actual asset that could be traded is carbon. Right? I mean, loosely speaking, there is other ideas out there, biodiversities coming, et cetera. But in my opinion, like optimizing for a single unit of accounts like this is somehow problematic, right? But it's an imperfect world and we are, you know, imperfect and getting better every day. Right? So I think that this unit of accounts approach is responsible for a lot of the issues I would say. And I guess to me, it's connected to how we decide to measure success while we are trying to increase... Well, not... When I say, "We," I mean, while company or individuals are trying to increase their sort of social capital or their social reputation through, through participating in these markets, I would say.

    Raphael: Yeah, this unit of account is, is one of these that is always difficult when you just look at a, a problem with like a certain colored glasses on, right? You look at it and you see the world in a certain color. But that's just reality of the complex system that we're interacting with. Like, it's always... You can look at the climate prices and even if you think you do everything right, you can end up creating harm somewhere else if you don't really do it right.

    So I think this is why the carbon market has come under, under a lot of pressure, especially in the past and, you know, mo- monocultures of trees or projects that have actually displaced i- indigenous people and yeah. But another point in my opinion is that it's just not really a well-functioning market, right? The majority of the carbon market exists over the counter and it happens behind closed doors. It's not really clear which prices, transactions are executed oftentimes. So... And this, you see that very often in the market that is opaque where it's actually a lot of the actors within the market, they profit from the lack of transparency in a market because they can, you know, use this information as symmetry tricks to act value. This is what we see, you know, middleman brokers, et cetera, that do that in my opinion.

    And then also combined with buyers that often don't have maybe the, the right reasons to purchase carbon credits. And, you know, you see that very, very often that companies will buy like 90% of cheap, hydro power credits and then they will like purchase 10% of like reforestation or like high quality nature based credits. And then they're just gonna put the nature based credits on their website. Right? And they're gonna say, yeah, we offset like X amount of carbon, but most of it comes from sources that are maybe that's, you know, less trustworthy.

    So... And this is one of the problems that obviously having carbon markets on chain can solve because we, we have a track record of exactly who compensates missions with what. But yeah, without going to crypto. So lack of transparency obviously is one. Then I think big, big problem is that carbon markets you always talk about, it's a lot of things, right? It's avoided emissions, it's reduction, it's credits that are a based from reduction of emissions. And then you have the other world, which is carbon removal, which is often like, you know, we talk about these things as if they're the same, but they're very, very different in my opinion. And they're both very, very important in my opinion, right?

    Like it's obvious we are in a system where we like keep emitting more, right? Like the first thing if you're like in, in the pool and there's too much water in the pool, the first thing that you do is like you close the tap. Right? And then the second thing that you do is like you pull the plug. So we have to do both, it's my opinion. And I'm, I'm not a friend of like being too evangelistic about one solution over the other, I have to say. I see Toucan playing a role in both worlds. Absolutely. And the way that we've built the system is that it, it already allows for both worlds to coexist.

    Jason Jacobs: So it's the unit of account. It's the lack of transparency. Were there other issues with the carbon market as it sits today?

    Raphael: I mean, the lack of quality that comes sometimes with this lack of transparency. Obviously, I mean, additionality, I think is one of the biggest problem, especially with like avoided emissions. And then with carbon removal, you have the big problem of permanence or, or durability, right? So each side comes with a big, you know, custom problem, if you want.

    Jason Jacobs: I mean, there are some people that say that carbon markets in general, by definition, just give an excuse for an action and that ultimately they should be abolished, they're not working anyways, they're convoluted, they're full of crap, the incentives are all screwy and that we just need to reduce our emissions and, and stop messing around. It sounds like you, you have a different view than that though. Can you maybe speak to how you think about that? 'Cause you just laid out all the issues with the carbon markets. It sounds like a mess.

    Raphael: Yeah, it is. I have a slightly different view, I would say. Like first of all, I do think, yes, we absolutely have to reduce our emissions. And I think one of the problems with carbon markets is that the only use case of carbon markets today is to match these like positive externalities which, you know, carbon offsets are kind of packaged positive externalities, if you want. And the only use case that we have for them is to match them with negative externalities, which is a slightly boring use case in my opinion. And I agree, we have to go beyond carbon neutrality, right? Like just buying your way out of it is not gonna cut it. Right? And this is why looking at, you know, the first application or like the first project that is making use of our infrastructure of Toucan, is KlimaDAO which is this idea of having a carbon-backed currency, which just drives the price of carbon up for everybody.

    So increasing the price of carbon means that it creates an incentive for polluters to actually reduce emissions rather than compensate it. And it also creates price signal for project developers to develop more projects because it's more lucrative, similar to like when the oil price increased, suddenly fracking was a thing. Like we have to get carbon prices like well above $100, right? Like for meaningful change to happen. And we believe that by basically expanding the use case of carbon offsets beyond just the idea of like using them as offsets, but using them as a store of value, using them as a collateral, in other system using them as a collateral in, in KlimaDAO, but also using them as collateral in systems like MakerDAO or the Central Reserve or, you know, you name it. There's like now we have, you can do lending against, against carbon credits on chain. Like unlocking all of these applications essentially just increases in just adding more people to the market.

    'Cause right now it's a market that is closed. It's really hard to participate in the carbon market because it's kind of like there's gatekeepers in place that make it really hard for like non people to participate. So our idea is by like allowing everybody to participate in these markets, it will be possible to internalize or like to have the future value of carbon reflect in its current price because people are gonna price it then. And we can have systems like KlimaDAO that actively create incentives so people... To lock carbon away, which creates a positive feedback loop essentially, right? Like driving the price of carbon up.

    So I would say, yes, carbon markets and the way that they exist today are, are broken. And a lot of it has to do with the way that carbon offsets are used. But I don't think that we should stop doing projects, right? That do many meaningful change. And I don't think we should stop measuring these projects and trying to analyze how they, you know, how much carbon you have emitted or how much like other core benefits they have created. And obviously, there's a lot of problems with the way that it's done, right? The way that these projects are currently monitored is not ideal. It's far from being ideal and it needs to be more data-driven, it needs to be more transparent, it needs to be more grassroots, the barriers need to be smaller so that small projects can exist. All of these things are true.

    And this is why it was so hard for us to start and, and... To start. Right? 'Cause we, 'cause we, you need to build everything at once essentially. But yeah, I don't believe that the idea of having a positive impact, measuring it and then creating incentives to people to reward that positive action is a problem.

    James: Yeah. I mean, people are not going to behave better if we just ask them nicely, right? Like we need a carrot and a stick. And I think at the end of the day, like even if people are gonna behave because they look good and, you know... I mean, let's face it. Reputation is the only side money we have. Right? Like even if we make the statement like this, like how do we actually know that people are doing good in the first place? Like that's still a problem to be solved. Right? And we should also solve that problem. Right? But I think that like clearly we've made a decision around using markets, markets' assets themselves in order to coordinate value. Right?

    And like having assets that have a value like allow us to create incentives that allow us to incentivize people to do what's best for them. Right? And if people would do what's... Like one thing we can be relying on is that people will do what's best for them. Right? So I think market mechanisms allow for that. So for me, it's definitely part of that equation. And even if we go beyond that and allow people to dazzle and shine and, you know, allow companies to look super awesome and super amazing, this needs to be based on data also, right? Not just on advertising or green logos or whatever it's gonna be. So yeah, I mean, all of it, all the above.

    Raphael: Exactly. Like in, in crypto, you know, there's this concept of money-legos, or, you know, composable building blocks. This is what makes, you know, decentralized finance incredibly fast is that you have these like small financial or not even financial, like you have these small applications that can all be pluck together to build very complex systems. And what we've built is the first carbon money-lego that is fully composable and that allows anybody to bring carbon on chain. Like we are just a first facilitator of that.

    And now that we have this composable building block, we can now unleash the whole creativity of Web3 builders and like, and builders beyond Web3 obviously as well, on creating incentives to do something really cool with these building blocks. Right? And we see it already, like, you know, as collateral. I think this is one of the biggest use cases, essentially, because if you just look at the amount of like money in the world, I mean, if we can find ways to use carbon as a collateral, this is the, essentially a new sink, right? We create economic carbon sinks, if you want, by locking it up in like currencies and by locking it up in like automated market makers and all of these things. So this is a huge kind of like part for itself, I would say.

    The other one is obviously using it as a building block in, you know, NFTs, metaverse. So there's a project that is building, you know, a metaverse that is kind of a, a f- front page to, to Web3 called Atlantis World. And essentially within their system, they're building this big forest, which is a metaverse forest. So it's like the pixel, a pixel forest, but they want each tree in that forest to have actually sequester carbon in the real world as well. So this now becomes like extremely easy to build because having carbon as a token and it's ERC20 token, which is a, a token standard that, you know, everybody's using on in, in like in Web3, or like mostly like in, in the Ethereum unit system, this allows people to build cool stuff on top of carbon.

    And you know, how do we... I was, it's hard to explain to my mom or to my grandma that like there's this virtual forest that is sequestering like million tons, like couple million tons of carbon. As James said, it's really just about creating this incentives for people to do the right thing and to direct, to direct some value to, to where it needs to go. Right? I see this essentially, you know, a financial system is two things. It's like infrastructure and it's vehicles, right? So we need to build the infrastructure obviously. And this is one of the bigger problems with like climate finance and sustainable infrastructure is that we lack... It's really hard to send money from, you know, Germany to, to Brazil, or it's really hard to get a loan, get, get, get credit as like an entrepreneur in Peru when you wanna plant some trees. Like, and this all creates friction and it means that things don't happen because it's too difficult or 'cause it's too expensive.

    So the first thing is to create this infrastructure that value can actually flow and blockchains is this infrastructure. And it doesn't allow just for like financial like applications, it's just like, you know, blockchains are inherently a coordination tool, that's what smart contracts do, they're really good at it. And like climate crisis is the biggest coordination failure that we have. So I think, you know, there's a match made in heaven here. And it works for finance, but it also works for just like tracking impact and like validating impact and like, you know, accreditation, identity, like all of these things are gonna come together to build kind of this, this network of notes that can allocate the value where it needs to go.

    And the other thing is vehicles, right? And I see carbon credits just as one vehicle. And it's a vehicle that, you know, transports, you know, it's a form of results-based finance mechanism if you want, that just allows like money to flow from one place to another. And it's not the only one, right? There's bonds and, and I think we can be innovative on like these vehicles as well. It's just like we have to start somewhere. And for us relying on some actors like Verra or gold standard that have built legitimacy over, over many years is a way to fast track this, this change because, you know, a lot of people, a lot of people are kind of skipping over this part of like rigor and like scientific rigor when it comes to carbon markets. And I think this is, has been a huge problem in the past.

    And I believe that rigor is absolutely important to guarantee that carbon markets are a thing because we're dealing with intangible assets that are basically just a accumulation of data and signatures that like form these credits at the end of the day. And at the end, you trust the actors in, in institutions that put the stamp on top of it. So relying on some actors that have been doing this for like many, many years has been our way to kind of fast track and like kickstart this market.

    Jason Jacobs: You talked about how you essentially need to build everything at once. And I mean, what I hear here is this big vision, but in order to get there, it seems like there's a number of these kind of chicken and eggs where, you know, if you don't have one side, the other doesn't work and if you don't have that side, you can't get the first side. And in terms of staging, how are you thinking about, and how have you been phasing the evolution towards what you're articulating for vision and, and where are you down that path today? Like you mentioned the 13 million credits, I think it was, for example. So it'd be great to just understand, like, what does that mean? What is actually happening on your platform and, and what different stakeholders are you serving and what, what elements exist today? And also which ones are Toucan taken on versus ones that others, you know, whether it be a KlimaDAO or a Verra or somebody else needs to fill.

    James: Yeah. Aligning incentives. Again, we chose to build what allows everybody to communicate with each other and to transact value. Right? And like, I mean, even for us, like the language that we use is very different to like non Web3 people. I spoke to someone yesterday who asked me questions about, okay, so all of these companies that are gonna use Toucan or something, and it just sounds weird to me. Right? Because we don't look at it like that. We look at it as it a complex system that has got actors within it that are all working towards the benefit of all of these different actors? Right?

    So our strategy has always been, how do we enable others? How do we partner with people? You know, there's other people that like have taken an approach to like scaffold out, like a very clearly defined playing field of what their protocol is. They've written massive white papers that are now three or four years old. And they ended up not doing much of what they set out to do in the first place. Right? And I think our, our approach has just always been like, let's start simple. Let's start at the bottom with the building blocks itself. Let's stay flexible and allow ourselves to move, but let's always try to get as many of these work streams happening as, in parallel as possible. And the way that we do that is we kickstart the project and we look for entrepreneurial spirits of people to kickstart that project, always with the vision that we can fund them and spin them out later. Right?

    And like, that's always it, right? Like it's like, how do we enforce the biggest change or create the biggest change in the world? Is to enable everyone else to do so to their own benefit really. So, yeah. I mean this, and just like really having an open out of attitude of honesty, like with ourselves, like we play devil's advocate with each other all of the time and we're very skeptical of our ideas and always ready to pivot and change and simply like trying to figure out like, how do we enable as many people and, you know, should we continue on the path we're on, basically. So staying agile and flexible in this way also.

    Raphael: Yeah. And this is why we, you know, call it the ReFi ecosystem and we are not gonna build everything. Like I hate projects that claim that are gonna build everything, because it basically excludes everybody else from their party and it essentially creates this, like for somebody new coming in, it creates this huge red flag where it feels like, "Oh, no, I can't build with them because they're just gonna swallow me." Right? Like this is again, you know, lining incentives. What we can do is we can create systems that align incentives between stakeholders by having, you know, token swaps, by having all of these systems where we all profit from, you know, building on top of each other.

    And to make it very clear, like who are the actors right now that are using Toucan, right? 'Cause this is all very abstract, what we're talking. So the users that are using Toucan, there's, there's on the supply side. We have project owners, we have project developers and we have brokers. So I would say very traditional carbon market actors that they currently sit on carbon offsets or carbon credits. And these are carbon credits that are so-called, VCUs, verified carbon units from the Verra standard. And what the Toucan Carbon Bridge allows these actors to do is to essentially tokenize these credits. And essentially what this means is that we create a digital representation of these credits as a token. Right?

    And we've built this system in a way that guarantees that there's absolutely no way that can be double issuance or double spending of that, of that credit. So now what we have or what these people have is a token that represents a specific carbon credit from a specific project and a specific year, what we call vintage in carbon markets. Right? And it was important for us to build this as an infrastructure that still maintains and keeps all these attributes on chain, because that's the value of these projects, right?

    Like this is what James alluded to earlier is like, I don't believe in one ton as a ton, as a ton, for instance. Like, yeah, I think this is too shortsighted. It's just like rice, you know, there's not just like one form of rices. There's like, you know, basmati rice and different forms of rights. It's the same thing with carbon, you know, like why would we create a commodity that is like so narrow? So... But now these actors, so they bring their carbon credits on chain and, uh, they represent it as TCO2 token. So the T stands for tokenized or Toucan or a ton. So a ton of carbon on chain, and now they have to deposit this ton of carbon into the first pool that we've created. So it's called a carbon reference pool. And it's very much based on the, or, you know, in line with the Taskforce on Scaling Voluntary Carbon Markets.

    They've created this idea of like reference contracts and essentially these pools are, as far as we know, the first implementations of these reference contracts. So a pool works in a very simple way. It has something like, like entry or like gating attributes. And, and basically you can create some like filter mechanism. And it says, you know, we only allow credits from this standard, from this year with these methodologies, for instance. Right? So the first pool that we've created in partnership with KlimaDAO is the Base Carbon Tonne pool. And the idea of the Base Carbon Tonne pool is that it's this like, it's the catch it all. It's the first, it's the first pool that essentially can deposit any TCO2 token. So any carbon credit from any project you can deposit into it, if it's from Verra and if it's a vintage that is 2008 or newer, and the pool's gonna give you another token, which is the BCT, the Base Carbon Tonne which represents essentially a coupon for any project token that is inside this pool.

    And the beauty about this is that now we have one token that essentially is backed by this basket of different carbon offsets. And now we can create a liquid market, right? So what we have now is that we make use of this with, you know, these decentralized exchanges that we have in crypto, we particularly, we use SushiSwap, which is one of the bigger exchangers on Polygon. So we chose a blockchain that is not powered by proof of work, but by proof of stake to, you know, have 99.9 fewer carbon emissions associated with the blockchain that we use. And now in SushiSwap, we have a market. And as of today, the Base Carbon Tonne that we use, this C pool, so this is essentially a market between this carbon ton and a US dollar stable coin is the most liquid market on SushiSwap Polygon with over a hundred million in liquidity.

    And so this means that now anybody that has a wallet that has, you know, crypto can come and can swap their assets for this Base Carbon Tonne. And what KlimaDAO has done essentially is that they've created another, it's kind of like a sea... You know, Toucan is kind of this horizontal system that can power multiple protocols. And KlimaDAO is one of this protocol that is obviously the, the first one. And you know, you talk about this chicken and egg problem. And this is, you know, Toucan and Klima has been this like, we've been helping each other because one of us is the chicken and the other one is the egg, right?

    So KlimaDAO is creating the demand and we're, we're like allowing the supply to come on on online. And neither could have happened without the other. So KlimaDAO now creates this carbon-backed currency, which, you know, basically creates an incentive for people to lock our carbon ton inside of their treasury and mince a, a currency that is called Klima and that is essentially backed by, by carbon. So the actors on the demand side, like there's actors like KlimaDAO, which is essentially protocol, but we have other actors that are, what we now called the builders in Web3 that are, it could be like metaverse builders or NFT projects or companies or companies that want to offset their emissions and they wanna do so in a way that is transparent and they wanna get the market price right.

    'Cause what we've created, essentially we've created a wholesale market on chain that is also accessible for the retail investors, right? So you can get essentially, you know, you can get your carbon offsets at very close to the price or often the same price that wholesalers would get it, but you don't, and you don't pay for a middle man essentially. And the cool thing about, I really have to emphasize this, this cool thing about Web3 is that this demand thing is almost sorting itself out without our help, right?

    Like we have market.xyz which is a lending market that has just implemented BCT. Like we didn't do anything. And now we have the first lending market. We have QiDAO, which is a stable coin on Polygon that has gone through a governance process that they have kicked off to accept BCT as collateral for their stable coin. And they're doing it right now. Like obviously we're in touch with the team and we're like coordinating and et cetera, but they don't even have to ask for permission. They can just do it. So now the demand side is kind of sorting itself out. Parts of it is sorting itself out naturally. Obviously we're doing... You know, our goal is, as you said, yes, it's to creating more demand sources.

    And at the same time, now that it's clear that this crypto climate thing is a thing and the Base Carbon Tonne is, you know, it's gonna be the worst of all reference tokens because it's the widest. So we are already working on a new pool that's gonna be higher quality. And as you said, you know, an nature based carbon ton, a carbon removal ton, a nature based carbon removal ton, a blue carbon ton. You know, like all of these things are gonna come and we are already working on them with different teams essentially.

    And I just wanna highlight this, like this is for project owners right now. You know, project owners are right now selling to intermediaries often at like very low prices. And then once they did, so they don't get any upside in any market movement. This gives project owners the possibility to just sell directly to the market if they want, right? Like they don't have to go anywhere, they can just come online. And, and we have companies that are, that are partnering with us that are helping project owners to onboard directly on our platform and are doing so. So there's like a hundred thousands of credits coming on chain every day.

    James: I will go a step further, right? It's like the projects don't even need to bring their assets on chain and sell them directly and get that higher price. Right? Like they can literally bring the carbon credits that they produced on chain. They can use market.xyz to deposit this as collateral. And they can borrow US dollars against the value of this carbon and then finance themselves with this. Right? And then the project manages then to keep, keep exposed to this asset of carbon that's going up all the time. Right? And that's a big part of what's happening also. I mean, let's not forget, right? It's very difficult pre six weeks ago for the average Joe to gain exposure to carbon markets, right? Like how do you get access as an individual person to a rising price of carbon, right?

    Like you can offset yourself, yes. With a retailer. Or if you have a special account in Verra, then you can hold these assets. But it's really not easy to get that account, first of all. And it's not cheap either. It's like thousands of dollars if you're lucky enough to be approved to get that, right? But now we have a world where anybody with a computer or a phone or, you know, the ability to learn can have access to this rising value of carbon itself. Right? Including the projects. So that for me is one of the most exciting parts of it. Right? And like we see people really, you know, embracing carbon also.

    I mean, like, I'm just looking at the, the SushiSwap pool right now, in the last 24 hours, $30 million of carbon has been transacted. Like CBL, like per year, boosts 70 million tons per year. Right? And now we're looking at like $30 million, not tons, in 24 hours. Right? Like, it's crazy. Like this is new stuff guys. Like it's really, it's incredibly exciting. And I think by providing this infrastructure or this playing field for people to innovate and build on this, like, we don't know what's coming next. Right? Because now people are empowered and enabled and can do that with these building blocks. So yeah, I mean, it's, it's a very interesting time, I would say.

    Jason Jacobs: So one question I have, and part of this is just my own na- naivete about Web3 in general, but what are the common ways that the project owners or founders or companies make money in Web3? And then how are you thinking about capturing value? And I mean, along with that, I guess a more existential question, but do you even think of yourselves as a company? Are you incorporated as a company? Or how do you think about, and what's the legal entity around, around this effort?

    Raphael: Yeah, I'd start with the last question. So the legal entity is a nonprofit, a Swiss nonprofit that is kind of steered into protocol. And like, this is the first kind of like key difference between Web3 companies, I guess, and traditional companies is that Web3 has found ways for nonprofits to have a business model, which can be as simply a token, right. So we can have... We don't have a platform token, but we can have a platform token in the future and essentially gives gradually decentralize the protocol through this serious token and giving people like that use it, there are users of the protocol that are investors and the possibility to govern it in the future. So this is the first, you know, about how to monetize it. There's this, you know, concept of governance tokens, which allow protocols essentially to, uh, it's often called exit to community if you want, where, you know, you allow the community now to govern your project.

    And, and so I think this is one that, this is a very obvious way. We haven't introduced any fees yet. I think at some point we were gonna think about, you know, where can we, where does it make sense to introduce fees that are, you know, enough to sustain a protocol 'cause you know, it doesn't make sense to... Like it's important to also, you know, sustain yourself to keep growing this ecosystem. So we are kind of like, we're doing a lot of sessions right now on whiteboards again. Like, you know, the different parts in the system where we could have a fee that, that incentivizes maybe also the behavior that we wanna see. Right?

    And then, sorry, your original question was project, companies, who are these companies. So, I mean, when I talk about project owners, I talk about about carbon project owners. So this is the supply side. In crypto, we have, you know, there's startups, obviously sometimes they call themselves differently, but then there's DAOs, Decentralized Autonomous Organizations, which essentially are a, you know, collective of people that come together and just build. And KlimaDAO is one of these, but MakerDAO is another one. I'm fascinated about DAOs. I really think like DAOs are gonna change a lot of the, you know... The incentives and DAOs are, are beautifully aligned.

    And there's investment DAOs. I think, you know, we talked about this real quick before we recorded this. I think when MCJDAO, you know, like My Climate Journey should absolutely be a DAO and allow, you know, the community to, you know, co-invest or, you know, be part of the value that is, or kind of creating this ecosystem. So long story short, there's a bunch of different actors in this Web3 ecosystem that can use this. And our, really also wanna highlight this that, you know, we are not just focused on this Web3 stuff. Like we think this is also important for [inaudible 01:00:29], the real world. However you wanna call it. The meatspace is also... You know, because for, you know, a traditional company, there's a lot of benefits also for a traditional company or for traditional asset managers, right?

    Like today there's some asset managers that like hold carbon on their balance sheet as a hedge or like as a bet for like the rise in price. But it's pretty much a like non-productive asset that sits on the balance sheet. Like just telling these people that, "Hey, you can just put your asset and, to work and earn like a couple percent a year." And you know, we all know that the interest rates in crypto are sometimes a little bit higher than in the real world. So this is a, a use case that is created and that is made really easy today to just like invest in carbon and even earn yield on top of it. So yeah. And really just to finalize this, we have no idea [laughs]. I just really wanna emphasize this.

    Like this is a bet on building a primitive, what, you know, this like building block that others can use. And we have seen things. We have seen people coming with ideas that we haven't even dreamt about. Right? So like we don't know everything. We're like we only know a fraction, but what we do know is that we are running out of time to solve this crisis. We do know that crypto is extremely fast moving and innovative and like just amazing group of like smart people that are trying to do real things that matter.

    It's also a group of people and that's, you know, sometimes forgotten is it's also a group of people that often has made it from like a financial perspective. You know, they don't have to work so that in this sweet spot where they can just work on the things that they care about and that matter. So this is a really good group to, you know, unleash on this climate problem in my opinion. So, hey, here you go. Just, you know, play with it and like do something with it and, and improve it and build on top of it. So yeah, we don't have all the answers, but we don't have to have all the answers also.

    Jason Jacobs: Now in terms of team, what does the core team look like today? And are they the only ones that are working on this or are there others? And if there are others, how do you think about core team versus others, if you even distinguish? Like, how do you think about resourcing in general, as you try to build more and, and do so more rapidly?

    James: I mean, what's clear is that the hardest part in technology is finding good people, right? It's really, we spoke to Friends yesterday, also a climate protocol region network who we really love and respect. And I think like people in the, people in the climate sort of DeFi space, like, you know, we know each other years and like we talk all the time, we collaborate, we're close and we always try to figure out how we can align incentives amongst us also. Right?

    And, and we were just talking yesterday about this. It's like, literally like, you know, money is not the problem. Like good people are the problem. Right? So in reality, if we can enable other people to, you know, plug in to our building blocks with their building blocks and they have teams of good strong people that are smart, that are working in the space for some time, I mean, cooperating with them is far easier than hiring. Right? So I think generally speaking, we all try to cooperate and align incentives as best we can. Right?

    Jason Jacobs: What about your building blocks though? Is that, is that all you? Like the two of you or, or do you have sort of-

    Raphael: Luckily enough, not at all.

    James: Not at all. No.

    Raphael: No. Like, I mean, core team, yeah. I think we have something like a core team. I think we're like 12, 13 people right now. Honestly, I'm losing track. I think it's probably more because we are like, "Hey, we are hiring and we are hiring more people. If you, if you're looking for a job at crypto climate, come and joins us." As James said, like talent is [inaudible 01:04:00]. But so yeah, we're onboarding new people right now that have been, some of them been, you know, community members that just came into our Discord and just like delivered value. They just saw what needed to be done and just did it. And now we are working together on this, right?

    So sometimes it's not, it's like a spectrum of people that are in the core team because they've basically been there for a while. And then there's people that are, you know, very much becoming part of the core team. Then there's like contributors that maybe had just like, part-time that, you know, they still have their regular day jobs but they wanna contribute over the weekend. We have an analytics, a page that, you know, really goes into like, how are these pools made up? And like, all of this has been done by a community member. And so the community is extremely active already. And we really wanna like create the foundation for the community to really be even more active and unleash the power of community.

    We're still in this like early phase where we have to, you know, get our ducks in, in order and make sure that it's easy to build on top of these factors and that, you know, it's easy for community members to pick this just up and they know exactly what to do. So we're investing a lot of resources right now and kind of like making easy for others. But yeah, like the core team is like roughly 12, 13 people I think. And yeah, we're looking to grow the team even further.

    Jason Jacobs: And how, how are they incentivized and/or compensated? A- and are they technically employees of the organization? Do they have standard employment agreements and things that regular companies have? And I'm asking this mostly because I just don't know how this works in Web3. It's, it's a big mystery to me.

    James: [laughs] I mean, the reality is we've bootstrapped a lot, right? Like ourselves. And it's been a lot of volunteering, I would say. But otherwise, I mean, going forward, like it will become more typical and more traditional, I would say. But there's been a lot of love given by everybody [inaudible 01:05:47] in this case.

    Raphael: Yeah. Which is something that we really wanna change. Like I personally, like this climate space has always been a space where people had to, you know, where the system used to extract a lot from the individual by, you know, relying on, on the voluntary work or paying people really, like not paying people much. I think we want to pay people and we want to have the smartest people working on this climate problem. And this means we also have to incentivize them properly.

    So we have people that like... And this is all happening right now as we speak. You know, we're not, we're basically formalizing these contracts. And some people have like traditional employment contracts, some people are freelancers and some people are like not, not paid or don't want to get paid. We have people that explicitly say, "Yeah, I don't, I don't wanna get paid. Like I don't need to get paid." Um, and yeah. So I think that in the future, there's gonna be things that changed like other ways to incentivize people also through other means than just like paying them in, in US dollars or euros or whatever. But yeah, I won't talk too much about this right now, but some to people like sometimes it's a very, it's a very boring contract that you just have with a real world entity.

    Jason Jacobs: But when it comes to resourcing though, the way that I'm familiar with, if you're building a small, high growth, ambitious endeavor is you raise equity capital typically from venture capital or other sources like that, that can kind of stomach the risk. And then that gives you the resource to go and build. What does that look like in a Web3 world? And, and for you, I mean, has, has the company been capitalized to date in any way? And if so, or if not, just how do you think about getting the fuel to get the resources in the future? Where does that capital come from? A- and is it... What form of capital is it? Is it a token? Is it, is it USD is it euros? Like, what is it?

    Raphael: Yeah. So like so far as James said, like we've been bootstrapping and obviously we're in a very privileged position that we could do that. Like I would say the crypto bull run has paid some of this [laughs] for us. But yeah, not gonna lie, it's not been fun to do it that way. We are going to raise some capital. We are not running towards that. Basically we're taking our time because we really think that, like, we wanna make sure that if we bring people on as, you know, investors, that these are people that are really value aligned and that they understand that this needs to be a community project first. Right? And that they don't look at it as a, as a like fast buck and make money quick scheme, essentially.

    So there is a lot of interest, that's for sure. We are taking it relatively slowly and not focusing too much on a fundraise right now. Yeah. And then we definitely wanna make sure that there's enough room for the community to run this protocol and that we don't give away, yeah, too much for like private investors or something like that.

    Jason Jacobs: Well, probably a topic, not for this podcast discussion, but gosh, I mean, we, we're thinking through similar things with MCJ, just in the sense that, you know, we have this fund and we have LPs and the, and the funds are timeboxed, right? But at the holding company level, given that we wanna build a generational firm and we are so impact driven, you know, we think about resourcing and we're really poor at the holding company level in terms of being able to grow the team. But at the same time, there's so much to build and there's so much opportunity and there's so much impact to be had. But then if we have timeboxed capital, then there, it brings pressures and perverted incentives that don't align with ours. Right? So, so really kindred spirits in that way.

    Raphael: Yeah, totally. And I mean, we definitely have to get to like an abundance mindset and out of scarcity. Right? And we have to make it so that everybody who works in this can give it their best and that they're not in a position where they, they have to kind of live where they struggle to make ends meet. So, but the beautiful thing about like Web3 again, is that you have obviously traditional BCs, but you also have investment DAOs like the LAO or others that are essentially just a, you know, often like just group of founders that like come together and they co-invest in, in projects.

    And then you don't have like one single company, one single like venture firm, but you have, have a whole network, essentially that is your investor, right? Or community members, angels that are like, that are founders or that, you know, are other representatives in the space that can really help your company grow. So yeah, this is, we're at the stage where we, we have, where we now know that we found, you know, market fit and that we wanna scale this. And so this is the reason that we are, that we're looking at pricing.

    Jason Jacobs: Awesome. Well, gosh, I mean, this has already been probably one of our longest shows. Uh, I mean, o- one question I'll ask is just, I'll, I'll ask you the same question I ask every guest, which is just, if you, if you could wave your magic wand and change one thing outside of the scope of your control that would most accelerate your efforts, what would you change and how would you change it?

    James: I mean, for me, it's like, you know, we start this mission with the voluntary carbon market, which is, you know, unregulated and the only international markets. But it's quite clear that, you know, the fastest change comes with regulation. That like the power of flicking switches can really make things happen.

    So, I mean, I don't have like a wish if you were a genie so much as like that we get to a point where we prove like our theories and approaches and you know, that they prove themselves essentially that ultimately these switches can start flicking because up until this point, we've decided to take action as many people have without like asking for permission or without like, you know, having consent of the governments or like, you know, operating on our own really. Right? And like, my wish would be that like, this was not necessary really. So, I mean, let's get the chassis ready, let's get the wheels on the car and let's get it ready for gas. Right? I mean, my wish would be like this gas basically.

    Jason Jacobs: And then last one is just for anyone listening that's inspired by what you're doing, where do you need help? Who do you wanna hear from, if anyone?

    James: We really, really, really want the best technical people, developers, systems architects, all of these guys. Like, we want to talk to you. But we need everybody. Right? Like, I mean, all of people who wanna get involved, who wanna roll up their sleeves, who wanna be a part of actually taking action, our team is incredible, I have to say. Like, it's full of amazing people who are super optimistic for the future. And yeah, we need to do this together. We need, we need each other. Right? So I think like amazing human beings, come join our Discord. You'll find the link on our website, Toucan.earth. And yeah, go to Toucan.earth/jobs, see what's there. Contact us.

    Jason Jacobs: James, Rafael, anything I didn't ask that I should have? Or any parting words for listeners?

    Raphael: No. I mean, it feels like we could have another couple of these conversations. So maybe let's have a couple other of these conversations, right? Like, as we said, this is like just the beginning, you know, I think it's really cool that you explore this new field of crypto and climate. I think it's really promising. And you know, if you need somebody to channel ideas or like... A lot of this is about education, so happy to come on stage another time or even like off stage, just if there's anything that we can do to like grow this community and make this climate, the climate community more aware that crypto is not just, you know, this dirty industry that is like burning up the planet but it's in my opinion, also the, the secret sauce that can solve a lot of these coordination problems that we have. Yeah. I'm happy to contribute to that.

    Jason Jacobs: Well, I'm, I'm early in my Web3 journey. And so I'm sure my, my opinions will evolve as I get deeper down the rabbit hole in your words. But my strong intuition going in is, is, as you said, that there's, there's not a lot of cross pollenization or pollination, whatever you call it, across the two groups. And there's even some, I'd say, resentment, antagonism, you know, hatred, one might even say, but my, my intuition is that there is an area of overlap where, where great things can happen. And, and you guys are an example of a team that's trying, and it's super interesting and inspiring what you're doing.

    I, I can't claim to be an expert on this stuff far from it, but I will say I'm coming out of this discussion energized and super eager to keep digging. And, and also we have similar spirits and we're doing, we're really kind of coming at it from different angles. So our networks are complimentary and I'm sure there's a lot we can learn from each other. So, but anyway, guys, I, I can't thank you enough for coming on the show and wish you best of luck on the project and let's make this the, the first discussion of many.

    Raphael: Cool. Thank you, Jason.

    James: Thanks Jason.

    Raphael: It was fun.

    James: Total pleasure.

    Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note that is .co not .com. Someday we'll get the .com, but right now, .co. You can also find me on Twitter at JJacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.

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