Nature Carbon Tonne (NCT)

NCT is a fungible token (ERC-20) that represents a verified carbon unit (VCU) from the Verra registry. Each token is backed 1:1 by a retired VCU, ensuring a direct link to a real-world environmental action. The process involves:

• Bridge & Retirement: A VCU is retired on the Verra registry and a corresponding NCT is minted on-chain.
• Transparent Provenance: All NCTs carry immutable metadata linking to the original project, vintage, and methodology.
• Standardization: By creating a uniform digital asset, NCT enables seamless trading, bundling, and integration across DeFi protocols.

The primary use case for NCT is for entities to retire the token to claim carbon neutrality. This on-chain retirement is a permanent, public declaration of offsetting emissions.

• Process: A user transfers NCT to a designated burn address or uses a protocol's retirement function.
• Immutable Proof: The retirement transaction serves as a public, verifiable certificate, eliminating double-counting.
• Integration: Protocols and dApps can build automated offsetting features, allowing users to retire carbon directly within an application's workflow.

To facilitate a liquid market for carbon, NCT is paired with other assets in decentralized exchanges. The most significant pool is the NCT/DAI liquidity pool on SushiSwap.

• Price Discovery: The pool allows for continuous, market-driven price discovery for a tonne of carbon.
• Accessibility: Provides instant liquidity for buyers and sellers, moving beyond traditional OTC markets.
• Composability: This liquidity enables NCT to be used as collateral or integrated into other DeFi primitives like lending or index products.

NCT serves as a base asset for carbon index tokens, which bundle different types of carbon credits into a single fungible token. The C3 Token (Carbon Credit Counter) is a prominent example.

• Diversification: C3 holds a basket of carbon tokens, including NCT and others like MCO2.
• Risk Mitigation: Reduces exposure to the specific risks of any single carbon project or methodology.
• Simplified Access: Offers users a one-click way to gain broad exposure to the voluntary carbon market, similar to an ETF.

NCT tokens are sourced from a variety of nature-based projects validated under Verra's Verified Carbon Standard (VCS). Common methodologies include:

• Afforestation/Reforestation (ARR): Planting new forests.
• Improved Forest Management (IFM): Changing forestry practices to increase carbon storage.
• Agricultural Land Management (ALM): Practices that sequester carbon in soils.
• Blue Carbon: Projects involving coastal ecosystems like mangroves. Each NCT's metadata specifies its project ID and methodology, allowing for preference-based retirement.

The integrity of an NCT is established at issuance through rigorous third-party verification against established standards like Verra's Verified Carbon Standard (VCS). This process ensures the underlying carbon removal project is additional, permanent, and quantifiable. The token's metadata must be immutably linked to the verified project registry entry to prevent double-counting or fraudulent claims.

Every NCT transaction is recorded on a public blockchain, creating a tamper-proof audit trail. This allows any party to trace a token's full lifecycle—from issuance to retirement—verifying that it has not been double-spent. Transparent provenance is critical for corporate ESG reporting and regulatory compliance, as it provides proof that a retired credit corresponds to a genuine, unclaimed tonne of carbon.

The definitive, on-chain retirement of an NCT is the core action that fulfills its environmental purpose. Security mechanisms must ensure retirement is:

• Irreversible: Once retired, the token cannot be transferred or reused.
• Transparently recorded: The retirement event and reason are permanently logged.
• Linked to a beneficiary: Clearly attributes the climate claim to the retiring entity, preventing ambiguous ownership of the environmental benefit.

NCTs rely on smart contracts for minting, trading, and retirement. These contracts must be extensively audited to prevent exploits that could lead to loss of tokens or fraudulent minting. Furthermore, custodial solutions (like centralized exchanges or wallets) holding NCTs introduce counterparty risk; a platform's failure could result in loss of access to the tokens, separating holders from both their financial asset and environmental claim.

Bridging off-chain verification data to the blockchain requires oracles. These are critical points of failure. A compromised or inaccurate oracle could mint NCTs for invalid projects. Security depends on using decentralized oracle networks and cryptographic proofs to ensure the on-chain representation of carbon credits faithfully matches the authorized off-chain registry state.

The integrity of NCTs is subject to regulatory evolution and methodological updates. A governing body like Verra could revise a methodology, potentially invalidating the science behind previously issued credits. Smart contracts and token logic may need upgrade mechanisms to handle such reversal events or invalidation, ensuring the system's long-term credibility aligns with the best available science.

Base Carbon Tonne (BCT) and Nature Carbon Tonne (NCT) are the two primary carbon reference tokens created by Toucan. They serve different market segments:

• BCT: A broad, general-purpose pool containing a mix of carbon credit types (including renewable energy and nature-based). It was the first pool created.
• NCT: A curated, higher-quality pool containing exclusively nature-based carbon credits (e.g., forestry, agricultural projects). It was launched to meet demand for credits with perceived co-benefits like biodiversity and community impact.

On-chain retirement is the definitive, permanent withdrawal of a tokenized carbon credit (like an NCT) from circulation to claim its environmental benefit. This process:

• Burns the token on the blockchain, creating a public, immutable, and timestamped record.
• Is linked to the retirement registry of the underlying standard (e.g., Verra's registry).
• Prevents double counting by ensuring the credit cannot be sold or used again. This transparency is a key innovation of blockchain-based carbon markets.

A carbon credit methodology is a rigorous, approved set of rules that defines how to quantify greenhouse gas emission reductions or removals for a specific project type. For NCTs, the underlying VCUs are issued using Verra methodologies for nature-based solutions, such as:

• ARR (Afforestation, Reforestation, and Revegetation)
• IFM (Improved Forest Management)
• REDD+ (Reducing Emissions from Deforestation and Forest Degradation) The methodology determines the credit's scientific integrity and quality.

Digital MRV refers to the use of technologies like satellites, IoT sensors, and AI to automate and enhance the Monitoring, Reporting, and Verification of carbon projects. While not exclusive to tokenized credits, dMRV is closely associated with next-generation carbon markets because it can:

• Increase transparency and reduce verification costs.
• Provide near-real-time data on carbon sequestration.
• Improve the trust and auditability of the underlying assets that tokens like NCT represent.