[ANALYSIS]: Polygon is going carbon negative. Why?
To understand this, let’s understand how much CO2 does the Polygon Network really emit? Since May 2020 (when Polygon Mainnet went live) till Feb 2022, Polygon Network emitted 90,645 metric tons of CO2. That sounds like a lot.
But hang on, let’s translate this to the American football fields or households analogy. Each American household generates 7.5 tons of CO2 per year. This means the entire Polygon Network emitted in a year what nearly 8,000 American households or a town emitted in the same year.
For a network like Polygon which is scaling the world’s biggest decentralized computer Ethereum, this doesn’t sound like a lot at all anymore. Compare this to Bitcoin, which produces 37 megatons of CO2 per year, nearly 616 million times that of Polygon Network.
Then why is the drive to go not just carbon neutral but carbon negative?
Here are the top 4 reasons why Polygon Network wants to go carbon negative
Genuine care for Mother Earth: Even though Polygon Network itself is emitting much less than all of us combined in our houses, doesn’t mean it should ideally sit by doing nothing. It is doing its bit. To compensate for just 1 tonne of CO2, 31 to 46 trees are needed. So that means for the emission so far by Polygon, we will need to plant 2.8–4.1 million trees. That is a crazy lot. Nearly 2,000–4,000 acres of trees. Now can you picture the damage? Just don’t try to picture the damage done by companies, countries, or Bitcoin. It’s too painful.
Competition: The competition for Polygon to be green is not really China or even Bitcoin for that matter, it is the other L1 challengers to Ethereum. For Polygon to succeed, it must ensure Ethereum remains the dominant L1 chain. So, it has to fill in the gaps that even Ethereum leaves at least for its operations. This is evident as 99% of Polygon Network’s emissions are coming from checkpointing and bridging activities driven on Ethereum or other chains. As other L1s are also fairly efficient, it is largely Ethereum.
If you have read other posts of ours, you know we believe that the only real contender to L1 after Ethereum we see is Solana. To understand this in detail, check out our previous post here. Solana is already carbon neutral. This means Polygon has to do better. What is better than being carbon neutral? Being carbon negative. It’s on, Solana.
Institutional capital: This is the game-changer. The average institutional allocation to crypto is still less than 1% but it occupies a far higher mind share. One of the key impediments is that blockchain technology and cryptocurrency (led by Bitcoin) is perceived as energy guzzler. It is important to not just be energy efficient but also to be perceived as one. Institutional capital recognizes the carbon credits system. Hence, this move will help institutions sell the story of Polygon being the right choice for their crypto allocation.
Starting early: The traction and party on Polygon are just getting started. Below is what the graph of NFT sold on Polygon OpenSea looks like (as of Feb 3rd). Polygon is exploding and so is the chance that its carbon footprint will explode too. If it does, the institutions, governments, and the public, in general, are not going to be happy. So it is best to start early and kudos to PolygonDAO for doing so.
$20 mil, what good are you for?
Polygon DAO has dedicated US$20 million towards making the network carbon negative. What are funds going to be used for?
Carbon credits: First, it is buying 90,000 tons worth of credits which can offset almost all it has emitted till now. It will use the credits to selectively offset future emissions.
Initiatives: Polygon Network itself doesn’t generate many transactions, the DApps on the Network do. To become energy efficient, the DApps and ecosystem will also need to become energy efficient. Polygon doesn’t lay out a roadmap, probably because each DApp might have to follow a different path to efficiency but it has committed funds to achieve the goal.
Resources: If the above one is to encourage partners to go green, this one is to provide them with the necessary tools. What do these tools look like? Early to call.
Donations: Finally, if you can’t fix something, you can at least donate to causes that are trying to fix the problem.
Genuine or whitewash?
Polygon’s Sustainability website says and I quote:
As the first step, Polygon is buying $400,000 worth of high-quality and traceable BCT and MCO2 carbon credits, the equivalent of roughly 90,000 tons of CO2 emissions. Polygon will then selectively retire the offsets within the carbon token pools that meet the highest standards for additionality and positive environmental impact.
Polygon is partnering with KlimaDAO, a decentralized collective of environmentalists, developers, and entrepreneurs, widely recognised as the most high-profile proponent of facilitating the nascent on-chain carbon market. Polygon will purchase the credits via KlimaDAO’s on-chain carbon market, Klima Infinity, and retire them using its offset aggregator decentralized app.
From the looks of it, Polygon DAO seems pretty committed and we should know the impact of its efforts in a few months or quarters.
Impact on Polygon Token Price?
Short-term: Another classic Polygon move that has a short-term depressing effect on price. Why? Because all these transactions are funded by the Polygon DAO which dips into the Treasury to trade Polygon tokens to buy stuff like carbon credits or to give out donations. These large-volume sell orders depress prices though this $20 mil seems like one of the smallest of other Polygon-funded measures and hence might have a limited effect.
Long-term: This is gold. Polygon is anticipating future roadblocks to its adoption One of the key concerns highlighted for blockchains is ESG. After all, Bitcoin emits as much as the entire country of New Zealand (NZ). I can argue that NZ’s population is 5 million and BTC’s user base is 80 million-plus but politicians don’t like that argument. So what do we do? We go green.
Overall, Polygon DAO seems to have taken steps in the right direction to go ‘carbon negative’. What do you think about the move by Polygon? Do share your analysis too in the comments.
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