Finding liquidity to start climate projects can be a challenging and labor-intensive process, where DeFi for climate can offer significant assistance.
Barriers of Traditional Financial Systems:
- Limited Access to Capital: Securing funding for climate projects typically requires navigating through numerous financial regulations, interacting with various intermediaries, and meeting strict criteria set by financial institutions.
- High Transaction Costs: The costs associated with obtaining funding through traditional methods can pose a significant obstacle. These costs include fees for legal, administrative, and banking services.
- Slow Processing Times: Traditional financing processes often take months or even years to secure the necessary capital, which can delay the timely implementation of climate projects.
- Centralized Control: The centralized nature of traditional financial systems means that a few institutions have the power to approve or deny funding, leading to inefficiencies and a lack of flexibility in financing options.
Solutions Offered by DeFi for Climate:
- Direct Access to Funding: DeFi platforms eliminate the need for intermediaries, directly connecting project initiators with investors.
- Low Transaction Costs: DeFi reduces transaction costs by automating processes through smart contracts, eliminating the need for traditional financial intermediaries and associated fees.
- Fast Transactions: Transactions on DeFi platforms can be completed within minutes, significantly faster than traditional financing methods, allowing for quicker allocation of funds to climate projects.
- Increased Transparency and Security: DeFi platforms operate on blockchain technology, providing a transparent and immutable record of all transactions, enhancing trust between project initiators and investors.
- Global Reach: DeFi platforms are accessible to anyone with an internet connection, allowing a global pool of investors to support carbon unit projects, increasing fund availability and diversifying liquidity sources.
Learn more about liquidity provision methods for climate projects through DeFi for climate in the table below. If you are interested in DeFi usage options for already issued carbon unit tokens, visit this link.
