Decentralized Framework for Transparent Carbon Credit Verification and Exchange Using Blockchain Technology

Abstract

The voluntary carbon market is vital for getting private money to projects – worldwide – which cut emissions or take carbon from the air. However, current markets suffer from fragmentation, lack of transparency, manual verification, and risks of double-counting or fraudulent credits. These issues severely erode buyer trust and market efficiency. This study shows a blockchain system built to deal with these faults: verified carbon credits are made into ERC-20 tokens on the Ethereum blockchain. The system lets people trade without needing to trust each other, using Balancer Automated Market Maker – AMM – pools that have DAI stablecoins with them; and it ensures credits are removed from the market for good with a ‘buy-and-burn’ method, ending with ERC-721 Non-Fungible Tokens – NFTs – being given out as proof the emissions were offset. By including data linked to Inter-Planetary File System (IPFS), and signs from cryptographically checked people who confirmed things, the system stops double-counting, makes it easier to find where credits came from, and helps the market to trade more easily. Using what we’ve learned from carbon platforms which have used tokens, from 2020 to 2025, we use a fixed-effects Difference-in-Differences – DiD – test to find what effect the system has on how well prices work and how many trades there are. What we found is that using blockchain makes prices more steady when there’s a reasonable amount of trading, but doesn’t change trading volume much in the short run. These results show how blockchain can make carbon markets stronger, lower costs of trading, and help the Sustainable Development Goals – SDGs. What this study gives is useful to people who make policy, control things, and invest, who want to make digital carbon systems that can last, work well and grow.