Democratizing weather derivatives through tokenization could be crypto's most important real-world use case
The author argues that tokenizing weather derivatives via blockchain could provide a vital financial hedge against climate-related economic risks. By using smart contracts, these instruments could become more accessible and transparent for vulnerable populations like farmers.
Why it matters
This proposal suggests a practical, real-world application for blockchain technology to mitigate the multi-trillion dollar impact of climate change.
That's Canada's Prime Minister Mark Carney talking about climate risks in his 2021 book Value(s): Building a Better World for All.
I recently finished reading this 600-page book and it has been an eye opener on many levels, especially on weather, a space I last tracked at my gig on a currencies and commodities research desk in Mumbai from 2012 to 2014. Part of my job involved tracking natural gas prices, which take cues from weather forecasts and sometimes weather derivatives, more specifically options on heating degree days (HDD) and cooling degree days (CDD).
Back then, it struck me how broken, fragmented and little known these weather options were, leaving the bulk of the world’s population exposed to the financial devastation of weather and climate risks (not to mention the physical risks).
Omkar Godbole is a co-managing editor on CoinDesk’s Markets team.
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