Marrying and impact is nothing new. From dynamic and value chain traceability to the exploration of mechanisms like quadratic funding for public goods, the fusion of technology and impact continues to break new ground. web3 NFTs Now, there’s another innovation in the spotlight: . Born out of research by Protocol Labs started in the middle of last year, the new protocol answers the difficult question: How can we better align incentives to work on impactful work that might not have a business model or might be viewed as high-risk but potentially high upside? hypercerts Hypercerts propose a solution: Displaying impact on chain. As fractionalized, semi-fungible tokens, they enable the capture, definition, and representation of impact recorded on an immutable ledger. Such an improvement in transparency and evaluation structure paves the way for a better understanding of positive impact, fueling more funding and recognition. And, with a dash of retrospective funding magic, hypercerts’ ultimate goal is to empower humans to rather than mere intentions—by actually providing resources after the fact. fund tangible impact So, how exactly do hypercerts work, and how can they transform areas like carbon credits? Hypercert: The new public good primitive Leveraging , hypercerts’ creators defined a single hypercerts standard. Users can thus populate the tokens with unique information and create various classes of hypercerts—all managed within a single smart contract. This way, the hypercerts protocol represents a single, open, shared, and decentralized database for different impact funding mechanisms. ERC-1155 The philosophy is straightforward: Today’s economic systems don’t reflect what we value as humans, such as environmental and social well-being. Yet, we do have the power to design systems that guide our actions and reward the outcomes we desire. Hypercerts present an opportunity to establish structures that favor positive impact, support the funding of important causes, and implement transparent, trustworthy evaluation methods, effectively bridging the traditional divide between private and public sectors. NFTs have shown us that powerful and dynamic marketplaces can exist in the web3 world when the right tools are employed. By combining human values with large-scale structures, we can make a significant difference in our societies. Hypercerts facilitate coordination, laying the groundwork for various decision and funding mechanisms, including quadratic voting/funding, auctions, voting, bounties, grants, and more. And, while they don’t solve the coordination issues on their own, they do provide a solid foundation for these diverse strategies. The ability to “enable” makes hypercerts a great . In the context of web3, Francesco Renzi from Superfluid as a fundamental functionality upon which everything else is built. For example, in the automotive world, the wheel is a primitive that enables the construction of cars. So, introducing more primitives allows for the development of entirely new systems. public good primitive describes a primitive Therefore, hypercerts empower people to identify impactful work, leading to the creation of new building blocks for assessing community values, determining the most influential work, and, ultimately, enabling the development of novel utilities on top of these foundations. And for funders, hypercerts provide a convenient way to “put their wallet where their values are.” How do hypercerts work? Hypercerts serve as an interoperable data layer, creating a standardized method to capture key information about work intended to have a positive impact. Each token represents a claim detailing the scope of work performed by specific contributors within a given time frame and the scope of impact achieved during a specified period. Gitcoin has already retrospectively granted hypercert fractions to anyone who participated with at least $1 DAI in its Alpha Grants Round (in January) and Beta Grants Round (in April). All the metadata was stored on IPFS; the hypercerts protocol itself lives on Optimism (though you can also experiment with it on Ethereum’s Goerli Testnet). Each hypercert contains information about: The scope of work and its corresponding impact Time frames for both the work and its impact Contributors involved in the project Rights obtained through hypercert ownership Let’s look at how hypercert funding can work step by step Each effort involves various stakeholders: beneficiaries, contributors, prospective funders, retrospective funders, and evaluators. To receive funds, contributors develop an impact activity, create hypercerts defining the impact they aim to achieve and obtain funding from prospective funders. Upon minting the hypercerts, fractions are awarded to the prospective funders in—this is the initial, highest-risk stage. As the project progresses and creates impact, funders enter the scene to finance evaluators, who then assess the impact on beneficiaries. Evaluators create and publicize impact reports, allowing retrospective funders to compare the project’s goals with their results. This process can lead to the disbursement of award funds based on any further retrospective funding. At that point, the interesting thing is that hypercerts represent , enabling multiple evaluations to point to the same hypercert, increasing the variety of methodologies used, and allowing evaluations to differ over time. This, naturally, facilitates learning about the most effective impact assessment methodologies over time. completed work With an evaluation layer embedded into the semi-fungible “NFTs”, contributors must clearly define their goals and commitments beforehand, making evaluators’ jobs much easier. This separates the interests of projects and evaluators, as independent impact evaluators can remain neutral and are incentivized to develop a reputation for credibility. For hypercerts, ideal funders are then those who care about impact and seek to fund projects with credible impact claims and high-quality evaluations from reputable evaluators. For example, they could establish an impact evaluation pool, allocating a percentage of funding to reward impact evaluations for all projects under their consideration. If they choose to support an effort with retrospective funding, they can buy more hypercerts fractions from contributors and even the prospective funders who retain a fraction of their hypercerts. This mechanism has a crucial role: It allows contributors to work now, anticipating future cash flow for their positive impact, effectively "borrowing" from future funding. This approach incentivizes them to undertake public goods projects with uncertain yet potentially high impact and promotes a more efficient market by evaluating impactful outcomes post-hoc. We spoke to Carl Cervone, Holke Brammer, and Raymond Cheng, some of the key minds behind the hypercert protocol, about what happens at the very last step—once the contributors receive retrospective funding. Raymond shares that it’s the projects themselves that must decide how to use their funding best, often applying it to support ongoing operations and development. The way projects utilize funding will likely contribute to their overall reputation, as funding events on impact claims are expected to be a regular occurrence. According to Carl, retrospective funding supports various project needs, including compensating contributors, funding the next phase of work, or prospectively repaying backers who financed the work. The long-term goal is to encourage more people to do good work without waiting for grant proposals. Let’s talk carbon credits Carbon credits provide financial incentives for reducing greenhouse gas emissions by assigning a monetary value to the cost of polluting air. Since their trade began in 1997, they have become a key instrument for fighting climate change. But even today, carbon offsets continue to face significant challenges, such as a lack of standardization and methodology, low trust in credit quality, and fragmented marketplaces. But hypercerts could change that. Hypercerts offer a new perspective on carbon credits, democratizing the process and adding more rigor to evaluations. By addressing many of the Monitoring, Reporting, and Verification (MRV) challenges, they facilitate a more effective, trustworthy system for verifying and registering environmental impact. As Carl Cervone explains, hypercerts capture the work that was done, but there is still often still a need to evaluate the impact of the work. For example, we could create a hypercert for planting 10 trees. If you buy the hypercert, then you would own any impact that comes from our work. But someone would still need to measure how much carbon those trees removed. From water preservation to biodiversity, hypercerts force participants to fit their proposed impact into a framework, making it easier to incentivize or feel comfortable providing the funding. This allows contributors to better manage both capital and operating costs. For projects like tree planting, while the initial cost may not be high, the cost of maintaining the project can be significant. Hypercerts become a means to secure upfront funding to cover these costs and continue funding the sequestration process through the sale of additional fractions as the project starts generating impact. Yet, in order for that to happen successfully, there should be more transparency around how credits are created and where they are sourced from. Hypercerts can’t help us access data points to create this provenance and make sure that the data is verifiable. Imagine a small community starting a reforestation venture. They don’t have much capital, but with hypercerts, they can still secure initial funding for the project. As the trees grow and sequester carbon, the community sells more hypercert fractions, funding ongoing sustenance and further tree planting. This way, the community is incentivized to maintain the project for the long term, while backers can trust their contributions are making a real, measurable impact. It’s the retrospective funding piece that makes it really interesting. It encourages anyone to start working on a project—such as agroforestry—much like academic research. Let’s say a small-scale farmer or landowner wants to restore a degraded piece of land, knowing it has the potential to sequester huge amounts of carbon. They might think twice if they can't get money upfront or know for sure they'll earn carbon credits later. Without guaranteed upfront funding or the assurance of carbon credits, they may be reluctant to embark on this journey. With hypercerts, the landowner can begin the restoration work with the understanding that they will be able to generate and sell carbon credits based on the actual amount of carbon their project sequesters. As the project progresses and the land begins to recover, storing more carbon, the landowner can sell more fractions. If a contributor believes in their project’s potential, hypercerts can provide ongoing funding for maintenance and further restoration. Funders, on the other hand, can easily access the impact data of the project they fund, linking their funding directly to quantifiable carbon sequestration. This brings a more intuitive way to understand the information that’s being put in front of them. Simply put, hypercerts confront your impact goals with the results—so you can see all the information for yourself. So, where does this leave us? We believe that hypercerts do more than just legitimize carbon credits funding—they unlock projects previously deemed unviable due to a lack of initial funding. They represent a step toward a more inclusive, diverse impact dynamic, and we’re eager to see the ripples they create—in carbon and beyond. - By & Nicholas Edmonds Tereza Bizkova

The is an opinion piece based on the author’s POV and does not necessarily reflect the views of HackerNoon.

What Are Hypercerts & How Can They Transform Impact Certification? (+ Carbon Credits Example)

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