Business Insight

How a 10-year tech startup is using AI, blockchain to solve a global climate crisis

Jinny Kim
March 11, 2024

Carbon credit trading is an emerging market, aligned with the climate crisis and ESG trends. According to a research report published by Spherical Insights & Consulting, the global carbon credit trading platform market was valued at $158.3 million in 2023 and is expected to reach $752 million by 2033.

(Source : Precedence Research)

However, it is not very accessible for individuals to participate in carbon trading.

Typically, carbon trading schemes set a cap for companies to reduce their greenhouse gas emissions. Individual efforts are underrepresented in this market, as carbon credits are awarded to companies that contribute to reducing carbon emissions (e.g., installing solar panels, building wind farms, reforestation).

Phantom Yun, the founder of Sovereign Wallet and CO2 Network, set out to solve this problem.

The startup is building a platform that allows individuals to trade carbon credits on a small scale using a blockchain that provides identity verification. The company is also involved in building digital currencies and infrastructure for the Australian indigenous sovereign governments and other countries. 

From blockchain to AI. What problems does the 10-year tech startup aim to solve with its carbon credits platform and digital currency technology? How can digital technology help combat the climate crisis?

Asia Tomorrow caught up with Phantom Yun to talk about the problems and solutions the startup is working on.

(Credit : Phantom Seokgu Yun)

How a former Samsung researcher started a tech startup

Q. Please introduce yourself and your company. 

Hello. I'm Phantom Yun, founder & CEO of Sovereign Wallet and CO2 Network. 

I majored in electronic engineering at KAIST in Korea and computer science at the University of Southern California in the U.S. After completing my graduate studies, I worked at Samsung Advanced Institute of Technology (SAIT) as a researcher working in the technology strategy department and digital communication labs. 

In 2014, I founded Sovereign Wallet, a technology company specializing in blockchain. We provide various services including CBDCs, tokenized securities, identity wallets, and AI security. 

The Sovereign Wallet collaborated with the University of Southern California to research and develop an identity-based blockchain called MetaMUI. This is the first commercialization of blockchain technology that decentralized the identity verification, unlike the Bitcoin blockchain we're all familiar with. 

The MetaMUI blockchain has many use cases. It's building a secure, decentralized network that enables everyday digital transactions. CBDC solutions are being deployed in Aboriginal countries inside the Australia, Northern Europe, Central Asia, and the Middle East.

According to that, CO2 Network is an app service that allows users to trade carbon credits based on the MetaMUI blockchain.

(Source : MetaMUI)

Carbon Emissions Trading Market : Structural Problems and Technical Solutions

Q. You have quite a variety of businesses, but first I would like to ask you about CO2 Network. What exactly is the concept of 'carbon credit trading'?

You've probably heard of greenhouse gasses, which are often blamed for causing global warming.

Greenhouse gasses increase in the atmosphere depending on the amount of carbon emissions we use in our daily lives. Therefore, there are growing calls for controlling carbon emissions to respond to the climate crisis. 

Carbon credits are a type of credit for reducing greenhouse gasses. 

It can also be understood as a reward for activities that reduce carbon emissions. The party that needs to emit carbon has to purchase the credits from the party that owns them, thus establishing the concept of carbon credit 'trading'. 

Q.I heard that carbon credits are already traded on the market. What makes ‘CO2 Network’ different?

The structure of carbon credits trading is as follows: first, the carbon credits need to be certified by the issuer. Once the seller and buyer have mutually authenticated each other, the ownership of the credits must be transferred from the seller to the buyer. 

The existing carbon credit trading market (due to this structure) involves an inefficient process that requires an intermediary to handle all the certifications and trade connections. This is because the current system has its limitations. 

(Credit : CO2 Network)

If you want to buy a house, you go to a real estate agent to find a property and fill out the paperwork.

Without an intermediary, there are only two ways to buy a house: you have to drive around and find a property yourself, or you have to buy the house documents online(!). Even then, it's difficult to verify that the other party actually owns the house. You can't be sure that the transaction will go through.

Q. Systematically, it would be ideal if authentication and transactions could be done securely and quickly. But that's not the case. 

These structural issues are the reason why intermediaries exist in traditional transaction systems. 

However, adding an intermediary to a transaction comes with its own costs and limitations. For example, intermediaries tend to prioritize parties that can pay large transaction fees, which is why the carbon credit trading market is currently dominated by massive transactions between countries. 

Just as the stock market was inaccessible to individuals from the beginning, the carbon emissions trading model is similar. CO2 Network aims to technologically solve this structural problem and build a platform based on blockchain that allows anyone to trade carbon credits online. 

(Credit : CO2 Network)

Q. Why is it important to enable trading of carbon credits between individuals beyond trading between countries or corporations?

The scale of carbon emissions is ultimately in the hands of the end consumer : The steel and cement needed to construct a house or building, power plants, public transportation, and food production activities, including beef.

Every aspects are all emitting carbon for the end consumer. So making carbon trading accessible to more individuals is crucial. 

As part of that work, we focused on building the technology foundation to enable identity verification and digital trading through a decentralized system that minimizes the need for intermediary platforms. 

Q. What do you mean by a decentralized system?

It's not uncommon for a third party to buy a bunch of carbon credits and announce, "We're going to issue a token based on these credits that you can trade". 

Even with blockchain and digital currency technology, at the end of the day, you still have to rely on the third party actually owning the carbon credits (whether they actually own them) and how much they own. It's just another form of intermediation

Ultimately, ownership transfers need to be able to happen securely (while eliminating the role of the middleman) through a decentralized network where individuals can verify their identity. That's the key. 

(Credit : CO2 Network)

CO2 Network aspires to provide a digital platform where anyone can securely authenticate their identity and transact ownership through the MetaMUI blockchain. By enabling individuals to trade carbon credits in their daily lives, we hope to contribute to reducing the acceleration of the climate crisis. 

In other words, by digitizing essential infrastructure, ‘CO2 Network’ seeks to go "paperless" (which can radically reduce carbon emissions).

Creating a digital common currency for Australia's aboriginal states?

Q. In addition to democratizing carbon credit trading, is there another attempt to make paperless a reality?

In 2024, Sovereign Wallet partnered with the Australian Indigenous Nations* to develop a common currency, the Allodial Unity Digital Dollar (AUDD). This marked the first step in building a digital infrastructure that will allow Indigenous nations living on the Australian continent to conduct economic activities based on a common currency. 

*Editor's note: The Yidinji Autonomous Government was established in 2014. The Australian continent is home to a number of autonomous, Indigenous-oriented territories. The Australian government does not officially recognize them. In 2023, a constitutional amendment that would have recognized Indigenous people as "first Australians'' and improved their rights, including creating a constitutional body to represent them, was defeated in a referendum. There is ongoing public debate around this.

(Source : AUDD)

Q. The idea of a common digital currency for multiple sovereign states is a unique concept. What inspired you to take on this challenge? 

The project that led to this came to fulfillment in 2022, when we provided a MetaMUI-based digital identity and CBDC to the Yidindji government, an independent Aboriginal nation. 

At the time, Yidindji launched the world's first Sovereign Yidindji Dollar (SYD) on the MetaMUI blockchain, digitizing the national identity and financial transaction system while complying with financial laws and privacy regulations. 

Three years after the launch of the SYD, the partnership extended to other Indigenous communities, taking them one step closer to "digitizing infrastructure", using a common currency, the AUDD.

By keeping their national currencies intact, they are one step closer to going paperless. We hope that the MetaMUI blockchain will become a meaningful platform for economic inclusion, digital sovereignty, and climate change solutions.

Q. The project seems to be quite distinct from what most people think of as Bitcoin and blockchain.

Bitcoin and blockchain as we know them cannot be used as a practical transaction system, since small-scale payments (micro-payments) are almost impossible. Moreover, it's unlikely that we have eliminated intermediaries in Bitcoin. The so-called "miners" who maintain the Bitcoin network act as intermediaries.

Additionally, cryptocurrency wallets have been plagued by the so-called "ownership problem": if you can't remember your digital wallet keys, you can't prove ownership of the digital assets stored there. So you can only rely on "custodial services," such as a brokerage platform to manage your digital wallet keys on behalf of you. 

To build a truly paperless infrastructure, these technology/service usability issues need to be addressed.

MetaMUI has attempted a structural design that empowers individuals to authenticate their identity, but without intermediaries holding sensitive information. It seeks to democratize carbon credit trading, but also securely digitize existing systems to anchor the new one, such as the Yidindji CBDC.

(Credit : CO2 Network)

Can we make a revenue model while tackling the climate crisis?

Q. From carbon emissions trading to paperless (digital identity, CBDCs, etc.). These all seem like topics that are focused on solving social problems. 

In fact, Sovereign Wallet and CO2 Network are working in a similar field as social ventures. People who are interested in solving social problems are knocking on our door. 

Q. Your business model sounds different from the traditional startup model, which emphasizes rapid growth. 

Regarding that, there are two challenges: Building a revenue model while solving social problems, and recruiting talented people with both skills and morals to join the team. As a startup, I think we should have a sustainable business model. So our team is trying to do something socially impactful and still make money. 

Q. I'd love to hear how you're actually monetizing. 

First, we build digital infrastructure through CBDCs and generate revenue through B2G (business to government) or B2B (business to business) deals as the digital currency is utilized. 

We are also preparing a large-scale trading platform based on security tokens as a service. You can understand that we are not only trying to provide direct transactions through digital infrastructure, but also crowdfunding platforms. 

Q. Speaking of crowdfunding, what kind of blueprint are you looking at?

We are preparing a platform that centers on eco-friendly projects and companies to trade their security tokens.

I believe that the value of eco-friendly technologies, materials, and products will only increase in the future due to the climate crisis. Our goal is to create a trading platform where anyone can invest in environmentally friendly businesses that are well versed in renewable energy, batteries, etc.

Q. So the mission of crowdfunding service is aligned to the carbon trading app. 

Yes, we want to build a new system where anyone can participate in trading and investing because we believe that the root cause of the current climate crisis is the economic structure. 

Q. What is the context in which you see the economic structure as the underlying cause of the climate crisis?

Until now, the climate crisis has been given relatively low priority despite the fact that it is a global problem. In particular, corporate entities have continued to emit carbon recklessly in the name of maximizing profits, which I believe is strictly a structural economic problem. 

(Source : Unsplash)

What if there were enough incentives to act to resolve the climate crisis?

If more people could trade carbon credits and reap the economic benefits of reducing their carbon emissions, or if more people could invest in businesses that are trying to solve the climate crisis without barriers to entry. 

So I don't just see our team as looking for a revenue model. I truly believe that if we can find a framework that works to make enough money to do something socially impactful and meaningful, it's tantamount to changing a whole society that has been treating resources with disregard for making money. 

It's time to empower those businesses that are building, investing, and innovating for the future, not those that are going into debt to grow bigger and emit carbon.

We are confident that CO2 Network and other crowdfunding platforms that specialize in sustainability will fundamentally contribute to tackling the structural problems that have caused the climate crisis.

"Innovation happens when you break the paradigm" 

Q. There is a myth that it is difficult for a startup to succeed as a platform business. What is your perspective as a founder who took on the challenge of building a trading platform? 

I strongly agree that challenging and succeeding in the business of 'unknown unknowns' (future events or outcomes that cannot be predicted or planned for) can lead to an unmatchable startup, because it gives a startup an absolute edge when it tackles a market that no one else can, with technology that no one else dares to try, and finally accomplishes its mission.

(Credit : Asia Tomorrow)

Q. An absolute competitive advantage...!

The survival/growth/success strategy of a startup is to 1) seize opportunities that others have not yet seen and 2) gain a competitive advantage with technology that others do not have.

It is the capability of the founding team to jump into the unknown and quickly build solutions through various trials and errors in the blue ocean.

Q. What are the future plans for Sovereign Wallet, MetaMUI, and CO2 Network?

We are planning to launch a crowdfunding platform in Switzerland in 2024.

(With this new platform) we are looking to connect with the European market in order to fund sustainability and scientific research-based projects. We are currently building this crowdfunding platform in line with regulatory, legal and support framework standards, which we expect to be good news for social impact-minded startups. 

CO2 Network has also launched its app and is on track. This year, it will evolve into a platform that enables crowd donations to eco-friendly ESG projects as well as carbon credit trading.  

Furthermore, the MetaMUI CBDC project doesn't end with just digital currency. One by one, we are going to add various metaverse features that will connect the physical and digital worlds, such as digital IDs, certificates, e-voting, registered mail, and more. Stay tuned!

Written by Jinny (Underdogs)


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Jinny Kim
underdogs. Media Manager & EO STUDIO. Freelance Writer