Rewards Distribution

How rewards work

When a quantity of credits is purchased, the proceeds from that sale are shared with every participant who contributed to the environmental work those credits represent. This is the core incentive mechanism of the Carrot Network — it ensures that supply chain participants, Network Integrators, MvF Authors and MvA Developers are all rewarded for their verified contributions.

Rewards are paid in USDC (a traceable digital currency pegged to the US dollar), giving participants stable value without exposure to market price volatility. Participants can withdraw their rewards in fiat or stablecoin according to their needs. See the Rewards Distribution Policy for full details on payment currency and withdrawal options.

Distribution mechanics

The distribution follows the MassID chain of custody through three steps:

Step 1: Split by credit value

When a buyer purchases a quantity of credits, the order is fulfilled by allocating from one or more certificates (each backed by MassIDs). The proceeds are split across those MassIDs proportional to the value of the credits drawn from each. When every credit drawn carries the same unit value — as in a recycling-only allocation, where one credit is one metric ton of certified material — that reduces to a split by weight: a MassID contributing 10 kg to a 1,000 kg allocation receives 1% of that allocation's proceeds. It does not reduce to weight when a purchase mixes credit types priced differently, as the paired carbon and recycling model does.

Step 2: Split by role

Each MassID's share is then distributed across all participant categories. Each category receives a percentage defined by the Rewards Distribution Policy:

The total percentages across all categories always equal 100% of the MassID's value. G, WM, BC, H, P, and R are supply chain roles. The Waste Manager coordinates destination without physical custody; the other roles in this group handle material. The remaining categories (I, A, D, DF, RG, dMRV) are ecosystem participants and network components that provide the digital infrastructure, methodology frameworks and MvAs, and network infrastructure that enable methodology execution and credit generation. For the full participant list, the destination funds, and the specific percentage breakdowns by waste type, see the Rewards Distribution Policy.

Step 3: Allocate to participants

Each category's share is sent to the participant(s) in that category. If a category has more than one participant — for example, two Haulers — that share is split among them. The network components (DF, RG, dMRV) are not participant payouts: the Distribution Fee and Registry cover network operations, and the digital MRV and Integrity Component feeds the Foundation Treasury.

For organic waste, a confirmed Waste Manager receives 4%, drawn from the Hauler (1%), Processor (1%), and Recycler (2%) categories. Without a confirmed Waste Manager, each share returns to its source. More than one confirmed Waste Manager splits the 4% category share.

Confirming a Waste Manager

Waste Manager onboarding alone does not create reward eligibility. The Waste Manager must declare the Waste Generators it serves, and each generator must confirm that relationship during its own onboarding. Both sides must complete onboarding before the relationship affects distribution. A one-sided declaration has no effect.

The incentive mechanism: reaching the source

The distribution mechanism changes dramatically when the Waste Generator is not identified in the chain of custody. This is by design — it creates a powerful incentive to extend tracking technology all the way to the source of waste creation and to encourage behavior change — incentivizing waste generators at the source of waste creation to participate in better sorting and contracting high-performance recycling services.

When the Waste Generator is not identified:

• 100% of the Waste Generator's share is redirected to the Community Pool — a discretionary fund that reinvests value into open-network growth.
• All other logistics and service participants (Haulers, Processors, Recyclers, and the Network Integrator — and the Bin Custodian where applicable) receive a 25% discounted payout compared to what they would receive in a fully tracked supply chain. The discounted amounts are also directed to the Community Pool.

An unidentified Waste Generator cannot be associated with a confirmed Waste Manager relationship for the MassID. The Waste Manager therefore receives no share in this case, and its conditional 4% returns to the Hauler, Processor, and Recycler categories.

This recycles value that would otherwise sit idle back into ecosystem growth, rather than letting it be captured by any private party. For how the network organizes its funds — the Foundation Treasury, Community Pool, and Impact Pool — see the Rewards Distribution Policy.

This creates a direct financial incentive for every participant to push for source identification. When a Hauler's rewards are discounted because the Waste Generator is missing from the chain of custody, that Hauler has a concrete reason to adopt tools that track waste from the point of generation.

When a supply chain is fully digitized — tracking waste from the Waste Generator through every step to the Recycler — eligible participants receive 100% of their allocated rewards. Waste Manager eligibility still requires the confirmed relationship described above. This is the economic incentive driving the network toward full supply chain transparency.

Claiming rewards

Rewards are committed on-chain at the moment of sale, through a privacy-preserving claims mechanism. During each credit purchase, a Merkle root is recorded on-chain, representing the complete rewards distribution for that transaction. This root commits to the full distribution without revealing any individual amounts or identities at the time of sale.

Participant identities stay pseudonymous in the public records. The sale-time reward commitment carries no direct participant identifier — inside it each participant is a purchase-scoped hash, so the committed distributions on their own cannot be correlated across purchases, and an observer can verify that a distribution is valid without determining which real-world participant corresponds to any given entry. That guarantee is scoped to the commitment, not to every public record: a MassID publishes a stable participant identifier as a non-reversible hash, and when a participant withdraws, the claiming wallet and the amount are recorded on-chain, so a participant who claims from several purchases with the same wallet is linkable across those withdrawals.

A participant's first payout is settled by Carrot, which is what binds their withdrawal wallet; from then on the participant claims directly against the on-chain proof. A stablecoin withdrawal settles straight from that claim; a fiat payout is fulfilled through an integrated payment provider. Each claim is verified against the recorded Merkle root using a Merkle proof, ensuring the distribution amount is correct without revealing participant identities publicly.

Auditability: While participant identities are protected from public view, authorized auditors can access the underlying data to identify participants for compliance and regulatory purposes. This balances individual privacy with the accountability requirements of environmental credit markets.

Governance of rewards

The percentage allocated to each participant category is not fixed — it is governed by the Carrot Foundation with input from ecosystem participants. Percentages can be adjusted by waste type to optimize recycling performance for specific markets.

For example, the Foundation could increase the Waste Generator's share for a waste stream where collection is the bottleneck, or adjust the Hauler's share where transport cost is the barrier to recycling.

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Credit Purchase · Supply Chain · Smart Contracts