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 stablecoin 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 weight

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 each MassID's weight in the allocation. A MassID representing 10 kg in a 1,000 kg (1 ton) allocation receives 1% of the total proceeds for that purchase.

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. The first categories (G through R) are the supply chain participants who physically handle waste. 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.

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.

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 — all participants receive 100% of their allocated rewards. This is the economic incentive driving the network toward full supply chain transparency.

Claiming rewards

Participants claim earned rewards through a privacy-preserving on-chain 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 publicly.

Participant identities are anonymized on-chain. No participant identifiers are stored publicly — each participant is represented by a purchase-scoped hash, preventing cross-purchase correlation by external observers. An observer can verify that a distribution is valid but cannot determine which real-world participant corresponds to any given entry.

When claiming, participants can receive payouts in fiat or stablecoin as described above. Each claim is verified against the on-chain 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 and location to optimize recycling performance for specific markets.

For example, the Foundation could increase the Waste Generator's share in a municipality launching a new source sorting program to drive participation, or adjust the Hauler's share in regions where transport costs are a barrier to recycling.

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Credit Purchase · Supply Chain · Smart Contracts