This blog is a short recap of Tapx Talks — our weekly Twitter spaces where we discuss all things web3 and technology. Our first episode was dedicated to sustainability in crypto.
Keep on reading to learn more about the amazing web3 projects that are working hard to make web3 green — DOVU, KlimaDAO, Climate Collective, and Toucan Protocol.
We were discussing the following:
Is blockchain really environmentally unfriendly?
What is ReFi and why should you care?
The challenges of making web3 green.
Bonus — some great book recommendations from the speakers.
Let’s dive deep into making web3 green!
DOVU — a trust layer of carbon offset integrity
DOVU implements carbon sequestration practices to tokenise carbon credits. This makes it easy for organisations to offset their carbon footprints with carbon that’s sourced directly from farmers.
Irfon Watkins, the co-founder of DOVU, highlighted that the existing carbon marketplace is broken. The place lacks transparency and openness.
DOVU’s mission is to make this market more innovative and transparent by building an auditable on-chain solution where you can track carbon offsets from purchase through to redemption.
To do that, DOVU can’t rely on centralised agencies like Gold Standard or Vera, because centralisation and lack of transparency are a part of the problem. The audit process disappears as it enters some of their business practices.
The number one priority is to make it a transparent system. Make it open so that we can work with all the other projects that are focused on sustainability. This way, we can change the model of web2 blitz scale winner takes all opportunity.
Besides transparency and collaboration, Irfon also highlights another mission for DOVU which is to stop the colonial approach to farming and to carbon projects that is happening right now.
The idea that somebody in Thailand has to follow a process that’s been set by somebody in the UK or the US in order for them to get credit put on the system is broken — he says. The cost is too high. The process is too difficult. There are better ways of doing that, and one of them is using blockchain technology.
As a web3 business, we need to disintermediate those processes to make methodologies more transparent, make them less colonial, more local, and put it all on-chain.
Klima DAO — the center of a new green economy
KlimaDAO uses a stack of technologies to reduce market fragmentation and accelerate the delivery of climate finance to sustainability projects around the world.
Marcus Aurelius from KlimaDAO, speaks about the future opportunities of the environmental service credential schemes.
He says that in the future, additional ecosystem services credits will develop around things like biodiversity conservation, and wasteland restoration, etc. There are things that don’t necessarily directly equate to a tonne of carbon avoided or removed but do still add value to the earth as a public good.
That sort of vision, he believes, will help to learn from the macroeconomic structures that have shaped our current extractive global economy and use them to build a regenerative economy.
If you want to build a thriving economy you need to be driving as much of the value back to the producers of the commodities in that economy, which in this case is carbon but will eventually expand and make it easy as possible. Lower the barriers to entry for new producers of value so that sort of the long-term vision. Concretely what KlimaDAO is trying to do.
KlimaDAO is doing that in three ways. The first one is by introducing KLIMA, a digital currency backed by real carbon assets. The second one is building a set of tools, for instance, their retirement tool makes it easy to retire carbon credits from different tokenization schemes.
They also have a carbon dashboard that shows statistics and data on the different tokenised carbon assets.
And the third step is a robust partnerships programme where they are trying to drive demand for the carbon credits.
Klima Infinity is a partnership programme where KlimaDAO works with a variety of different organisations, from NFT projects to entire blockchains to web 2 corporates so they can offset their emissions through the suite of tools in their ecosystem.
Climate Collective — innovation network supporting web3 and climate
The Climate Collective is an expanding coalition of companies collaboratively building at the intersection of web3 and climate action.
The project started as an effort driven by the Celo community, Celo is an environmentally friendly proof-of-stake blockchain platform. Their mission is to fight climate change by tokenizing rainforests and other carbon-sequestering assets to enable natural capital-backed stablecoins on Celo.
Craig Wilson, the lead of Climate Collective highlighted that climate change is a mass coordination problem and crypto is a mass coordination tool. And mass coordination tools should be used to solve mass coordination problems.
At Climate Collective, they provide grant capital non-dilutive funding to projects that are operating at the intersection of crypto and climate. They are focused on open source projects, technical projects, real-world asset reports, and even podcast series like the Refi Spring podcast.
We want this particular space to be as highlighted as possible, we want more climate people who are crypto-curious to realize that this is an area where they should be spending their time, effort, energy, and talent.
Climate Collective supports a range of impactful products and interoperable protocols that progress the Regenerative Finance (“ReFi”) ecosystem, Toucan protocol being one of them.
Toucan Protocol — unlocking web3’s potential for a regenerative economy.
The Toucan protocol exists to support a planet-positive economy built on the public blockchain.
At Toucan we are essentially building a carbon market infrastructure to finance better climate action and to create an economy that’s regenerative by design — Ela, community lead at Toucan.
To understand that, there are two pieces to the puzzle, explains Ela. The first one is to improve the existing carbon markets which are flawed in many different ways. Moving them to open blockchains can help to address any issues that the current system struggles with. These include lack of transparency, double-counting, its middlemen that take much of the value, and greenwashing. All of those issues can be addressed with open blockchains.
The second aspect is to create a whole host of new demand sources for nature-backed assets by turning them into green building blocks.
Since carbon credits once they are brought on chain are tokenised, everyone can use them to plug them into DeFi protocols, use them for the metaverse and NFTs, etc. There is just a lot of new demand sources that didn’t exist before.
Blockchains: good or bad for the environment?
Aren’t crypto and blockchains environmentally unfriendly since they consume lots of energy?
Here are some thoughts from the speakers:
The statement that blockchains are bad for the environment is both right and wrong. Currently, there are certainly issues with proof of work chains and the amount of energy that’s being expended on them.
That said, it’s incredibly important to understand what the context is versus other means of computing power and what it’s being used for.
Proof stake chains are much less energy-intensive, and are much more prevalent than they were beforehand.
It’s important and critical to remember that we are making a lot of progress towards transparency, immutability, and hopefully in the future composability of blockchain.
In defence of Bitcoin and the Proof-ow-work chain, there are some really exciting opportunities to use the technology to help drive the green transition.
We have a number of different chains that have builders and entrepreneurs. We can decide to build on, you know, and you can choose the chain that’s best for your project.
Pretty much everything we’re doing is extractive, but blockchains do provide all of the tools that we need to create an economy that actually is regenerative, and we haven’t had the technology that was able to do that before.
Until we reach the point when all blockchains are sustainable, there are going to be issues with energy efficiency. But it depends on the blockchain. It depends on different factors and there are also all kinds of innovative projects aimed to eliminate the environmental footprint of mining. For example in Kazakhstan, there are projects that use Bitcoin mines to heat greenhouses. There’s also Cruso energy, a startup that uses flared natural gas to power Bitcoin mining rigs. We’ll see more of such projects in the nearest future.
Unlocking the ReFi
Since all of the speakers pointed out that they are building a better regenerative economy, we asked them to tell us more about what ReFi is and why we all need it.
ReFi is turning our extractive systems into something that is regenerative by design. There are many different ways to do that, but one that is very powerful is to just embed regeneration and kind of a fee for the planet into every transaction that is happening.
The other aspect that is quite interesting about regenerative finance, is that it is now possible to make it rewarding to do something good for the planet. It is not just an outright altruistic motive, it can actually be financially beneficial to do good for the public, the society, and the Earth.
Three verticals of the Regenerative finance
Marcus Aurelius from KlimaDAO explains three verticals of regenerative finance.
The first vertical is focused on climate issues. That’s mostly focused on carbon right now because it’s the most mature market.
The second vertical is social impact. Women’s empowerment, LGBTQ issues, and a variety of social issues around the representation of minorities. All of these social issues can be approached using regenerative financial primitives as well.
The third vertical is around public goods funding, especially open-source software, like blockchains.
The general idea of ReFi is around capturing and taking some of the innovations that DeFi came up with. These include things like borrowing and lending pools, automated market makers, decentralised governance protocols, etc. All these primitives can be applied to economic systems and protocols that have a regenerative character and are used to fight the climate crisis.
The challenges of making web3 green
Despite the great innovations and demand for sustainable solutions for blockchain projects, there are lots of challenges for them to scale.
Centralised carbon market players are one of the obstacles to the open and transparent industry.
The existing voluntary carbon market players will go with more centralised solutions cutting out many of the new players that are currently entering the space. That is bad for everyone. It’s bad for innovation in the carbon markets. It’s negative for the planet as well because it’s going to slow the pace of innovations that we want to move forward very rapidly.
If the innovation is slow, there is a risk that carbon markets will not achieve the intended effect of actually mitigating the climate crisis. The methodology will just be used to achieve corporate net-zero targets without actually having the level of impact that we need from these markets.
Blockchains provide the tools to drastically scale the supply of high-integrity credits. That could be the thing that speeds up the adoption by traditional players.
The other important thing that will help to incentivize the adoption of web3 technologies to fight climate change is financing.
Book recommendations from the speakers
In case you’ve been looking for a good read about climate, environment and economics, here are some great recommendations from the speakers:
Marcus Aurelius — Governing the commons by Eleanor Ostrom, the ministry for the future by Kim Stanley Robinson.
Irfon — Revenge of Gaia by James Lovelock.
Craig —Regeneration by Paul Hawken + everything from Bill McKibben.
Ella — Sacred Economics by Charles Eisenstein.
You can listen to the conversation and learn more about sustainability in web3 here.