The century ahead: natural capital on blockchain

Intro

When people hear ‘natural capital’ they usually think of it in reference to either carbon credits or Charles Eisentein’s book Sacred Economics. The philosophy of natural capital is simple enough: Nature provides a number of both quantifiable (clean air, clean water, resources, medicine ingredients, etc.) and unquantifiable (scientific, artistic, and spiritual) benefits that hold value to every human being. However,  since John Locke’s Two Treatises of Government, the ownership of private property in line with natural law omitted any economic obligation or value to the natural world. The enlightenment and subsequent industrial revolution sprouting from the liberal tenets of private ownership, virtue ethics, and human rights also overlooked how such tenets might impact the natural world on an extended time horizon. 

Environmentalists and philosophers writing on the Tragedy of the Commons have unraveled the implications of this omission: Without a place for nature in economics, we find ourselves in a ‘race to the bottom’, with misaligned incentives destroying extremely valuable swaths of the natural world (for example, the Amazon), and polluting watersheds and ecosystems that support healthy human and animal communities. Instrumental reason and the economically rational agent of business fails to plan beyond immediate time horizons, despite it being common knowledge that clean water, air, and healthy forests are essential for human and animal flourishing. 

Carbon credits have emerged in the 21st century climate change discussion as a mechanism for drawing down carbon emissions. But more generally, I see carbon credits as the first step towards creating a financial market for natural value: Corporations and governments buy carbon credits to ‘offset’ their negative impact on the climate elsewhere. This is done sometimes through obligation and other times through voluntary actions. In the case of nature-based carbon credits the purchase of these assets directly contributes to the upkeep, conservation or regeneration of key natural ecosystems around the world. 

The nature of value and the value of nature

Blockchain transforms the programmability of value. With scalable and highly performant blockchains (Like NEAR Protocol, for example) we can create entirely new systems for quantifying, tracing, and issuing value for large portions of the natural world. This is the core vision of Open Forest Protocol: To enable any stakeholder to create high quality, data-backed assets representing natural value in the physical world. 

With the transformation of how value can be programmed, comes an opportunity to transform the way nature is valued and imbued in a free market. In other words, the nature of value is revolutionizing the value of nature. While we talk about carbon credits and corporate emissions today, we have a unique opportunity to tokenize and hard code the conservation of biodiversity hotspots around the world into our economic systems of the future. 

The creation of novel systems 

For the first time in our short human history, we have a technology that can connect the long-term time horizons of nature's growth and benefits, with the short term instrumental time horizons of modern business and finance. Today, we can finally create novel systems that incentivize the conservation, stewardship and regeneration of the natural world, as a core part of productive economic activity. We can correct John Lockes’ omission on the value of nature or our obligation to the natural world through hard coded programmable systems of internet money. 

A century time horizon for natural capital

Open Forest Protocol (OFP) is a platform with a 100 year time horizon: We aspire to create a network for the creation of natural value, such that natural capital can flourish on blockchains and eventually spill over into larger capital markets and fiat currency systems. This will reconnect the natural world with larger economic systems, creating long-term incentives to conserve and regenerate nature, as opposed to the existing fragmented short term incentives to pollute and destroy. 

Natural asset creation using blockchain technology

Our vision for accomplishing this mission is to start with the voluntary carbon market (VCM), and find product market fit for a number of different methodologies among large corporations, governments, and retail.

Every natural asset is currently issued according to a methodology. This defines the conditions and parameters for how a natural asset may be issued. On OFP, we have released one methodology for Afforestation and Reforestation Credits (ARR), but the protocol is designed to accommodate any number of methodologies from any number of project developers. Any existing certifier or developer, as well as any future certifier or developer, is able to create a natural asset with their own custom methodology. Our system is open, free-to-use, and always transparent (every asset is traceable back to its origination upload and validation).  

Value by consensus

The free market can then decide which assets are a better representation of captured natural value and of improved quality than another. Over time, better assets can be priced higher and imbued into larger financial systems (lending, stable coin backing, credit markets, pre-financing), while poorly designed methodologies or low quality natural assets are put out of business. 

Future methodologies can go beyond what currently exists in the VCM to truly capture the long-term vision of tokenizing nature in all of its complexity. This could include a methodology for old growth forest’ and even biodiversity hotspot’ and conservation zones around the world. There is a clear pathway to bringing over 1 billion hectares of natural capital onto blockchains in the coming decades. 

Incentivized stewardship of natural assets 

Practically, this means that there has never been a better opportunity for a climate entrepreneur or a government to create a system that incentivizes the conservation and stewardship of their natural assets. The tools for such a system are finally available and freely accessible! 

As Bitcoin has become referenced as a potential ‘reserve currency’ for a debasing US Dollar, and Ethereum and other L1 Networks have found value as blockchains that power the future of finance, we see OFP and its accompanying token - $OPN - as the fundamental platform for Natural Capital Reserves. 

The natural capital standard of the world 

Our hope is that by 2035, OFP becomes the Natural Capital standard of the world, with more than 80 governments and 200 large corporations using the protocol for their natural asset needs and climate commitments. This expectation is feasible, as OFP exists as the only on-chain natural asset issuer, with the mechanism enabling the only carbon yielding asset in the world. 

We hope that the many different environmental activists, NGO’s, governments and corporations - hungry for a future that includes natural capital and proper incentives for environmental stewardship - reach out to purchase the first credits on the protocol, support the network by running a validator, or onboard their own carbon development projects to the platform. OFP is a new beginning for how humans can value nature, and it runs on a new layer of the internet that promises to make such natural capital instantly accessible, globally available, and independently valuable.