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This chapter has been written by Louise Borreani and Pat Rawson, the authors of Ecofrontiers, with insightful review and contribution from Erik Bordeleau.
The Green Crypto Handbook is an ongoing research volume incubated by Ecofrontiers with two overarching objectives: (1) improve the funding environment for green crypto, and (2) enhance the efficacy of projects devoted to sustainable causes within the blockchain ecosystem.
In this blog, we present a chapter drawn from the book (see previous installations: Market Layer and Asset Layer). The book establishes an Environmental Finance Stack for Eco-capitalism 2.0, a framework encompassing six material and conceptual layers that are collectively responsible for the production of green crypto—each chapter detailing a specific layer. The sample chapter published today describes the Protocol Layer.
“Blockchains are not about bringing to the world any one particular ruleset, they’re about creating the freedom to create a new mechanism with a new ruleset extremely quickly and pushing it out.”
Vitalik Buterin: Visions Part I: The Value of Blockchain Technology (2015)
As discussed in the prior Institution Chapter, as nodes in an institutional network, institutions exchange and incubate factors of production—land, labor, capital, and innovation—in order to ensure their long-term livelihoods and achieve well-defined objectives. While the previous chapter focused on the general benefits to coordination and governance surface design of crypto-institutions, this chapter primarily focuses on how crypto-institutions technically structure their intra- and inter-institutional relationships, covering those blockchain-based institutional protocols crypto-institutions use to exercise control and boost productivity for themselves and their neighborhoods. The affordances of these technical protocols are of particular importance to green crypto-institutions, whose supreme thermoreal imperative compels them to weave a planetary-scale institutional network that can “evolve fast enough to contain climate change” and resolve “fundamentally global problems… beyond the reach of existing institutional forms like nation-states and pre-internet global institutions such as the United Nations, World Bank, and IMF.”[1]
"Institutional protocol consists of technical, legal, and social (normative) operations. An institution’s capacity to impress these protocols on its institutional neighborhood is a measurement of its power. This chapter primarily focuses on the technical operations reinforced or introduced by the crypto-institutional, as the immutable nature of these technical operations shifts the locus of power away from the legal and the social towards the technical. This being said, discussion does extend at times to legal and social operations, as green crypto-institutions must contend with the underlying material reality. Source: https://www.sciencedirect.com/science/article/pii/S0959378019302729"
The Protocol Layer is essential to understand as it lays the foundation through which the market objects of the Asset Layer are produced. Its relational web of overlapping rules, mechanisms and incentives co-determine the means of green asset production. Explicating these protocols through Web3’s technical lens and language provides critical insights to ecological economists who have so far failed to redress the absence of a mechanistic transition from orthodox financial economics to postmodern ecological variants. They have thus far been unable to articulate “a comprehensive and internally-accepted [ecological] theory of money” that recognizes “the social and ecological relationships inherent in its production and use.”[2] By using a Web3 lens to generalize and deconstruct institutional protocol in the context of green asset production (alternatively, ‘ecological asset production’), these relationships can be formulated, finally laying the groundwork for an ecological economic design language that demystifies financial object abstractions—the Asset Layer—with an honest understanding of their underlying material and social natures.
The authors admit that this call for an overtly cybernetic framing[3] of the socioecological immediately produces dissent. It collapses the design tension between the mechanistic and the psychosocial to posit the material primacy of one over the other. Proponents of the gift economy—“system[s] of exchange where valuables are not sold, but rather given without an explicit agreement”[4]—and other alter-economic currents would likely resist the thesis that crypto-institutional protocols can effectively reproduce socioecological systems into the future, much less enhance their normative vibes. Their concerns are easily rebutted, though, by a generalized analysis of Protocol: as we shall see in this chapter, all attempts to address the constraint of existing in economic exteriority are explicit protocological design decisions, with all corresponding tradeoffs. Web3 philosopher and media theorist Erik Bordeleau identifies this tension in full:
“What happens to the experience of sharing when confronted with the practical (that is, organizational) necessity of distribution, into digital governance rights, alter-monetary flows, or otherwise haptic, derivatives and anarchic shares? […] [T]he incorporation of forms-of-value as such”.[5]
He introduces this provocation in order to cite a brilliant rebuttal of crypto-institutional critique by Web3 artist and hacker Rhea Myer:
“The challenge that tokenization presents to its critics… is to account for where their money comes from and goes to, and to make their values and priorities explicit against the structurelessness of affordable appeals to good intentions. … This making explicit of value and values, structured both in terms of financial behavioral incentives and the language and meaning-making of their participants, is what gives DAOs such epistemological, ontological, and aesthetic potential.”[6]
None of the normative principles of alter-economic institutions, such as the evaluation of economic performance by non-GDP values (e.g. the Human Development Index) or the pursuit of equal distribution of wealth and public creation of money[7] are invalidated by explicating how these things are in the first place operationally realized. These principles are, on the contrary, empowered by an increased awareness of the generalized exteriority they seek to protocolize as institutions. Even Elinor Ostrom, the titan of commons-based resource management, stated outright that “all institutional arrangements can be thought of as [economic] games in extensive form.”[8]
To drive the point home, today’s alter-economies that “aspire towards ethically negotiated, diverse practices that support the livelihoods of humans and non-humans” are commensurable within the generalized economic exteriority, or the state of anarchy.[9] The economic exteriority in which they reside is always applying selection pressure, as financial capital—today’s hegemonic generalized means of exchange—always seeks surplus value. The factors of production institutions channel do not “reside in the kindness of people, but in the effectiveness of rules” and “the institutions that govern them”.[10] An overreliance on place-based social capital—i.e. shared norms—to counteract exteriority is as much a fallacy as the dogmatic elation of exteriority, especially in those regions where said social capital requires significant bootstrapping.
With this context, green institutions must construct interfaces—boundary subsystems—that relieve or re-channel interior and exterior stressors towards self-producing ends. To fully realize a world where a “renaissance of interfaces'' exist that exert “pressure on anthropogenic systems” in support of a woefully underrepresented, dying biosphere means explicating the already-existing and novel cryptoeconomic protocols that can do the practical job of maintaining a plurality of autopoetic ecological states at polycentric territorial, bioregional, and planetary scales.[11] While the former effort of articulating already-existing protocols is well studied, the categorical deconstruction of the operations of crypto-institutional protocol remains a shifting terrain of rapid, escalating innovation. The work of this chapter is to therefore attempt to catalog some of these innovations from the gaze of the green crypto-institutional. At a high-level, in the context of this book, we distinguish four categories of Protocol operations by which crypto-institutions interact:
This chapter attempts to move from basic protocological primitives to more and more complex assemblages related to the production of green assets, ultimately building towards the sophisticated, ecosystem-wide protocols characteristic of many powerful crypto-institutions today. We conclude the chapter with three case studies examining institutional protocol; the first two already-existing, and the final one a crypto-institutional design sketch of the possible.
"Policy drivers in the carbon dioxide removal (CDR) sector provide apt examples of how institutional protocol is used to shape the relationships between institutional interiorities and the generalized market exteriority. Each CDR ‘driver’ mediates this relationship in order to protect and scale green institutions. Source: https://www.bcg.com/publications/2024/boosting-demand-for-carbon-dioxide-removal"
“Asking ‘Do you want more market or more state?’ makes about as much sense as asking ‘Do you want more plants or more animals?’ The real question is ‘How do you get a healthy ecology?’”
—Eric Beinhocker, SFI Complexity Economics Symposium, 2019
The adjustment of the rules to change the rules, or the parameterization of an institution’s constitutional-choice governance surface, was already discussed in the previous chapter. The authors nonetheless invite readers to mule over the Ø1 protocols necessary to realize effective green crypto-institutions while reading this chapter.
"This map underscores the extent to which different nation-states have employed legal frameworks to recognize the biosphere. It reflects a growing global movement towards acknowledging the rights of ecosystems, a principle that directly challenges traditional notions of state resource management and opens up discourse on alternative institutional protocols like those proposed by Web3. Dark blue areas represent countries with laws recognizing the Rights of Nature. Light blue areas with dots represent countries with emerging legal recognition or legal initiatives concerning the Rights of Nature. Light blue areas without dots represent countries where the concept of the Rights of Nature is being discussed or considered. Circles with star patterns point out locations where significant Rights of Nature actions have taken place. Source: https://www.tandfonline.com/doi/pdf/10.1080/17445647.2022.2079432?ref=lawyersfornature.com"
“A communitarian integration of local techniques of measurement and mitigation into a more immediate tapestry may be an attractive vision for some, but a singing chorus to the invisible hand of flat networks is not a scalable posture of resistance… Without strong force-of-law mechanisms (and machines) in place, it is doubtful that design can possibly intervene at the superhuman scale of a planetary ecology…”
Benjamin Bratton, The Stack, pg. 104
In our framework, we distinguish Ø2 insomuch as it refers to discursive protocols imposed by force (the ‘force-of-law’) or social relations (the ‘normative’), and not a technical protocological mode imposed by trust-minimized consensus or smart contracts. Ø2 is unique in that for traditional institutions, it is the means by which all operations tend to be formulated. Consider that today, the force-of-law can:
Law is everywhere where green assets are produced. Nation-states exercise protocol by co-legitimizing a spatial registry whose bifurcations geometricize a figure of the “Globe” into shapes where operations concerning “resource extraction” and “ecosystem arrangements and dynamics” are legalized.[15] Within these geometries, ownership and stewardship rights of natural assets are implicitly reversible—that is, at any point the force-of-law can adjust the state of ownership from one actor to another.
As discussed in the Institution Chapter, force-of-law is deeply embedded in all aspects of present-day society and has become the dominant governance form of the socioecological by progressive enclosing commons, which previously tended towards a more normative, social governance. The enactment and enforcement of Know Your Customer/Anti-Money Laundering (KYC/AML) regulations is a pivotal example of how Ø2 punctures all aspects of global society today. Any attempt towards codifying financial privacy as a technical operation is thwarted by force-of-law, such as OFAC's takedown of Tornado Cash, a privacy-preserving tool on the Ethereum blockchain.[16] Mechanistically framed, today’s citizens—an Ø2 identity registry assignment—are little more than dynamic NFTs (dNFTs) minted by nation-states. This means of analogizing the lives of unique people in an operative techno-protocological language seems dehumanizing, yet calls attention to the realities of the commodity and computational treatment of labor today, where a “legally sanctioned market of labor commodification” exists to rent, sell, and trade an objectified “twenty-first century workforce”.[17] Fundamentally, today’s ‘citizens’ are state-transduced “smart object[s] held together by platforms for deep biographical comparability”.[18]
"Various types of law and their respective mappings to crypto-institutional protocol operations. It would be equally viable to read this chapter as only describing three top-level categorical operations with both legal and technical dimensions; the authors have deliberately chosen to separate out Ø2 in order to focus on Web3’s technical affordances in accordance with the context of this book."
Already existing Ø2 and the absence of effective Ø2 protocols can negatively influence the environmental sector. Examples of existing Ø2 frictions inhibiting environmental innovation include innovative rewilding conservation efforts that require rare state-issued permits for animal translocation,[19] newly AI-empowered Indigenous communities who could better preserve biodiversity if they had secure land rights.[20] and the lingering persistence of European nature protection laws which “do not include clauses that allow for innovation”, compelling state agents to ”stick with existing rules and procedures.”[21] On the other hand, a sort of Ø2 protocological twilight zone exists for most of the world: “mutual trust”, the capacity to “enter into binding agreements”, and “monitoring and enforcing mechanisms” simply don’t exist for many socioecosystems.[22] It is this Ø2 absence that gives weight and opens innovation opportunities for Ø1,3-4 substitutes. These types of problems are situationally similar to how the absence of effective payments infrastructure propels high rates of Web3 adoption as a payments technology.[23]
The same way pre-existing legislation has a tangible influence over rewilding innovation, the application of pre-existing regulatory frameworks like the 1946 Howey Test—a US legal framework that helps determine whether an asset qualifies as an investment contract and should be regulated as a security—are of particular importance for the production of green crypto-assets. These pre-existing Ø2 institutional protocols can speed up or slow down adoption as they are interpreted in relation to technical operations of the crypto-institutional whose technical trust guarantees did not previously exist. Unfortunately, the growth of the crypto-institutional has thus far been hampered by anachronistic regulatory interpretations; US Securities and Exchange Commissioner Hestor Pierce has admitted that:
“The application of the securities laws to token projects is not clear, despite the Commission’s continuous protestations to the contrary. There is no path for a company… to come in and register its functional token offering. Even if a company did manage to register its token offering, it would not be a particularly useful effort.”[24]
Today, overbearing US regulations now stifle institutional innovation—and by extension green institutional innovation—by imposing a one-size-fits-all approach to crypto-assets that no longer resemble in any meaningful sense Howey’s original interpretation. As noted by Ostrom, this tendency towards uniform, conservative regulations rather than regulatory adaptivity is the norm rather than the exception.[25] This underscores the need for a more nuanced and adaptable regulatory approach that can better navigate the tensions inherent between legal operations, the normative, and the emerging crypto-institutional.
"This infographic depicts the flow and interplay of layers required for applying institutional protocol, resembling the environmental asset stack articulated throughout this book. At the top, economic value flows provide snapshots of existing and desired network behavior—i.e. the Market Layer. These flows, in turn, are shaped by local agent behavior steered by Protocol and its corresponding Assets. Protocol’s ‘constraints on interaction patterns’ is shaped by the governance surface of Institutions, who rely in turn on the computation and state information of the Data Layer. Source: https://www.researchgate.net/publication/351560095_Finance_40-A_Socio-Ecological_Finance_System/link/60a3ab65458515952dd49fc5/download?"
“[D]AOs promise to turn the economy into a design question: that we could program its governing categories in another way— beginning with the operations of its value accumulators—by partially short-circuiting its statal and legal foundations …”
The Derivative Community: On Soulful Asset Formation, Erik Bordeleau (2023)
Setting interior parameters is inherently a technical process that involves modifying the configurable rules and settings under the control of some governance surface. This section delves into the nuances of setting these interior parameters either analogized from their existing Ecocapitalism 1.0 institutional counterparts or as already practiced or conceptualized in Web3.
“The proposed design of a social organization in space is a techno-anthropological diagram… functions of particular strategies of sorting, partition, enveloping, interfacing, planning, and sectioning…”
— Benjamin Bratton, The Stack, pg. 165-66
In cryptoeconomics, all object primitives—e.g. tokens, green assets—can be systematically categorized into four distinct classes, delineated along two fundamental axes: reversibility and transferability. These axes confer upon the objects a permissioned or permissionless character that either internalizes or externalizes their control vis-à-vis an institutional governance surface:
Crypto-institutions leverage all four classes to define and exchange a wide spectrum of blockchain objects, from fungible tokens like ERC20s to tokenized treasuries. These classes are fluid: acts of governance, programmable triggers or broader social or technological shifts may transition an object from one class to another, such as a non-transferable token becoming transferable due to a DAO’s governance vote.
Non-transferable and non-reversible objects are distinguished by their immutability and association with a specific address or identity, rendering them fundamental to the integrity and security of decentralized systems. These primitives are generally designed to remain perpetually tied to their original recipient or creator, without the ability to be revoked or altered by any institution. This permanence fortifies their trust and authenticity for some broader system.
A quintessential example of the class is the private key, an emblematic cryptographic primitive. The private key's sanctity lies in its resistance to external manipulation, safeguarding against unauthorized access unless compromised by clever exploits, the force-of-law, or brute force. Another example would be digital identity when applied under a self-sovereign design pattern (self-sovereign identity, or ‘SSI’).[26] Citizens analogized as dNFTs follow from this example: achievements, event and community participation, etc. are all attributes of the non-transferable non-reversible dNFT that ‘objectivizes’ a citizen’s digital identity. Approaches like SSI are important in that they place the underlying control of identity credentials under the person they describe.
"Web3 projects like Ceramic are working to build more effective ‘data ledger’ infrastructures for the calculation and assignment of non-transferable object primitives, enabling “scale, composability, and trust guarantees” essential for “a system of record for points and events.” Ceramic notes that “blockchains were built to be asset ledgers… designed for scarcity… Points are not bought, sold or traded like assets—they’re earned. They’re best served—fast, cheaply, scalably—on a data ledger.” Source: https://blog.ceramic.network/points-how-reputation-tokens-collide-where-it-goes-from-here/?ref=the-ceramic-blog-newsletter"
“One way to redistribute power within organizations and make explicit contributors’ institutional knowledge is through reputation systems… Given the distributed and ‘promiscuous’ nature of web3 work—where contributors work for several organizations at the same time—the creation of interoperable contributor credentials is of paramount importance and closely connected to self-sovereign identity and decentralized identifiers.”
— Social Security for Web3 Work: A Preliminary Specification of the Design and Deployment of Solidarity Primitives for DAO Contributors
Non-transferable and reversible assets are characterized by their inability to be transferred, yet are modifiable or revocable by an authoritative governance surface. Their limitations on transferability allow them to “curate a progressive exposure to the ‘outside,’ which does not automatically equate with the exteriority of the so-called market.”[27] This category encompasses a range of assets that play pivotal roles in governance, identity, and reputation systems:
"An overview of mechanism design considerations and tried practices for points rewards systems. (Source: https://mirror.xyz/veryearly.eth/n7i4f62CnvlPW7icpWkBwwAAlRjK213xgXuYNGGcM_I)"
"Transferable and reversible objects tend to encompass all physical property, as they can be seized by the State using the force-of-law. “State control, the police and the law, legitimate violence and judicial power play a role of ultimate controllers” of reversibility."
Transferable and reversible objects illustrate an intricate interplay between control, regulation, and innovation in the digital economy. While they can be freely transferred between parties, they are not sovereign; these assets retain a layer of control or influence from an authoritative institution, such as a regulatory body. Proposals for Central Bank Digital Currencies (CBDC) exemplify this design pattern: they are generally fitted with ‘backdoors’ for state institutions to freeze or seize assets. Popular stablecoins do this as well: USDC, for instance, can be frozen by Circle, a corporate institution.[35]
Staked Ethix, as detailed by EthicHub, serves as an example of how transferable and reversible assets can be conditionally utilized to secure systems via collateralization and generate liquidity.[36] Holders of Ethix—a transferable ERC20—may stake their tokens to underwrite micro-loans for regenerative coffee farmers, in exchange for rewards and governance rights within EthixDAO. In case of default, the staked Ethix is seized, demonstrating the asset's reversible nature while staked.
Transferable and non-reversible assets are uniquely characterized by their fluidity in exchange and irrevocability. This dual nature not only underscores their robustness in value exchange but also their resilience against censorship and external manipulation. Cryptocurrencies such as Bitcoin and unstaked Ethereum fall into this category. As transferable and non-reversible assets, they defy the conventional constraints imposed by control societies, demonstrating an inherent resistance to Ø2 state interventions.
Within regenerative finance (ReFi), numerous transferable and non-reversible green crypto-assets already exist. Fungible innovations like the Toucan Base Carbon Ton (BCT)[37] establish a reliable and enduring record of environmental-related contributions that can be freely exchanged in an open liquidity environment (see Market Chapter). Additionally, non-fungible digital impact certificates offer new avenues for investors and philanthropists to support value-aligned holders by combining the flexibility of transferability with the certainty of non-reversibility—e.g. Hypercerts[38] or OpSci.[39]
"A subgraph of a larger financial transaction Data network; a specific segment of the transaction graph to which protocols can be applied. Key flow motifs of goods and services within a local institutional network can be filtered by topological parameters such as degrees of freedom or centrality and assigned to a registry. Source: https://www.kolektivo.cw/whitepaper"
A registry can be understood as an array of objects, addresses, or entities that are afforded or disafforded certain functionality within a network. Alternatively, registries can indicate that other actors now have extended powers vis-à-vis their content. While the Registries section covers different types of registries relevant to green finance, it is by no means exhaustive. Registries have a long history as legal instruments ranging from land to company registries and serve three main functions:
"Annual volume of Suspicious Activity Reports (SARs) filed across all industries from 2014-2023. SARs reflect the operational activities of identity registries, while financial transactions are mapped to actors within “the FinCEN SARs database.” Source: https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/special-report-suspicious-activity-reports/"
An identity registry can be conceptualized as a database of identities where each entry points to specific attributes and information regarding an individual or organization. These registries can impose or lift restrictions and allocate or deny resources and privileges based on predefined criteria—e.g. KYC verification is enforced by institutional compliance processes and typically determines access to centralized financial services. Citizenry can be analogously understood as an identity registry that confers spatially-delimited rights and obligations to registrees.
In Web3, identity registries play a fundamental role in facilitating trust, access, and participation in decentralized systems. In the context of DAOs, these types of registries are crucial for defining eligibility and access to services, serving as allow-lists for onchain accounts that benefit from provided services.[41] One example is the Proof of Humanity (PoH) registry, which combines a social web of trust, reverse Turing tests, and dispute resolution to verify the unique identities of its human members.[42] The DAO service provided to PoH registrees is a steady stream of UBI tokens that simultaneously confer voting rights.[43]
"Decentralized identifiers (DID) are a type of verifiable credential for digital identification and authentication that operates in a decentralized manner. They are not controlled by a single, centralized institution but instead leverage Web3 to enable secure, private, and direct control over personal identity information by the individual to whom a credential belongs. Source: https://medium.com/@bdharris/web3-identity-primitives-2d4883cbed5b"
Private proofs-of-identity are becoming more prevalent; using zero-knowledge proofs, members can prove their membership in a registry without disclosing their personal information. Although these techniques are not yet widely implemented, they are rapidly evolving to become industry standards[44] as ‘passport’-branded identity products.[45]
"This complex network map categorizes various carbon certifications and their respective climate benefits. The map visualizes the connections between the various assets, entities, activities, and carbon reservoirs, illustrating the complex landscape of certification and standardization in the carbon sector. Source: https://osf.io/fu59w/download/?format=pdf"
According to AgripolicyKit, “Certification is a process used to provide evidence of compliance with certain quality requirements, in the form of binding or voluntary quality, environmental or social standards”.[46] Certification registries track assignments and serve as authoritative sources for certification. As discussed in the Institutional Chapter, a ‘thermoreal’ drive towards material legitimacy compels registries to innovate in the certification of green assets, as without verifiable monitoring, reporting, and verification (MRV) data backing their claims about the underlying material reality, ‘green’ assets lack substance as financial abstractions.
Max Borders, a Web3 futurist, has observed that many traditional institutions run their certification registries similarly to economic cartels. Accreditation Boards and universities, for instance, issue NFT ‘degrees’ and assign ‘grade’ attributes in exchange for financial compensation.[47] These certifications are artificially scarce through regulatory and cross-institutional mandates: the same degrees-as-certification exclusively assigned by these ‘higher education cartels’ are required to unlock freedom of movement between the ‘spatial registries’ of nation-states. The costs of certification—often identified as a type of ‘monitoring cost’ in MRV—are “often among the highest” of transaction costs, and contribute to industry centralization in ecosystem services markets.[48]
Today, certification registries are adjusting standards and innovating, particularly in the carbon sector, as the durability of carbon reductions is of major ongoing concern. Loosely defined carbon offset certifications have proven ineffective.[49] In response, new and stricter standards such as the Isometric Standard are filling this market gap by strengthening requirements for certification, emphasizing scientific rigor and transparency.[50] They disallow so-called ‘avoidance’ credits and temporary carbon dioxide storage projects. The EU’s carbon removal certification framework is also attempting to combat durability-related greenwashing by emphasizing removal over avoidance credits (see Asset Chapter).[51] Overall, while these innovations are useful and needed, they also lead to a high level of market fragmentation. Similarly, ESG now boasts “over 600 ESG reporting provisions globally” with “differing interpretations of sustainability.”[52] Addressing this fragmentation requires the use of protocological fungibility transformations, which we discuss later in this chapter.
"A registry-integrated Decentralized Reporting, Monitoring, and Verification (DRMV) Platform. The Project Developer engages with Pachama's DRMV system for carbon, forest cover, and baseline mapping. The system undergoes a Third-Party Software Audit for Certification, after which the results are used for Auditing purposes. Verified data then flows to a Third-Party Registry for Credit Issuance, and the certified credits are listed in a Marketplace. Source: https://pachama.com/blog/building-the-modern-carbon-market-the-planet-demands/"
There are many ongoing Web3 advances in certification registry design:
"Deconstructed stack of a typical Geographic Information System (GIS), where vital spatial and environmental data is organized into layers. Some layers, like the Zoning layer, are primarily composed of vector data, formulating clear shape-based geometries. Others, like Demographics, are generally raster-based, displaying hotspots with pixelated grids. Collectively, these layers help delineate overlaps and points of collision between the underlying material reality and (human-designed) institutional protocol. Source: https://geos.louisiana.edu/news-events/news/20230124/undergraduate-certificate-geographic-information-systems"
Spatial registries play a crucial role in resolving collective action problems. They enrich protocol design by delimiting geospatial boundaries, geolocating economic factors of production, and spatializing transactions. Simply put, spatial registries enable geo-aware protocological operations, such as location-based incentives. Clear spatial demarcations target and ground protocol in the real-world in order better optimizing socioecological outcomes. Today, “on average” across countries, smarter land use could “double… economic returns or environmental outcomes… without a sacrifice in the other outcome”.[58] emphasizing the pivotal role spatial registries occupy in green institutional protocol design.
Spatial registries have long been utilized in an Ø2 sense by spatializing the boundaries of many forms of regulatory law. Consider the most basic spatial mechanism: a land-registry system that demarcates land use, ownership, or zoning.[59] This primitive clarifies and delimits property rights while simultaneously serving the general state necessity “of collecting land revenue”; today, multiple states are experimenting with blockchain land registries to these ends.[60]
Spatial registries, when combined with certification registries, help delimit precise boundaries and distinguish between ecosystem service-providing (spatial zones generating ecosystem benefits), service-connecting (the corridors or pathways that transfer benefits), and service-receiving areas (their places of receipt and utilization).[61] The observed ecological state within these sets of bounded or connected geometries—e.g. CO2 levels or biodiversity metrics—ultimately determine the certifications they qualify for. This interplay is crucial in contexts where spatial ownership or stewardship must be transparently linked to ecological outcomes, e.g. reforestation.
Blockchain-based spatial registries unlock more than just certifiable zones of impact. Imagine ‘geo-aware transferability’, which would only allow crypto-assets to be traded within some locale to the benefit of a local economy. More exotic use cases could include alert systems that create incentives when property-damaging wildlife exits a certain conservation area.[62] If inverted, this exotic use case could incentivize the proper care of species entering a designated area, as described by various conservation banking proposals:
“[B]ankers [should] generate credits by following a specific species as it migrates, establishing habitat not just on one purchased piece of land but instead by identifying viable habitat the species may migrate to and working with private landowners through incentives… the accompanying sale of credits… [supports] an endangered species as they follow species migration…”[63]
It’s important to note that while Ø3 spatial registries would allow for fine-tuned control over interspecies spatial access rights and incentivization schema, they do not replace present Ø2 realities, once again highlighting the importance to the Rights of Nature as a movement. This being said, Ø3 spatial registries can establish additional monitoring guarantees through composability with other Ø4 primitives—such as blockchain-based arbitration. With them, the operational cost of disputing damages caused by migratory species can be automated and brought to a much higher efficiency.
"A high-level architecture of a blockchain-based spatial registry design by Astral Protocol, aggregating needed functionalities such as private location attestation and dMRV certification. Source: https://github.com/AstralProtocol/astralprotocol"
Despite significant technological advances, Web3 spatial registries remain an underdeveloped primitive with no overarching industry standard.[64] Nonetheless, standards such as the Geospatial Non-fungible Token (GeoNFT) have been proposed to bridge this gap.[65] Other projects, such as zkMaps[66] and zkLocus,[67] are building supporting infrastructure that allow for the verification of geographic locations without compromising privacy. This capability is vital for accurately assessing and trading natural assets while maintaining user privacy. Overall, though, these projects are still in their early stage and have not yet gained widespread acceptance or utilization.
"Screenshot of the Prisma Finance collateral registry, entailing four different assets described by five different parameters. Source: https://prismafinance.com/"
Collateral registries enumerate and parameterize assets which are usable as collateral to back currencies or debt issuance. Historically, fiat currencies were backed by tangible natural assets like gold. Today, the concept of collateral has become synonymous with debt: as articulated by Mira Tekelova, the majority of money in circulation originates from loans.[68]
Several innovative concepts have been proposed to make currency more sustainable and less reliant on its high entropy petrodollar roots.[69] Shifting the control of money creation and collateral from state monopolies to local communities holds strong potential to enhance the stewardship of natural capital and give weight to socioecological transition. Notably, the Silver Gun Hypothesis proposes the collateralization of carbon assets by Central Banks to create a green, carbon-backed currency.[70] One overarching thesis in ReFi is that regenerative crypto-asset collaterals can ultimately play a significant role in addressing the climate crisis by shifting the collateral base of daily money towards negentropic rather than entropic assets.
Within Web3, collateralized stablecoins such as MakerDAO’s DAI and Mento’s Euro are pegged to fiat currencies and backed by various crypto-assets. These Web3 collateral registries tend to be community-governed by token holders. MakerDAO's founder, Rune Christensen, published a manifesto outlining ”The Case for Clean Money”, where he posited the potential for stablecoins to drive sustainable investment globally by massively collateralizing with Green Real-World Assets (GRWA).[71] His ‘clean money’ vision, however, has yet to come to fruition at any greater scale. As of May 2023, the Maker Protocol supported 14 collateral assets, but none of them were of a sustainable or green character.[72] To this date, no major Web3 real-world implementation of ‘clean money’ yet exists.
"Table entailing examples of fungibility transformations in Eco-Capitalism 1.0 and 2.0 contexts."
Fungibility refers to the characteristic of a good or asset that allows it to be exchanged with other identical items.[81] This attribute is crucial in simplifying trading and exchange processes, as it ensures that each unit of an asset holds equivalent value to its counterparts. Unlike traditional financial assets, crypto is uniquely differentiated by its capital fluidity: the capacity for an asset to transition across different fungible or non-fungible states. The fungibility of assets is often framed in this binary manner, but this perspective deserves a more nuanced understanding where fungibility is a set of possible states. Similar to the transferability or reversibility of tokens, conditional fungibility suggests that assets can exhibit varying degrees of interchangeability based on predetermined or imposed adjustments by an authoritative governance surface. This gradation enables more tailored policy decisions that accommodate both complete or partial fungibility, enhancing market flexibility—particularly for environmental assets, where multi-dimensional attributes like permanence should affect asset properties.[82]
Transformations in fungibility encompass the methods and strategies that alter an asset’s degree of fungibility. These transformations facilitate more dynamic market interactions as they allow for continuous adaptation as new data or technologies emerge. Such adaptivity is essential for maintaining the relevance and efficacy of green crypto-assets in a rapidly changing global landscape.
"Minting flow for Open Forest Protocol Carbon Credits. The type and quantity of credits minted is largely determined by MRV processes. Source: https://docsend.com/view/75zb4teqgzvvmyva"
Minting refers to the process of generating an asset and establishing its unit of account. For many green assets, minting is derived from a specific measurement or MRV methodology capturing the underlying material reality, such as an environmental index. Mint conditions are highly variable and customizable across environmental assets, such as biodiversity credits, whose dizzying array of potential mint schemes are summarized by the table by Bloom Labs below:[83]
Minting need not be limited to fungible tokens, and tokens may be minted in complementary fashion. Consider Coorest's NFTrees, which are digital representations of real-world trees. While the NFT representation of the trees is purely symbolic as a digital collectible, these NFTs mint in parallel fungible CO2 tokens to their holders that correlate to the sequestration of their real-world arboreal counterparts.[84]
Wrapping typically refers to the transformation of a crypto-asset to render it “operable on another blockchain” or off-chain[85] database while retaining “the exact same value.”[86] A simple example of wrapping is the transformation from ETH → WETH (wrapped ETH), where ETH is rendered technically operable with a broader ecosystem of decentralized applications.[87] Beyond this understanding, wrapping as a 1 → 1 transformation can take more complex forms:
"Fractionalization plays a crucial role within the Toucan Protocol, where carbon registry entries are first minted as NFTs, then sharded as TCO2 tokens, before eventually being indexed to produce highly fungible carbon assets such as the Nature Carbon Tonne. Source: Toucan Protocol’s Documentation"
Fractionalization, or sharding, is a key fungibility transformation where a non-fungible asset is made fungible through a process of division. With this, the asset becomes more accessible for exchange in the market. Think: trading a house vs. trading shares in a house.
Sharding helps price discovery by accommodating a larger pool of participants who can now trade fractional shares for partial ownership of an NFT at lower operational cost. Consider the progressive integration method of shard issuance, where a sharding protocol issues new fragments for a given NFT at a constant rate—for example, 1% per day, or 5% per month.[90] These new fragments are sold for ETH in an auction that goes to existing fragments holders as staking rewards.[91] This achieves two critical financial objectives simultaneously: supply reduction through staking, and more efficient price discovery through auctioned-shard sales. Finally, it becomes easier to layer derivative financial products and investment vehicles on top of sharded assets—e.g. index funds.
"Kolektivo proposes a fractionalization mechanism centered on the variation inherent to spatial registry parcels, or GeoNFTs. It is imagined that measurable ecological or spatial attributes of the GeoNFT can be used as inputs for calculating the fractional shardcount of the GeoNFT. Source: https://assets.website-files.com/5fcaa3a6fcb269f7778d1f87/63297723f700491a0698ab5a_Kolektivo%20Bluepaper.pdf"
Sharding is highly relevant to ecosystem services (ES). In ES, one creates "mapping units" by splitting a large area (the "study area") into smaller, easier-to-manage spatial shards. These units can be defined by various criteria such as geographical features, administrative boundaries, or specific land uses. This approach allows for more precise measurement, attribution, and management of the ecosystem services provided by different parts of the landscape.[92] Ultimately, this sharding method produces “a unit of reference” that can be “measured” and “translated into information” for green crypto-asset production and exchange.[93] As territories become increasingly tokenized and spatial registries gain acceptance as Web3 primitives, one can expect them to increasingly explore the design space afforded by fractionalization.
Reconstitution refers to the inverse process of sharding, where fractionalized tokens are aggregated back into a non-fungible whole, restoring the ‘original’ asset. Reconstitution is not a one-size-fits-all process; it encompasses a diverse range of methods that can have strong effects on the governance surface for some non-fungible asset. The most popular method is a 51% takeover: once a single owner controls over half of the shares of an asset, or is willing to pay for more than half of the value of the asset’s market capitalization, they can reconstitute the asset for themselves. With these types of mechanisms, the rights and responsibilities associated with fractionalized ownership require clear and equitable processes for reconstitution, such as ensuring that each fractional owner receives their fair share.
A pertinent design question arises: if a green asset cannot be reconstituted and sold on the market, does it hold any intrinsic value? Consider, for instance, a conservation area governed by an institution that has issued shares to assign and determine its ownership. If buying 51% of the shares cannot be used to gain the right to sell the conservation area, do the shares themselves have value? The answer to this question has profound implications for investors of natural capital, as assets whose reconstitution do not infer rights of sale may be less attractive or even devoid of exchange value.
"This figure showing Cumulative VCM Issuances and Retirements by Project Category can be understood as an attempt to aggregate fungible carbon credits (N) into composite groups (M) based on issuance and retirement volumes, project types, and vintage years. Source: https://3298623.fs1.hubspotusercontent-na1.net/hubfs/3298623/SOVCM%202023/2023-EcoMarketplace_SOVCM-Nov28_FINALrev-1.pdf"
Indexing (a.k.a ‘pooling’ ‘basketing’ or ‘batching’; in some cases 'redenomination’) refers to the concept of crypto-asset pooling where multiple fungible assets (N) are basketed in a fungible index (M). Whereas liquidity pools in blockchain are typically pools of tokens locked in a smart contract to facilitate decentralized trading by crowdsourcing liquidity, indexing in environmental asset markets involves aggregating similar assets to create a more homogenized, tradeable asset. The authors’ general preference for the term ‘indexing’ over ‘pooling’ arises from the need to distinguish this process from ‘liquidity pools,’ a common Web3 term; nonetheless, this section will use the two terms interchangeably.
Creating liquid assets is a common challenge in environmental asset markets. The heterogeneity of these assets, as noted in a 2021 McKinsey's report, has historically impeded market growth due to the difficulty in generating reliable price signals.[94] This is evident in carbon and other environmental asset markets like Renewable Energy Credits (RECs) where liquidity fragmentation is of particular concern. Indexing helps mitigate this issue by batching green crypto-assets based on specific criteria or attributes and minting fungible tokens representing a share of the batched assets. For example, an index might amalgamate nature-based carbon credits from a certain year, with Ø3 parameterized smart contracts guaranteeing that only credits meeting the pool's criteria are included.[95] The pioneering efforts of the Toucan Protocol with their Nature Carbon Tonne pool exemplifies this approach.[96] Other notable examples include Solid World's CRISP-M token, a collateralized basket of Verra-certified mangrove forward contracts.[97]
"Example of batching RECs with Jasmine Energy. Source: https://docs.jasmine.energy/v1/basis-pools/introduction"
"Retiring a tokenized carbon asset using the Toucan Protocol. Source: https://docs.toucan.earth/toucan/retirements/retire-credits"
Burning, in the Web3 lexicon, refers to the process of permanently removing a crypto-asset from circulation and thus from any further fungibility transformations. This is typically achieved by sending the token to an address from which it cannot be retrieved, effectively reducing the total supply and rendering the token unusable. It is for all protocological purposes the same process as retirement, a term specific to the context of carbon and other environmental assets. Retirement of a carbon asset denotes the act of permanently removing it from the market to ensure that the associated reduction or removal of greenhouse gasses is not double-counted or resold.
To illustrate, consider the retirement flow of a tokenized carbon asset. Once a carbon asset is tokenized, it becomes a digital representation of the removal or counterfactual avoidance of carbon emissions. The holder of this tokenized asset can then choose to 'retire' it. This retirement is executed by sending the token to a designated address where it is effectively 'burned' or permanently removed from circulation. When recorded on the blockchain, the carbon token’s retirement provides a transparent and immutable record of its utilization. This ensures that the environmental benefit represented by the asset is accounted for and not reused, upholding the credibility and environmental integrity of its offsetting function.
For produced goods, Extended Producer Responsibility (EPR) is an emerging concept where a fee is automatically charged to producers to cover the cost of sustainably retiring a good in question. Simply put, “the responsibility for managing the product’s end-of-life” is “on the producer”, with the fee covering “downstream costs of waste management, in particular collection, transport, sorting and recycling/treatment.”[98] This policy can be easily extended to tokenized natural assets and commodities, where the final sale or consumption of a good simultaneously releases an Ø4 escrow contract claimable through a real-world proof-of-disposal (see: Ø4 section).
"AgripolicyKit is a helpful agri-food sector policy compendium whose protocols could fit in many places in this chapter. This being said, the majority of its aggregated instruments are socioeconomic interventions. Source: https://www.agripolicykit.net/en"
Socioeconomic interventions represent a complex array of institutional strategies and policies that state institutions typically employ to influence economic behavior and control the distribution of factors of production. Such measures include fiscal policy, dealing primarily with spending and tax policies, and monetary policy, conventionally implemented by central banks to control fiat money supply and interest rates. In this section, the authors separate out a third category of socioeconomic intervention: treasury/vault settings, representing the interior Ø3 parameterization of an “automated investment platform”—i.e. a smart contract that generates yield through investment—that can be engaged with by any onchain actor.[99]
Socioeconomic interventions are of high protocological concern for green crypto-institutions. These policies, when based on unfounded or unscientific claims, can hinder effective climate action. They can have adverse and unforeseen effects if not properly understood. While there are many examples to pull from, consider the EU’s Just Transition Fund, whose significant reliance on private for-profit investment often undermines the public good and hampers equitable and sustainable development.[100] With this, the discourse around socioeconomic climate policies is a highly politicized and hotly debated spectacle—where to spend, how to spend; what to tax, how to tax; who pays, who benefits, etc… As discussed in the previous chapter, the navigation of these complex tensions prefigures a rich design space for green crypto-institutions to invoke new, cybernetically data-driven solutions for tighter protocological intervention of the underlying material reality.
Note that while fiscal and monetary policies in this chapter are generally discussed in the context of their application to crypto-assets, they could easily be substituted for policies dealing with the real exchange of goods or natural assets, e.g. a currency import quota that defines the maximum of a crypto-asset that can be deposited to a DAO’s reserve vs. an import quota that defines “the maximum quantity of a product that can be imported based on factors such as weight”.[101] For a more generalized catalog of socioeconomic policies that transcend Ø3 crypto-financial application, readers can visit the AgripolicyKit website.[102]
Fiscal policy refers to a variety of mechanisms primarily designed to control the ownership and distribution of capital in society, using registries as targeting and attribution mechanisms. Solving distribution and attribution problems in “an equitable and credibly neutral way” is a “key aspect of ensuring financial stability”.[103] If a non-significant portion of an institution’s constituents feels that fiscal policies are unfairly applied, it can lead to extreme shifts within an institution’s governance surface, membership, or its very existence.
To understand how registries target fiscal policies, we use the real-world example of a state tax applied to a spatial registry. In Russia, authorities automate and levy taxes based on graph-based spatial data that measures a vehicle's journey from the point of highway entry to exit, taxing “the total distance taxpayers drove”.[104] The taxpayer’s trajectory, a line segment connecting topospatial entry and exit nodes, serves as the targeting mechanism for implementing the fiscal intervention—specifically, a tax. These types of ‘nudging’ measures are critical to broader 21st century political agendas, where digital tools are now used to subtly influence or adjust citizen behaviors.
In cryptoeconomics, there is a much wider design space for fiscal policy. Crypto-institutional fiscal policy can extend beyond public sector budgeting, spending, and taxation towards greater cybernetic interactivity. Redistribution mechanisms can, for example, be tailored to the specific capital dynamics of a crypto-institutional topology, encouraging spending or more efficient circulation of capital within an interiority (or alternatively, preventing excessive capital accumulation). While evaluating each policy below, readers should keep in mind the dynamic and surgical capabilities of blockchain-based interventions:
"The mechanics of Central Banks can be generalized to the Protocol Layer, which refers to the “controlled variables” and “tools” that central banks use to produce assets that enter the “financial” and “real sector”—the Market Layer. “Economic modeling” in turn, takes place in the Data Layer. Source: Open Earth Foundation (2023). Nature-Based Currencies: Integrating Natural Capital in Advanced Monetary Systems"
Monetary policy traditionally refers to the task of governing a nation's currency and its properties, such as supply. Monetary policy is often orchestrated by a central bank or a similar financial authority. It encompasses tools and strategies to control inflation, attenuate the flow/money velocity of a daily spending currency, stabilize credit bubbles, and achieve sustainable economic growth. In the pursuit of harmonizing ecological sustainability with economic development, monetary policy can be tailored to incentivize practices that benefit the environment, such as structuring preferential interest rates for farmers who adopt nature-positive cultivation methods.
Most monetary policies refer to control of a daily spending currency rather than a store-of-value asset; instead, reserve assets are used as collateral to back daily use currencies. Leveraging assets in this way comes with inherent risks, necessitating capital controls to maintain economic equilibrium and prevent currency crises. Conservative policies tested through simulation and gradually relaxed as confidence in an economic interiority grows are crucial for stable spending currency expansion. With this in mind, readers should conceptualize the below policies in relation to good algorithmic stablecoin design, as stablecoins are the de facto spending currencies of Web3 today:
"Example flow of a vault basis trading perpetual futures in order to “capitalize on the price difference between ETH perpetual futures and ETH on spot.” It mainly generates yield by collecting the “funding rate when it’s in the positive”. For a deeper discussion of perpetuals, see the Asset Chapter. Source: https://decommas.io/blog/defi-vaults-what-are-they-and-how-you-can-benefit"
DeFi vaults are “automated investment platforms” that “seek out the most profitable lending, staking, trading, and arbitrage opportunities” to grow deposits.[124] These vaults can be parameterized in an Ø3 manner by an authoritative crypto-institution to constrain the activities of their managers or set the vault’s automated investment strategy. To the extent a distinction can be drawn between vault strategies and the collateralized monetary policies of the previous section, it would be the absence of the overarching objective of producing a spending money through collateralization.
Treasuries and vaults themselves can be tokenized in either non-fungible or fungible manners; their tokenization represents a “claim on an underlying pool of tokens that grows with fees being generated.”[125] Such tokenized vaults represent the future of socioeconomic policy tools, where claims on diversified and dynamically managed resources can be traded, leveraged, or used as collateral, reshaping the contours of asset management and ownership.
"Bootstrapping green institutions typically requires high levels of infrastructural funding to change the underlying material reality at scale; e.g. solar farm construction or massive conservation projects. These financing vehicles, when applied to crypto-institutions, are Ø4 agreements where crypto-institutions negotiate with institutions exterior to their governance surface, e.g. receiving public funding or low-interest debt from a state or financial institution or selling equity to a corporate institution. The above graphic highlights the types of instruments used for institution-to-institution infrastructure financing today, which are increasingly being tokenized as (G)RWAs whose tokenization ultimately “overcome"
“An interface is any point of contact between two complex systems that governs the conditions of exchange between those systems… Only because they reduce and simplify complex systems can they make it possible for people to use those systems at a systematic scale and realize platform value from them.”
- Benjamin Bratton, The Stack, pg. 220-21.
Ø4 operations orient towards an institutional exteriority. Ø4, at its simplest, could be a transfer of non-reversible tokens from a community-governed treasury to an individual wallet, thus transferring control of the funds from the Ø1 governance surface elsewhere. Ø4’s overarching imperative is to extend the reach and functional capabilities of an institutional protocol beyond its interiority, engaging in exterior-facing ‘ecosystem building.’
Ø4 involves not only the transfer of funds but also the utilization of DeFi protocols, the crypto-institutional negotiation of joint technical operations, and blockchain-based arbitration, all in pursuit of new trans-institutional cooperative equilibria. By enabling more transparent, efficient, and direct interactions between crypto-institutions, Ø4 can support sustainable practices and equitable resource distribution. This is particularly impactful in contexts where traditional Ø2 methods have been inefficient or have resulted in the occurrence of negative externalities such as environmental degradation.
"Payments for ecosystem services (PES) are dependent on the type of the activity (does it restore or protect the environment?), the performance of the activity (did they plant trees or did the trees grow to be old?), and the flow-of-funds (was it direct or did it pass through an intermediary?). They can be spatially targeted or issued based on some certified performance (see Ø3 registries). Their success is measured by “a combination of (a) the extent to which the original goals of the PES scheme were met, and (b) the added value in terms of an overall improvement of the ecological, economic, and social conditions of the region, beyond intended objectives.”"
Funding mechanisms can be roughly characterized by their breadth—how many nodes are funded—and depth—how equally each node is funded. In this characterization, the deepest funding operation would be a 1::1 P2P transaction, where one node funds another. Direct investments similarly emphasize a narrow funding verticality through targeted payment to some singular entity. Investment payments do not necessarily need to be made all-at-once, but can be continuously implemented and tapered according to some prefigured contract. Renewable infrastructure, for instance, is frequently initiated by feed-in tariffs that provide “price certainty” at some “above-market price” before a “decline over time to track and encourage technological change.”[128] Offtake agreements function similarly, guaranteeing a buyer for a producer's future output—a 1::1 exchange—thus bootstrapping their efforts.
On the other hand, broad funding protocols like UBI or consumer subsidies tend towards equal financial support to a network of nodes. This type of funding is prevalent in open-source crypto-institutional finance, where innovative computational social choice approaches like quadratic funding aim to optimize the allocative efficiency of a decentralized network.[129] Retroactive funding—an ecosystem-wide funding method—aims to incentivize crypto-institutional neighborhoods to grow in the present “based on the assurance that they [contributors] will be rewarded for it in the future.”[130] In these social choice capital distributions, funded nodes are oftentimes defined by an Ø3 identity or certification registry, e.g. Protocol Guild’s streaming of funds to Ethereum developers who meet “eligibility requirements outlined in Protocol Guild’s documentation.”[131]
"Two different payments flows related to the production of carbon credits. Note that the top flow relies on greater trust between institutional actors than the bottom flow, but each has its own weaknesses (projects may struggle to bootstrap conservation without some form of fixed upfront capital). Source: https://blog.dclimate.net/j-redd-and-results-based-payments-the-flavor-of-the-day/"
The authors posit that all funding operations, whether they appear benign or directly transactional, inherently serve to attract and direct the recipient's attention towards the issuer. This phenomenon of attention accumulation suggests that funding is not merely a financial transaction but also a strategic acquisition of influence within a network. Even ostensibly altruistic acts such as anonymous donations are designed to influence recipient behavior, typically towards survival or growth. With this notion in mind, the prevalence of airdrops as a common crypto-institutional broad funding operation seem to stem “from marketing principles and network effect dynamics… recipients, now vested with a stake, are incentivized to partake actively within the ecosystem.”[132]
The infrastructure underpinning Web3 allows for innovative funding models, such as token streams, which facilitate a continuous transfer of value perfect for subscription services or salary disbursements.[133] Meanwhile, token vesting schemes incrementally release funds according to a specific schedule or performance, ensuring long-term alignment and commitment from institutional stakeholders.[134] Payment splitters are another unique Web3 primitive that automate the division of incoming payments, greatly reducing the operational cost of circulating capital across a lateral network of contributors.[135] At its most automated, nodes can be funded by “KPI-based emission controllers” whose “release of tokens is adjusted in real-time” depending on “measurable values that reflect how well a project is doing.”[136]
"There are many pros and cons to different types of large-scale investment spending. Tokenization reduces counterparty risk, expands market access, and mitigates inherent traditional financing limitations, “including cross-border currency fluctuations risk impacting the bankability of projects”, “tracking of operational performance metrics”"
Current institutional practices with fiat currencies tend to favor narrow and unequal funding, perpetuating a cycle of privilege for entities with significant liquidity (see ‘Cantillon’s Hierarchy’ in the Institution Chapter). Epidemiologists Richard Wilkinson and Kate Pickett in their influential book, The Spirit Level, showed that national inequality, rather than national wealth, is a profound determinant of social welfare.[137] They found that in nations with higher levels of inequality, there are increased rates of teenage pregnancy, mental illness, drug use, obesity, incarceration, gender inequality, and school dropouts, all adding up to lower life expectancy and local community breakdown. Their research compellingly concludes that poorly applied funding operations can undermine the very social fabric of society. This evidence strongly supports a planetary-scale protocological pivot towards broad Ø4 funding operations like UBI to foster a healthier, more stable economy. Despite this evidence, today’s policy-making generally favors narrow funding operations in industries that do not align with sustainable or equitable growth, such as fossil fuels and industrial agriculture: from 2020-21 alone state-issued fossil fuel subsidies nearly doubled.[138]
"The ‘credit trilemma’ is a design problem for DeFi lending protocols that aim to be permissionless (anyone can borrow without intermediaries), composable (other protocols can engage in an Ø4 manner), and undercollateralized (borrowing doesn’t need to be backed fully by collateral deposits). Characteristic of Ø4, resolution of this credit trilemma may “look somewhat like an archipelago, with “islands” of services integrated with each protocol linked via mutual agreements between them. Each protocol would benefit from internal network effects as its total capital and range of uses increased, but also from inter-protocol “trade” enabled by reciprocal agreements to honor debt positions.” Source: https://jumpcrypto.com/writing/paradigms-for-on-chain-credit/"
DeFi has democratized the ability to earn passive yield on crypto-assets through yield farming and liquidity mining[139] processes in a 24/7, globally-spanning open liquidity environment. This phenomenon is a testament to the high global demand for dollar-denominated instruments, with stablecoins fetching interest rates that often surpass those offered by traditional banks.[140] Overall, DeFi’s versatility enhances liquidity and funding opportunities without the constraints of traditional financial systems; DeFi’s “innovative protocols, mechanisms, and methodologies” seamlessly “work together to make loans cheaper, more efficient, and more transparent for borrowers”.[141] Below is a list of common DeFi mechanisms that illustrate this point:
"Disputes over natural asset production—such as mining—are inevitable given their complex financing and geopolitical importance. Above, you can see the typical institutional disputes that exist; e.g. between an international company and host state or other supply chain participants. Blockchain-based arbitration, international by default, can augment the institutional sovereignty of the Global South by providing a decentralized and transparent mechanism for resolving disputes over natural assets. To do so, it transparently records and enforces terms of contracts and agreements on credibly neutral public ledgers. Source: https://www.whitecase.com/insight-our-thinking/dispute-resolution-africa-mining-assets-exploring-arbitration-route"
"Kleros is a blockchain-based arbitration primitive. Kleros’ system is based on selecting jurors for each case randomly from a large group, such that it is unlikely the jurors can coordinate, and then rewarding jurors if they select the winning side of the dispute (creating an epistemological Schelling point). Source: https://moritzlaw.osu.edu/sites/default/files/2022-08/10-%20BERGOLLA%2055-98.pdf"
Green crypto-institutions have the capacity to utilize blockchain-based dispute resolution not only as a means for settling disputes but also as a strategic tool to ensure adherence to environmental standards and the effective stewardship of natural resources, thus reinforcing crypto-institutional commitments to the sustainable generation of natural capital. This is particularly pertinent in areas that require a deep understanding of local context and hands-on management—domains where centralized state institutions may not be as effective.[166] A well-constructed arbitration system furthermore acts as a preventive measure, deterring individuals or institutions ex ante from exploiting or mismanaging environmental resources.
“Climate action presents one of the hardest domains for protocol design, since it spans nations, public and private sector actors, global and local incentives, and complex on-the-ground conditions. An example of a specific hard climate-action problem is forest protection. The LEAF coalition, the largest forest protection initiative in the world… involves multiple governments, billions in funding, private sector actors, physical monitoring systems (including satellites and ground sensor systems) to monitor logging, and protocols for connecting local communities to global governance and finance systems.”
- The Unreasonable Sufficiency of Protocols, Venkatesh Rao, Tim Beiko, Danny Ryan, Josh Stark, Trent Van Epps, and Bastian Aue (2024)
This chapter concludes with an examination of three institutional protocol case studies: the Sarafu-Credit by Grassroots Economics, an analysis of carbon market policies, and a conceptual sketch of a decentralized communal tenure system applied to a Spirulina farm. These studies help illustrate the breadth of protocol designs available to green crypto-institutions as they navigate and adapt to the ongoing climate crisis.
"Flow of a Sarafu-Credit voucher. Source: https://grassecon.org/2023-report"
The Sarafu-Credit is a complementary currency system based in Kenya.[167] The system aims to foster local trade by mobilizing underutilized resources, helping residents satisfy basic needs, and enabling financial transactions despite the scarcity of state-issued fiat.[168] It initially took the form of paper notes, circulating alongside the Kenyan Shilling in several informal settlements and slums as an alternative means of exchange for local businesses and schools, but has since then been increasingly digitized. The system works approximately as follows:
Substantial empirical research showcases the efficiency gains and overall success of the Sarafu-Credit system. In one study, its adoption supported a 22% average increase in the incomes of participating businesses, and up to 10% of local food purchases were conducted in it by its constituent communities.[170] Sales within communities adopting the system grow, monthly incomes increase (one study showed a 22% increase),[171] and community trust between currency-using community members strengthens.[172] Overall, the complementary currency system manifests greater triple bottom line outcomes compared to conventional development efforts.[173]
"The Sarafu Network is an open-source dApp on the Celo blockchain where individuals and communities can issue and manage Community Asset Vouchers. Using the dashboard, credit system members can exchange some of their local currency with other communities, facilitating wide Ø4 exchange. Source: https://sarafu.network/vouchers"
The Sarafu Credit leverages rules and incentives to guide and weave its distribution into local circuits of production to coordinate user behaviors towards common communitarian network objectives. Each community issues a collection of intertwined sociotechnical Ø2-3 policies, and since the launch of the Sarafu Network, may Ø4 trade with other neighboring communities. A handful of these protocols are contextualized in the below table:
Carbon market policies aim to remove or avoid the production of carbon emissions. While certain regions such as the EU, UK, and US have started to engage in deliberate carbon dioxide removal (CDR) policymaking to grow the removal side of the sector, other states have been slower. Although over 100 countries have established net-zero emission goals, only a handful have produced detailed CDR plans for their long-term low-emission development strategies.[175]
Balancing development with CDR is a difficult task. Key CDR policy challenges include accurately measuring carbon stocks and changes, increasing carbon stocks beyond usual practices, ensuring durable carbon storage, and controlling or reducing emissions of other greenhouse gasses that may arise with practices that boost carbon stocks. Furthermore, leakage must be addressed by measuring and mitigating unintended, displaced increases in GHG emissions outside a target geography.[176] To accomplish this range of objectives, CDR plans propose a diverse range of active and future policy levers, including:
The table below reflects how those carbon market policy examples can be categorized as expressions of crypto-institutional protocol:
"French spirulina farm. Source: https://www.spirulineduroussillon.com/ferme-spiruline-francaise.html#/"
Spirulina is a type of blue-green algae that grows in both fresh and salt water and is renowned for its nutritional value. It is commonly consumed as a dietary supplement due to its high protein content, as well as its rich concentration of vitamins, minerals, and antioxidants.
Maintaining a spirulina farm requires consistent and careful attention. The amount of work and the number of people needed can vary based on the size of the farm, the farming methods used, and the level of automation. An SME may need 2-5 people working full-time, but larger farms or those with less automation may require more staff. The work on a spirulina farm can be labor-intensive, especially in terms of harvesting and cleaning.
"Design sketch of a communal tenure Spirulina farm, co-owned by the SpirulinaDAO."
The key difference between the SpiralinaDAO and a traditional spirulina cooperative is that its collective rules and protocols now have a technical means-of-enforcement and new revenue models enabled by the computational and financial affordances of Web3. With this context, we protocolize a design sketch of a ‘SpiralinaDAO’, an original platform cooperative “collectively owned and controlled by” its workers:[179]
The table below summarizes the previous description of the SpirulinaDAO system within the context of the chapter’s terminology:
1. Venkatesh Rao, Tim Beiko, Danny Ryan, Josh Stark, Trent Van Epps, and Bastian Aue. “The Unreasonable Sufficiency of Protocols.” Summer of Protocols. 2024. https://summerofprotocols.com/the-unreasonable-sufficiency-of-protocols-web.
2. Ament, Joe. 2020. “An Ecological Monetary Theory.” Ecological Economics 171 (May): 106421. https://doi.org/10.1016/j.ecolecon.2019.106421.
3. This book as a whole can be considered an undertaking in ecocybernetics, following from the view that “...the structure of the machine or of the organism is an index of the performance that may be expected from it.” Wiener, Norbert. 1954. The Human Use of Human Beings: Cybernetics and Society. New York: Da Capo Press, 57.
4. Wikipedia Contributors. 2019. “Gift Economy.” Wikipedia. Wikimedia Foundation. December 30, 2019. https://en.wikipedia.org/wiki/Gift_economy.
5. Erik Bordeleau, “The Derivative Community: on Soulful Asset Formation,” in Joke Brouwer and Sjoerd van Tuinen, Technological Accidents, Accidental Technologies, (V2_ , 2023), 205.
6. Bordeleau 205.
7. “Eight Principles of a New Economics for the People of a Living Earth.” 2019. Radical Ecological Democracy. July 15, 2019. https://radicalecologicaldemocracy.org/eight-principles-of-a-new-economics-for-the-people-of-a-living-earth/.
8. Ostrom, Elinor. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press, 23
9. Greer, John Michael. 2009. The Ecotechnic Future. New Society Publishers, 168
10. Potts, Jason. 2019. Innovation Commons : The Origin of Economic Growth. New York, Ny: Oxford University Press.
11. Wade-Smith, Austin. “Commons Sense - An Introduction to DAOs as Ecological ↔ Digital Linkages” June 28, 2023. Mirror. https://mirror.xyz/austinwadesmith.eth/J2Ac0fFG1XbEHLch5c_TQy2OxfFjebK6BnJpHJKbgFg.
12. In the context of academic international relations,’violence’ in Ø2 operations refers to the structural and systemic enforcement mechanisms—both legal and societal—utilized by states to maintain order and regulate behaviors within their jurisdiction, embodying a form of governance that underscores the legitimate use of power to uphold laws and social contracts.
13. European Crypto Initiative. https://eu.ci/.
14. Ariel Salleh (2019) 'The Meanings of Labor', Roundtable 'Planetizing the Labor Movement', Tellus Institute, Boston: https://greattransition.org/publication/workers-world-roundtable.
15. Lukáš Likavčan. 2019. Introduction to Comparative Planetology. Moscow, RU: Strelka press, 52-55.
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64. Unlike, for instance, ERC20 for fungible tokens.
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85. It is important to delineate to non crypto-natives that the term ‘off-chain’ in this context specifically refers not to the broader material world, but to a non-blockchain database.
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90. Sharding and fractionalization methods are a growing area of research and innovation in Web3. For a list of some of the most cutting edge methods, see this X thread: https://twitter.com/MariaShen/status/1779850842582982714
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100. Buller, Adrienne. 2022. The Value of a Whale. Manchester University Press, 178.
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102. “Objectives by Policy Dimensions.” AgripolicyKit. https://www.agripolicykit.net/en/dimensions.
103. Lotti et al.
104. Shekhar & Void 43
105. Many of these policies were originally defined in the Kolektivo Whitepaper by Pat Rawson (author) in 2021 and are re-printed with changes and additions. See: https://www.kolektivo.cw/whitepaper for the original.
106. “NFTrees.” https://nftrees.cc/.
107. For a comprehensive list, see https://www.mechanism.institute/library?search=fundraising&category=fundraising
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113. “Carbon Border Adjustment Mechanism.” Wikipedia. April 26, 2023. https://en.wikipedia.org/wiki/Carbon_Border_Adjustment_Mechanism.
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118. “Cycles: Respect the Graph.” https://cycles.money/.
119. Many of these policies were originally defined in the Kolektivo Whitepaper by Pat Rawson (author) in 2021 and are re-printed with changes and additions. See: https://www.kolektivo.cw/whitepaper for the original.
120. Conks @concodanomics. “The Price of Money (Interest Rates) Would No Longer Be Set by the Fed Altering the Level of Bank Reserves in the System…” Twitter, 14 Oct. 2023, twitter.com/concodanomics/status/1712987830342021515?s=20.
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123. Copic, Ezechiel, and Markus Franke. 2020. “Influencing the Velocity of Central Bank Digital Currencies.” SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3518736.
124. Defichain
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127. Granados, Julian, and Schlüter, 11
128. “Feed-in Tariff.” Wikipedia. Wikimedia Foundation. April 30, 2019. https://en.wikipedia.org/wiki/Feed-in_tariff.
129. Weiss, Kyle. “Gitcoin Grants – Quadratic Funding for the World.” Gitcoin Blog. August 29, 2022. https://www.gitcoin.co/blog/gitcoin-grants-quadratic-funding-for-the-world.
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133. “Token Stream.” The Mechanism Institute. https://www.mechanism.institute/library/token-stream.
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144. Defactor
145. Ethichub Docs
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147. Raworth 230
148. https://x.com/oceanprotocol/status/1772973862512120014
149. Many of these policies were originally defined in the Kolektivo Whitepaper by Pat Rawson (author) in 2021 and are re-printed with changes and additions. See: https://www.kolektivo.cw/whitepaper for the original.
150. “European Exchange Rate Mechanism.” Wikipedia. September 23, 2020. https://en.wikipedia.org/wiki/European_Exchange_Rate_Mechanism.
151. Granados, Julian, and Schlüter 38
152. “Overload Finance.” https://overload.finance/.
153. “Inverter Network.” https://www.inverter.network/.
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156. Nir.eth. “Blocklists: Decentralized Solutions to Combat Spam.” Mirror. January 4, 2024. https://nir.mirror.xyz/uoq15Yy5Scjm3zB9QT6Ir2ye3KQhUPfrp876i7-k7rY.
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158. zkMaps
159. Ruddick (2023) ‘Commitment Pooling – An Economic Protocol Inspired by Ancestral Wisdom’
160. “Purchase and redeem an rNFT”. Boson Protocol Documentation. https://docs.bosonprotocol.io/docs/quick_start/buyer_side/customer_redemption/
161. “Dispute Resolution Game.” The Mechanism Institute. https://www.mechanism.institute/library/dispute-resolution-game
162. Kadioglu, Cemre. “A Brief Introduction to Blockchain Dispute Resolution.” SSRN Electronic Journal. 2020. https://doi.org/10.2139/ssrn.4083107.
163. Choi, Jonathan H., Amy Monahan, and Daniel Schwarcz. “Lawyering in the Age of Artificial Intelligence.” Social Science Research Network. Rochester, NY. November 7, 2023. https://doi.org/10.2139/ssrn.4626276.
164. JayBuidl.eth @JayBuidl “The Mediator GPT Bot 🤖🤝⚖️” Twitter. Jan 16 2024. https://twitter.com/JayBuidl/status/1747371647051427957?s=20
165. Carrera, Mauricio. “ACOMODANDO a KLEROS COMO UNA HERRAMIENTA de RESOLUCIÓN de DISPUTAS DESCENTRALIZADA PARA SISTEMAS de JUSTICIA CIVIL: MODELO TEÓRICO Y CASO de APLICACIÓN.” Kleros. 2022. https://ipfs.kleros.io/ipfs/QmRNyeRQVpfP4xovAdZBjYQ3TrYFJP3YKjEKUoMLSnoXnH/Mauricio%20Virues%20Carrera%20-%20Reporte%20del%20Kleros%20Fellowship%20of%20Justice.pdf.
166. Lesaege, Clément, Federico Ast, and William George. 2019. “Kleros.” https://kleros.io/whitepaper.pdf.
167. Also called social, alternative, or community currencies.
168. “Sarafu-Credit.” Wikipedia. Wikimedia Foundation. November 14, 2023. https://en.wikipedia.org/wiki/Sarafu-Credit.
169. “Sarafu Credit.” Make Commoning Work Wiki. http://www.makecommoningwork.fed.wiki/view/sarafu-credit.
170. Wikipedia, Sarafu-Credit
171. Zeller, Sarah. 2020. “Economic Advantages of Community Currencies.” Journal of Risk and Financial Management 13 (11): 271. https://doi.org/10.3390/jrfm13110271.
172. Wikipedia, Sarafu-Credit
173. Zeller
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175. UNEP. “Broken Record.” Emissions Gap Report 2023. https://doi.org/10.59117/20.500.11822/43922.
176. Ogle, Stephen M, Richard T Conant, Bart L Fischer, Barbara Haya, Dale T Manning, Bruce A McCarl, and Tamara J Zelikova. 2023. “Policy Challenges to Enhance Soil Carbon Sinks: The Dirty Part of Making Contributions to the Paris Agreement by the United States.” Carbon Management 14 (1). https://doi.org/10.1080/17583004.2023.2268071.
177. Hope, George. “Not All Carbon Removals Are Created Equally. Here’s How to Govern Carbon Dioxide Removal Permanence.” CO2RE - the Greenhouse Gas Removal Hub. November 30, 2023. https://co2re.org/cdr-permanence-blog/.
178. Common Wealth 🍁, @commonwealth_ca. “The largest statement in the history of the economics profession is an open letter calling for carbon dividends paid universally to every citizen.” Twitter. https://twitter.com/CommonWealth_ca/status/1732853998196081141?s=20
179. Austin Robey, “What Co-ops and DAOs Can Learn From Each Other.” Friends With Benefits, Jan 13, 2022. https://www.fwb.help/editorial/what-co-ops-and-daos-can-learn-from-each-other.
180. Zhu, Baohua, Han Shen, Yun Li, Qiuke Liu, Guiyong Jin, Jichang Han, Yan Zhao, and Kehou Pan. 2020. “Large-Scale Cultivation of Spirulina for Biological CO2 Mitigation in Open Raceway Ponds Using Purified CO2 from a Coal Chemical Flue Gas.” Frontiers in Bioengineering and Biotechnology 7 (January). https://doi.org/10.3389/fbioe.2019.00441.
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