Telegram AMA #3: Project Update
Hosted by our CEO Christian Shearer and Chief Regeneration Officer Gregory Landua.
On Thursday, March 5, 2020 at 10am Pacific time, Regen Network hosted our third #AskMeAnything in Telegram. The following is a transcription from the morning’s chat.
Christian: Good morning. Signing in from Oakland, California. Doing some finger stretching before the AMA, starting in 5.
Gregory: Good afternoon from the Regen office in Great Barrington Mass!
Christian: I would like to start this AMA with a high level purpose statement for me. I’ve been working in ecological agriculture for almost 20 years now and deeply believe that the production of our food in a way that is also of benefit to the planet is a critical piece of the puzzle.
After years and years of working with farmers around the globe, we know that ecological farming practices are not only better for the planet, but also better for the farmers. It is better from a personal and community health perspective, better from a farm resilience perspective and better from a farm enterprise perspective.
After interviewing dozens of farmers, we find that the bottom line for most farmers in terms of their management decisions is financial. We’ve seen that whether farmers are interested in “environmental friendly farming” or not, when they are given the opportunity to earn more money, and reduce their long term risk, farmers will switch.
What’s really encouraging is that once this purely financial decision has been made, many farmers are surprised at the way the soil responds. The soil comes alive again and starts supporting the healthy production of crops. All of a sudden the farmers start to see the immense power of working with living systems and their interest begins to rapidly evolve beyond the financial outcomes that initially provoked the new methods. This is what we would love to see, that intrinsic curiosity and relationship with the living systems on the farm!
This is a photo of an integrated agro-ecological site I worked on quite a bit in Northern Thailand. Envlivening for people and the environment! The birds have returned, the butterflies have returned. There is a lot more moisture in the landscape!
But what does this have to do with PoS blockchain and decentralized tools?
In Q2, Regen Network will move from testnet phase of our blockchain development and onto Mainnet. Shortly after, we will be issuing the first three ecosystem services credits.
We are actively working on the methodology and verification related to these three credits and have buyers lined up to buy some portion of them.
These credits are Carbon Credits and Biodiversity credits representing real-world impact on a farm by farm basis.
And they are documented in such a way that it makes it easy for tech companies, individuals, or corporations of all types to purchase them and count them as part of their voluntary offsetting process.
Question: Okay jumping onto Christian’s intro from above: would love to hear more about Regen’s reasoning and decision-making process that resulted in choosing PoS/Cosmos in particular, esp given the array of options amongst blockchain tools
Christian: Starting at a high level, it’s clear that what is required of a global challenge like tracking greenhouse gases and climate change is an open, trusted ledger of ecological accounting.
From our perspective, PoS offers the most advanced and most appropriate form of governance available at the moment, and the Tendermint Consensus engine is the best there is.
We chose Cosmos because of the incredible community of developers that have coalesced around the Tendermint tools in this community. (And it has been an extremely rewarding decision so far. We love COSMOS!)
Gregory: I’d love to speak to that in more detail!
As @christian_regen noted there are both technical and community reasons we chose Cosmos as our community and blockchain SDK of choice. On the technical side, I would reiterate that the security benefits of a proof of stake approach to a public blockchain are significant. It also offers a flexible base for innovation on governance. The modular architecture of the cosmos SDK allows us to customize a public chain for a specific community and domain while linking to a very robust consensus algorithm. This is a much safer and more flexible framework than any of the “one chain to rule them all” solutions or general purpose virtual machine smart contracting platforms can offer.
Question: Have you decided on the pricing of carbon credits and biodiversity credits, and is it based on the actual cost of the action being done or is it a market price for carbon, correlation with price of carbon tax etc…
Christian: This is a great question, and as you may know a complicated one. How does one accurately price ecosystem services? I have heard a calculation of over $1000 per acres for all things considered for a well managed agro-ecological system for the ESC value alone, and yet there is no way that the markets will support this at this time.
To start with, we aim to improve upon the pricing of the current carbon and biodiversity markets by creating more transparency to the uniqueness and beauty of the story behind the credits.
We hope that this continually pulls the price of biologically produced carbon credits up and that there is a mandate for companies to be purchasing credits that have auditable real-world value.
Question: Hello! I would like to hear more on the initial grouping of buyers. Since emissions trading schemes are still voluntary, is there a potential tie with other outcome-based financing projects?
Gregory: Great question. First I’d like to comment on the premise. SOME emissions trading schemes are voluntary, others are compliance. California for instance has a compliance market. Second let’s dig into our strategy for the buy side of building the market. Currently adoption of voluntary markets is outpacing compliance markets due to lack of political will and other complexities. Voluntary markets are growing in leaps and bounds. For a good overview of the space check out: https://www.forest-trends.org/publications/voluntary-carbon-markets/ Much of the voluntary market is driven by corporate social responsibility goals, and board room activism. This in turn is driven by the growing understanding of “carbon risk” So this is not simply an “altruistic” market place. There is a growing understanding that we need to price in the risks of carbon emissions and other degenerative behavior that undercuts the health and viability of the ecological commons upon which the global economy is built. For more details about that check out: https://www.bloomberg.com/opinion/articles/2019-12-04/carbon-risks-reflected-in-stock-prices. Digging in deeper now that we have a sense of some of the corporate motivation (one of the buyer classes we are targeting, lets think now a little about Impact investors and the ESG space. ESG is an acronym for Environmental Social and Governance. This is a huge and growing field of investment. This is estimated to be a 502 billion dollar investing sector as of 2018 by the global impact investing network. What does this community of buyers need? Our customer discovery revealed the following items are most important: proof of impact or outcome (verification is key, and currently sucks), ability to have quantitative results as well as qualitative understanding (for instance carbon accounting but also understanding of the real impact on the ground of preserving the forest or regenerating the farm to be used in story telling and marketing), and exchangeability / liquidity.
Question: How much would a farmer get paid for acre for positive impact?
Christian: This is yet to be seen. In the current markets for Carbon Credits, water quality offsets etc, it is expected that farmers, ranchers and other land stewards and be rewarded in the range of $20-$80 per acre, which could mean the difference between a profitable year and a losing year.
The trend, and the expectation is that these prices will go up over time as there is more demand from those participating and voluntary offsetting and as more legislation is put in place to mandate ecological offsetting of corporations.
Question: What is the timeline of the reward? Paid out yearly?
Christian: This is certainly the aim. As we have all seen in the past month, there have been some HUGE announcements coming out of the corporate space.
- Microsoft announced $1billion in investments aimed at offsetting all their carbon going back to 1975.
- Delta Airlines announced that they will start offsetting all their Carbon starting this month, March 2020 to become the first Carbon nuetral airline. — $1billion committed.
- The Bezos Earth Fund was started with $10 Billion committed. Much of that aimed at Nature-based climate solutions.
What follows from this is a need for finance solutions of all types. It is of critical importance that the gap between paying for up-front capital investments is met.
This is also case by case.
Our aim as a company is to build a set of tools that allows for flexibility on arrangements. The way that carbon markets currently operate is to use a model to project a conservative amount of carbon into the future (in a forestry project for example), and allow the project developer to sell that carbon now. periodically, there is an audit to check if that model is on target or not.
We will issue credits that way, but I’m sure there will be methodologies where the carbon is calculated on a year by year basis and sold into the market at current prices (which could prove to have a higher upside for the farmer/rancher).
Question: So you find the financing first and then involve farmers or do you work the other way around, first engaging farmers and then look for funding, risking that there won´t be enough funding for all projects.
Christian: We are a marketplace, bringing together both sides of the equation. At this point, we have over 5 million acres of farmers interested in working with us to produce credits, and a number of technology companies interested in buying the credits. We’re working to bring in both sides of the market at once. Certainly, it seems that the buyer side is the limiting factor.
If you know an individual or an organization that would like to pre-purchase agriculturally produced credits, please send them here:
http://bit.ly/regen-credit-interest
Question: I wonder about additionality. Do you work only with new projects or do you also support existing ones?
Christian: We’re still exploring this question. I believe there is a place for rewarding recent progress to some degree, but our high level KPIs as a company revolve around transitioning degenerative acres to regenerative acres!
Gregory: Additionality! My favorite thing to rant about. :) We are very happy to work with existing projects and are both able to use existing carbon or biodiversity methodologies, or innovate to improve methods.
My rant about additionality: It is a dumb concept in carbon accounting. What we should be focused on is ecological PROFORMANCE and carbon cycle health with accurate understandings of carbon stocks and flows, and basing new credit and contract types on rewarding increasing ecological function and performance from a holistic perspective. Additionality as it currently works essentially allows people to hold markets hostage by saying: if I dont get paid I will ruin this ecosystem, cut the trees, burn the ground etc…so pay me and I wont do that. That is a silly way to run a credit market imho. Regardless of my personal beliefs…we ARE working with standard credit issuance best practice AS WELL AS innovating on custom MRV (monitoring, reporting and verification) to create new credit and asset classes that are better designed to value living capital and incentivize ecological performance instead of operating from an industrial “do less bad” emissions reduction paradigm.
Question: I agree. But it is a big thing over here if you want to sell credits. To only work with voluntary offsets could be a solution to start with. It is not logic that the pioneers should be punished for doing good before everyone else. And also, the pioneers are the ones driving progress and finding new ways of farming and need to be appreciated for that.
Christian: Absolutely. Enter another class of Ecosystem Services Credits, which should also be valuable. Let’s say an ecological system has already arrived at a state of Carbon saturation. There is a role for forest preservation credits. Despite the fact that these don’t represent new carbon, they should still be valued highly for all their biodiversity, clean water, and other ecosystem function benefits.
Question: It’s definitely been the main conversation as part of the ESG inveseting space; especially after Blackrock’s announcement earlier this year. Thoughts on a potential of the Regen Network to provide better ESG insights to outcomes? Right now the conversation in the investor space is wanting more long-term projects that would similar to regenerative practices, but it has been difficult to relate the outcomes to an output or return on the fund or investment.
Christian: This is a huge area of interest. I believe that the data we are working with and collecting will contribute to this in a big way.
For example, the Nature Conservancy, which is a partner of ours is studying the data around the transition to no-till and covercropping for grain crops.
It looks like there is a pattern of a 3–5 year dip in productivity (and profitability) and then a more profitable agro-enterprise. Clearly there is a role for impact investors and financing mechanisms to facilitate more farmers toward this transition.
Question: Who can use the platform besides farmers? Who is it designed to be used by?
Gregory: Let's talk about this in stages. Our network launch (STAGE ONE), and go to market strategy focuses on improving accountability, transparency, and liquidity for ecosystem service credit markets by launching a public registry. This is essentially a two-sided market place with a service provider interface for verifiers to support issuers (sellers) of credits, to offer high-quality credits to buyers (companies (corporate CSR is our focus), governments, individuals (like impact investors)). Stage two is a more full-featured ecological contracting platform that allows a variety of scientifically verified ecological state agreements to be made between parties (for instance perhaps your town wants to clean up a river that runs through it by offering a tax break to farmers upstream to shift to no-till agriculture) So in stage two the potential user base opens up beyond the three main actors (land stewards, verifiers, and buyers) to include a more complex ecosystem of stakeholders in ecological health.
Part two: traction. We have 5.3 million acres of farmers (land stewards) signed up to provide the base of the seller side of the market, we are in pilots to launch at least three credit classes when the network goes live later this year (Holistic Grazing Carbon Credits, Biodiversity Credits, and Agroforestry Carbon Credits). We have three pre-purchase agreements and are working on a fourth to off-take the initial rounds of credits being issued. I cannot speak to numbers yet but can say I am VERY excited about the buyer demand, as well as the seller interest.
Christian: Just to give you some visuals of what this agroecological transition could look like…
All of these systems incorporate tree crops into annual crop systems, which is beneficial in many ways, including the sequestration of much more carbon.
As well as reducing erosion, building habitat, and providing a much better long-term return for the farmers.
The provision of Ecosystem Services Credits provides farmers and ranchers even more motivation to switch toward these practices and help us all tackle climate change and species loss.
And the provision of financing mechanisms (DeFi perhaps?) will accelerate this even more.
Holistic Managed grazing practices, especially silvopasture, are incredibly beneficial for ecological systems, not a detriment!
According to the FAO: Grasslands in the wider sense are among the largest ecosystems in the world (Figure 1.1); their area is estimated at 52.5 million square kilometers, or 40.5 percent of the terrestrial area excluding Greenland and Antarctica (World Resources Institute, 2000, based on IGBP data).
Question: This could open up space to more green infrastructure projects underway — river restoration, timber management, watersheds, wetland restoration. Thoughts on how DeFi can expand beyond regenerative practices on private lands to public lands?
Gregory: Exactly. One of the potentials here is to link public spending to ACTUALLY ecological health results. As you noted regen network can serve as the verification and DeFi backbone to a whole class of new public goods agreement types with mixed funding sources, payout directly to individuals or businesses or governmental agencies base only on scientifically verified ecological results. Let’s have a look at a potential around range land management in the intermountain west of the US. There are 245 million acres of BLM (Bureau of Land Management) land classified as rangeland in the US. Currently, this land underperforms for both stocking density and carbon health due to historical overgrazing and lack of rotation. We can create peer-reviewed monitoring, reporting and verification systems that verified management practices and more importantly ecological health outcomes, and link grazing rights directly to management performance. We can envision our platform being used to link incentive programs (cost of grazing rights) to this performance (increase the price to bad actors) or disqualify bad actors entirely. This is just one concrete example. The foundations of this use are underway with our work at Openteam.community in partnership with the USDA, and our work with The Nature Conservancy on a rangeland credit in Australia.
Question: Is end of Q2 still in the plan for mainnet launch?
Gregory: YES!
Question: Do you have a max allocation per investor? Reported to token supply?
Christian: We have set a max participation amount that would represent less than 3% of the network.
Question: That’s great for decentralization👍 How many initial validators slots are opened for mainnet?
Gregory: There will be 50 validator spots open at genesis.
Christian: I have to hop onto another call. Thanks so much for your questions. Please feel free to keep asking! We’ll be around!
Gregory: Feel free to ask questions if you are coming in late and I will answer over the course of the day! One last note: phase one of our launch in Q2 will be an NFT based public ecosystem service credit registry and marketplace. In addition to this functionality, we will have a smart contracting layer allowing for bundling of credits, conditional agreements with oracle verification functions. Phase two is the maturation over time of the system into a fully decentralized oracle network for the ecological state, and public ecological contracting platform that incorporated the credit registry and market into a more layered and robust verification and contracting platform. This involved integration of DiD, trusted compute network, on and off-chain data storage solutions and other cutting-edge web3 tech that our very talented team is working on in partnership with the interchain foundation and other open-source developers around the world.
Thank you all for your time and questions. We appreciate your continuted support and interest in Regen Network.
