Bitcoin inadvertently created a more direct link between exchange currency and carbon, through the CPU- and hence energy-intensive process of proof-of-work mining. Can we make a better link?

Edward Dodge has proposed using the blockchain as a distributed ledger of carbon account, with mining based on a ton of sequestered CO₂. Let’s follow that suggestion but make each coin represent a kilogram of carbon.

Altcoin CarbonCoin replaces distributed mining of difficult to calculate numbers with mining by an environmental trust that uses six orders of magnitude less energy and puts profits into carbon mitigation. It relies on trusting that single third party organization, though. We want to have more decentralized platform management, as in many cryptocoins, while establishing this same carbon link.

There are a couple of other projects like Dovu or Treecoin which focus on particular types of carbon sequestration, but this sketch takes a different tack.

A Design Sketch

I wrote this design sketch a few years ago and then put it in a box called THINGS TO THINK ABOUT – URGENT. I’m not launching a billion dollar crypto play using it right now, so I figured I may as well share it here. I think we should have more public design sketches in software.

Basic Protocol and Squatting

We can push these initiating ideas a bit harder. As noted, forests and oceans are major carbon sinks. Prospecting rights could be claimed for mining, with proof of work replaced with an empirical proof of carbon. For each carbon sequestering device or location, you can associate a different allowed carbon coin mining rate. A corresponding proof of carbon could require 1) making the claim first 2) providing time and location specific weather information.

For secondary tropical rainforest, Bonner et al estimate 7.5-15 tons per hectare per year (via). That’s a pretty wide band, but let’s run with the lower figure for now and make that a claim worth 7500 coins per year. That’s 20.53 coins a day, which we’re going to round down to 20 for whole coin mining. We’ll also halve it, to 10, for reasons explained later.

For other types of carbon sinks, different rates would apply, but the protocol is the same.

Once a day, a miner can claim the right to mine the claim for that day. It has to provide

1. The location in latitude and longitude.
2. Proof the location is still a tropical rainforest through a public satellite photograph. Initially this could be from Google Earth.
3. The temperature and humidity at 10 am that day in that timezone, at the nearest location providing a trusted source for that information. Initially these would be bureaus of meteorology and similar institutional sources. 

Otherwise the process is the same as claiming a bitcoin – it is advertised to the network and validated by other miners.

A miner has to obtain a mining license. This can be bought for 1 coin from any miner that has minted a coin in the last month within 5km of the desired location. If there are no miners for the last month in that area, it is free, and can be self-certified. This is to discourage mining spam. Given the computational costs are much lower than bitcoin mining, there would be a possibility to create a miner for every hectare on earth, and spam a coin attempt at every possible temperature and humidity for a given day. The license mitigates this, and cost might vary over time to manage it.

A miner using the basic squatter protocol doesn’t need to demonstrate any legal connection to the land or ocean involved. It’s a mathematical mapping only, as with the large numbers in bitcoin. The carbon coin mining claim is more important to the network than the legal title to the land, because double-claiming the carbon sink would make the carbon accounting invalid. For natural assets, the computer where the mining software runs need not be in the same location as the trees, though a maturing platform demanding more precision might call for devices on the ground, linking the Wood Wide Web to the internet and the blockchain. These specifically designed sensors can also have more openly validatable code, connecting as part of the Internet of Things (IOT).

Proof of carbon definitions for a type of sequestration can be captured as public software contracts, using Ethereum or a similar platform. They would need to be more dynamic than the bitcoin protocol because valid earth data sources would vary over time. 

The local weather data requirement gives people local to the forest or ocean concerned a small co-location advantage similar to that of high frequency trading systems to stock exchanges. The world’s greatest carbon sinks are not found in rich world finance capitals: this would give a small home town edge to those local to say the Amazon or Daintree rainforests, and encourage more diverse locations and owners for miners.

Legal Title Protocol

The basic squatter protocol described above allows fast-moving mining organizations to get going with very low upfront costs and similar bootstrap dynamics to bitcoin. 

There are advantages in linking legal title to the land to mining rights in the network, though. Miners have a financial stake in the carbon sequestering income of the land they claim – if trees are cleared, proof of carbon is lost. Owners of land have much more direct control over what’s growing there. Mining rights would even be an incentive to reforest cleared land.

Legal systems are complicated systems varying widely by location. There are problems of language and legal expertise. Legal title is often hard to validate in software, and even where such interfaces exist, title searches have significant charges, which could easily multiply with independent validation by network participants. Imposing these as barriers to entry for all mining would make participation uneconomic until the coin value was relatively high.

The solution in this protocol is to treat the two types of miners as complementary and have both. 

With both proof of title and proof of carbon, a miner can mine a second coin for each corresponding kilogram of CO₂ sequestered by the underlying hectare of land. This gives no squatting protocol rights. The first coin is still determined by speed.

Title rights would often be shared, and any proof that does not rely on a central trusted source seems implicitly tied to proof of identity by an authority, and impossible to be anonymous, if published on a publicly verifiable blockchain, or through intermediaries such as banks or governments. Techniques for doing this in general, and the codification of proof regimes for each jurisdiction, will grow over time, and aren’t detailed here.

Deflation, Re-emission and Redistribution

Atmospheric carbon isn’t sequestered forever. Trees are cut down or eventually die. Ocean sinks and old coal mines leak. Tundra melts in the summer.

The simplest way to reflect this in a carbon coin is to make the coins expire. Those mined from a given type of carbon sink have an expiry date based on the ecological infrastructure that minted it. For secondary tropical rainforest, we use the example mean lifespan of 60 years.

The second way a coin can expire is if the sequestration source that backed it is destroyed, eg, the corresponding hectare of forest is cut down. This intensifies the economic incentive to preserve carbon sinks, as not just future revenue but existing wealth can be destroyed.

When this happens, it has the monetary effect of deflation. A fixed amount of commodity-like currency corresponding to the actual carbon stock is desirable in this case, as it would make market actors responsive to the actual carbon limits of the ecological layer of the economy.

We suggest the market would respond to expiry dates in a similar way it responds to expiry of options contracts or dividend rights, by value declining to zero near the end of their lifespan. Since it’s not desirable to have cash expire in your wallet, or to lose significant chunks of wealth because coins happened to come from the same source hectare, it would also create a demand for portfolios of coins balanced across many sequestration sources. Algorithmic balancing wallets seem a reasonable solution to this problem. This would also keep coins in greater circulation and discourage hoarding, which is more of a feature than a bug.

Linking Emissions

At this point you already have a commodity-based exchange currency platform equivalent to Bitcoin, including distributed mining. All of the usual financial and software infrastructures can be built on top of it. The main missing feature is money supply management available in central banking. That is deliberately designed out of Bitcoin too, out of libertarian grumpiness with the state. For carbon cryptocurrency it would be omitted for a more sincere representation of the foundational geophysics the whole planetary stack runs on.

That the coin is based on carbon allows extensions which reinforce carbon homeostasis. Carbon-emitting endpoints such as power stations, petrol service stations or factories could have corresponding IOT devices requiring spending carbon-backed coins to operate, basically acting as IOT smart meters connecting to a carbon exchange. Governing such a mechanism, and avoiding tampering to evade it, would likely involve both taxation enforcement and digital rights management, whether implemented by state or corporation. Because carbon emission would result in a transaction on a public blockchain, it would also be publicly auditable, depending on how much detail the emitting device is configured, or mandated, to disclose. This latter consumption piece isn’t necessary for the currency to work, but it does look like a good feature.