AREC Protocol & AREC Assets: Future Tokenzied Renewable Energy Certificate for On-chain Climate Action

10 min readFeb 10, 2024

This article was originally written by Derik.Lu

Tokenized REC

Renewable Energy Certificate (REC) is a market-oriented instrument representing the environmental attributes associated with renewable energy originating from wind, solar, hydropower, geothermal, etc. REC aims to mitigate global warming and climate change by incentivizing the shift away from fossil fuels.

However, the current REC issuance and trading system is centralized, highly regulated, and less efficient. To qualify for issuing and redeeming REC assets, entities must undergo tedious and complicated processes that always impose some substantial workload and cost and further impact the market expansion and mass adoption of REC as a tool to reduce carbon emission globally.

Tokenized REC is the recognized solution to this problem. Blockchain can easily make the issuance and trading of REC transparent and traceable, significantly reduce the cost of REC issuance, and enhance the efficiency of REC trading and redemption.

AREC, the tokenized REC asset issued by Arkreen Network on the blockchain, presents a solution to these issues. It comprises the self-certified AREC issued based on trusted renewable energy generation data from various miners within Arkreen Network, and the bridged AREC issued by bridging REC assets from the physical world into the Web3 domain. Both self-certified ARECs and bridged ARECs adhere to the same issuance framework and operational rules within the AREC protocol.

Self-certified AREC

The self-certified AREC stands as a pioneering Web3 native technological innovation underpinned by the reliable renewable energy generation data gathered by the Arkreen Network through IoT, cryptography, blockchain technology, and token incentive mechanisms. This self-certified REC can significantly improve the efficiency and credibility of REC issuance and be easily integrated to meet the carbon offset demands of the WEB3 ecosystem.

Within Arkreen network, As of Feb 10, 2024, more than 13000 Miners have been onboarded within Arkreen network, and 234 MWh of solar power has been generated, successfully reducing carbon emission of 165 tCO2e. Based on these power generation data, more than 600 self-certified AREC NFTs have been issued with 66 MWh included altogether.

With the introduction of self-certified AREC, home solar panel devices and other distributed renewable energy systems can be involved in REC issuance, which brings great benefits for the device holders.

AREC Bridge

The traditional REC market is inefficient. Only large power plants are likely to participate in issuing REC, and only large businesses can become the demand side of REC assets. The common public and small and medium-sized enterprises are excluded from the REC market. For a long time, REC demand has been seriously suppressed, and REC price is kept at the floor. This has largely impacted the REC market expansion and REC mass adoption in daily life.

AREC bridge, one component of AREC protocol, provides the capability to bridge classic REC in the physical world to the tokenized AREC in the Web3 system. Bridged AREC is backed one-to-one by classic REC. With bridged AREC, REC assets expand its market reach into the Web3 ecosystem, and its efficiency in meeting various carbon neutrality needs is greatly improved.

AREC bridge has successfully bridged 7000 I-REC certificates into AREC assets, most of which are used to offset the Bitcoin mining power consumption in the application of GreenBTC Club. We are exploring more application scenarios of bridged AREC assets in the crypto world.

AREC protocol and AREC assets

AREC protocol is the collective methodology of issuing AREC assets, including self-certified ARECs and bridged ARECs, transforming AREC assets between ERC721 and ERC20 compatibility, and offsetting AREC assets to commit climate actions and minting climate badges. AREC protocol manages the full life cycle of AREC assets from AREC issuing to being offset for carbon neutrality.

AREC NFT

AREC NFT is the initial form of AREC asset. Both self-certified AREC and bridged AREC are minted as an NFT at first. The metadata of the AREC NFT records the critical attributes of the linked AREC asset.

For self-certified AREC, the Metadata of AREC NFT records summary information of original renewable energy generation data from the solar panels, such as power start date, end date, and power quantity. It also includes the Content Index ID (CID) of all the original power generation data stored in Filecoin.

For the bridged AREC, the metadata also records the power generation date, quantity, region of the original redeemed RECs, instead, its CID is the CID of the REC redemption file delivered by the REC registry while the RECs are redeemed. This REC redemption file should indicate the purpose of REC redemption as to bridge the REC asset into AREC asset, and the related information of the target AREC NFT on the blockchain, such as AREC NFT ID and the hash value of the NFT minting transaction, should also be included.

Self-certified AREC Issuance

Within Arkreen network, a lot of home solar panel devices, also called Arkreen miners, are continuously sending power generation data to Arkreen system. These power generation data are integrated with cryptography technology and can be used as proof of renewable energy generation. Based on these renewable energy generation data, owners of these miners are eligible to issue Arkreen-certified AREC.

While one owner requests to issue AREC, all the related renewable generation data will be packed and uploaded to IPFS, and the CID of these data will be generated. This CID, together with other attributes, including power generation duration, location of the device, and amount of power generation, can be submitted to issue the AREC NFT. Arkreen is responsible for verifying each AREC issuance request strictly and certifying the issuance request once the verification has passed. The AREC issuer needs to pay the AREC issuance fee proportional to the amount of renewable energy included in the AREC NFT.

Bridged AREC Issuance

To issue bridged AREC, the issuer must hold some real RECs in the specific REC registry. Issuing bridged AREC requires four steps:

Step 1: Raise the issuance request on the blockchain.

The issuer needs to specify the amount of AREC to issue and pay the issuance fee proportional to this amount.

Step 2: Redeem the REC in the registry entity and get the REC redemption file.

The REC redemption file should indicate the NFT ID and the transaction hash value generated in Step 1. The issuer must submit this REC redemption file to Arkreen. Arkreen will verify the authenticity of the redemption file and upload it to IPFS. The CID of the redemption file in IPFS will be returned to the issuer.

Step 3: Update the metadata of the AREC NFT.

While the CID of the REC redemption file is available, the issuer needs to update the CID and other REC attributes into AREC NFT metadata, mainly including REC generation duration, region, etc.

Step 4: Confirm the AREC issuance

While the metadata of the bridge AREC is updated, Arkreen will strictly check the correctness of metadata and consistency with the REC redemption file and certify the AREC issuance if all checking passed.

ART Token

AREC NFT is less flexible than the ERC20 token while involved in Defi and other decentralized applications. So, the AREC protocol implements the “Liquidization” mechanism to transform AREC NFT to ART token, the AREC asset in the type of ERC20.

While an AREC NFT is liquidized, it is flagged as “Liquidized” status and locked in one AREC smart contact. At the same time, specific ART tokens with the same amount as the amount of renewable energy contained in the AREC NFT are minted.

As self-certified AREC and bridged AREC holds different intrinsic attributes, they are liquidized to different ERC20 tokens to keep this difference.

Currently, AREC Dapp on the polygon network has deployed 3 kinds of ART tokens: ART, cART, and hART. They all share the same code implementation, so their behavior is exactly the same.

cART and hART are all bridged I-REC, but different issuers issue them. cART is issued by Arkeen for being used in Arkeen ecosystem, and hART is issued by HashKey for being used in HashKey events.

Self-certified AREC is liquidized to the ART token, which shares the generic ART name.

Climate Action

Climate Action is the digital record created within the AREC protocol. There are two ways to commit climate action: a) Redeeming AREC NFT and b) Offsetting ART tokens.

While an AREC NFT is redeemed, it will be locked forever in “Climate Badge,” one of AREC smart contracts, and its life cycle is ended. At the same time, one climate action is generated to record all the information linked with this climate action, including the account address of the actor, amount of the renewable energy redeemed, relative AREC NFT ID, etc.

Offsetting the ART token means a specific amount of the ART token being burned forever. Similarly, one climate action is generated to record all the relevant information, such as the amount of ART being burned, offsetting timestamp, etc.

Climate Badge

Climate Badge serves as on-chain evidence that an individual has either redeemed an AREC NFT or offset some ART tokens to neutralize their carbon footprint in either business or daily life. The Climate Badge can be freely minted based on climate actions committed beforehand and can also be minted simultaneously while redeeming an AREC NFT or offsetting ART tokens as a commitment to climate action.

While minting a Climate Badge, the user could provide some explanatory information indicating the specific carbon emission event that is the offset target. Users can also specify a beneficiary other than themselves to offset the carbon footprint on behalf of a third party.

Climate Badge is an SBT (Soul Bound Token) bound to the user’s account and not transferable.

Its metadata contains detailed information about all the included Climate Actions. With this information, it is possible to trace back to the original generation attribute of the renewable energy that has been offset. AREC Dapp can automatically generate a digital PDF file serving as the proof certificate of carbon offset.

Income of AREC protocol

There are 2 nodes in AREC protocol that can make profits for Arkreen project.

While an AREC NFT is minted, the user needs to pay some issuance fee, which is proportional to the amount of renewable energy included in the AREC NFT. For the time being, the issuance fee ratio is 100 AKRE per MWh in AREC NFT, no matter it is bridged from the REC in the physical world, or it is the self-certified AREC based on the energy generation data of various miners. This ratio is subject to routine adjustment according to the price of AREC/ART and tAKRE/AKRE.

The other charging node is implemented but not activated with the AREC protocol. While the user offsets ART tokens or redeems AREC NFTs, some retirement fee is charged, which is proportional to the amount of renewable energy in the climate action. We will activate this charging node later, according to the project status.

AREC protocol has already made 706,641.0934 tAKRE as the income. While this income is refunded to Arkeen Foundation, 10% of which will be burned, which makes the tAKRE/AKRE deflation. While this project is officially launched, AKRE will be charged instead of tAKRE.

AREC operating status

The AREC Dapp and its related contracts were deployed on the Polygon mainnet in April 2023 and went live for trial operation. As of the current date, January 22, 2024, a total of 615 AREC NFTs have been successfully issued with 7,066.149 MWh of renewable energy included, out of which 66.125 MWh are self-certified ARECs based on the trusted photovoltaic data from the remote miners of the Arkreen Network. The remaining 7,000 MWh are ARECs bridged from the I-RECs in the physical world. A total of 526 AREC NFTs, including 6042.08 MWh, are liquidized to mint ART/cART/hART tokens, among which 3690.767 ART/cART/hART are offset to commit climate actions, and a total of 6291 climate badges have been minted.

ART Tokens

ART token is minted by liquidizing the self-certified AREC NFT. As of the writing time, 609 self-certified AREC NFTs are minted, and 521 of which are liquidized while 42.055 ART are minted. 20.079 ART are offset to commit climate actions, most of them are used to greenize Bitcoin mining power consumption in GreenClub App.

cART Tokens

cART token is minted by liquidizing the bridged I-RECs in the physical world. A total of 2000 MWh of I-RECs are bridged, 50% of which is liquidized to mint cART tokens. 17.647 cART is offset in the GreenBTC Club application, and 3056 climate badges are minted to record the contribution to greenize Bitcoin blocks.

hART Tokens

hART token is also minted by liquidizing the bridged I-RECs from the physical world. hART is used to offset the mining power consumption of Bitcoin block of height # 779089 in the 2023 Hong Kong Web3 Festival green bitcoin alliance ceremony. In this event, 24 climate badges were minted, and 3652 hARTs were offset.

AREC summary

As the world’s first self-certified REC issuance protocol and the inaugural REC bridge protocol, the AREC protocol has been successfully running on the Polygon mainnet for over six months. A substantial number of Web3 users have been using AREC protocol and AREC assets to offset their carbon footprint. AREC protocol has been seamlessly integrated with GreenBTC club application to offset the power consumption of Bitcoin mining. More than 20000 early Bitcoin blocks have been greened with AREC assets, and this number continues to grow quickly.

AREC protocol is also expanding its presence to other Web3 ecosystems. On Celo blockchain, AREC Dapp has been successfully deployed to serve the climate collectives within Celo community. The Celo Foundation has planned to include AREC in the basket of assets to offset the Celo blockchain's carbon emissions.

Mitigating climate warming is a collective responsibility beyond government agencies and corporate entities; it is a shared mission for every individual, family, and entity. The active participation of the common person is crucial for the success of the movement to reduce carbon emissions and combat global warming. AREC protocol makes it possible to involve numerous individuals in this battle. Let us unite and commit to our climate actions together with AREC.