Solution Architecture: Issuing Decentralised Forestry Assets 🌲


Inspired by Digix’s proof-of-asset protocol for tokenising gold, below is a technical outline for tokenising forestry assets. A global, risk adjusted, forestry portfolio can be tokenised to enable granularity and transferability by using blockchain technology. The assets are tracked through their supply chain using the the immutable ledger of the ethereum blockchain and the interplanetary file system. This empowers users to scrutinise the integrity of forestry-backed assets on the platform without having to trust the development team. Maintaining contractual and transactional data on ethereum’s blockchain, the risk to the integrity of asset data is mitigated. The double spend problem (source) is solved through ethereum’s distributed consensus algorithm, ensuring forestry assets issued by the platform are not allocated to more than a single party (source dole banana scandal). Through the use of a proof-of-asset protocol, asset issuance is radically transparent, moving towards a management model that is audit-able by third parties at any time.

Asset Issuance Process

Real world forestry assets are registered on the platform using a process of internal and external verification attesting to the state of the assets. The registered specifications of forestry assets are submitted to a smart contract that creates non-fungible forestry asset cards. Forestry Asset cards are submitted to the token minting contract. The contract checks the validity of the digital asset and generates an amount of TREE tokens corresponding to the asset card. TREE tokens are a fungible ERC-20 representation of the forestry assets held in the minting contract. When a particular forestry asset matures, TREE tokens are burned in order to retrieve the asset card from the minting contract. Forestry Asset Cards are sent to the redemption contract in order to redeem the physical assets in the event of cutting. The process is repeated by planting new stands or acquiring new assets.

Forestry Asset Cards: (ERC-721)

Non-fungible token (NFT) generated through the participation of internal and external parties. The asset cards act as a proof-of-asset authentication of real world assets, attested by the issuing foundation and 3rd party auditors. The Forestry Asset Cards contain the following information:

- Time stamp of card creation
- Management fees due
- IPFS Land Title
- IPFS Asset Audit
- Aerial photograph of forestry asset

TREE Tokens (ERC-20)

A virtual representation of forestry assets minted through the natural asset smart issuance system. A fungible asset token. Genesis tree tokens are issued at a value of 1usd/eur, corresponding to the value of the forestry asset card. For instance, if the audit valued the plot at $1.2m, 1,200,000TREE would be minted. subsequent minting will be a function divisible by the price of the tree token. For example, if the tree token is priced by the market as $1.04 due to growth by photosynthesis, and a further plot valued at $1.2m is minted to tree tokens, 1,153,846TREE would be minted by the smart contract.

Forestry Asset Card Generation Process

The beginning of the asset on-boarding procedure is started by acquiring the real world forestry assets. The land title is digitised and uploaded to IPFS. A third party auditor audits the asset, to ensure the integrity of the underlying land ownership and state of the forestry assets, defining the management fees assigned to the manager, uploading this confirmation to IPFS. A smart asset card is generated, consisting of a timestamp of the asset card creation, management fees due, IPFS land title, and IPFS Asset Audit.

Audit Process

To ensure transparency of the platform, quarterly audit events take place, ensuring no disparity between the physical assets under management and the corresponding digital assets generated by the smart contracts. The foundations portfolio is audited by a third party. The state of assets are evaluated. A valuation of the assets is published by the auditor. A PASS/FAIL condition is attributed to the audit documents. The audit contract verifies the PASS/FAIL condition of the audit. A pass will allow the minting contract to continue minting tokens corresponding to submitted asset cards. A fail will prevent the minting contract from issuing assets, and an off-chain resolution process takes place to ameliorate the audit discrepancies.

Token Minting Contract Process

In order to mint TREE tokens, the newly generated asset card is sent to the minting contract. The minting contract audits the asset card. It checks the timestamp of the card generation. It checks there is a specified management fee. it checks there is a land title and audit signed by the auditor. The value specified by the auditor allows for the minting of new ERC-20 TREE tokens.

Token Recasting Contract Process

In the event of redeeming tokens back to asset cards, the recasting contract is utilised. The previously locked asset cards are requested from the minting contract. The minting contract will release the requested asset card if there is sufficient TREE tokens staked in the contract to redeem the card. If there are no fees outstanding, the recast contract burns the staked tokens and the asset card is released to the foundation.

Asset Redemption Contract Process

To redeem the physical assets that are held in the asset cards, the relevant Asset Card is sent to the Redeem contract. The redeem contract burns the asset card, allowing it to be redeemed in the physical realm. In the event of thinning, a new asset card is generated with the updated state of the forestry asset. In the event of cutting, the timber is sold and proceeds are used to plant or acquire new forestry assets, and the process of generating a new asset card repeats.

Note: V0.1 does not outline price functions and corresponding oracle solutions required for dollar referencing required in further iterations. This is simply a brief overview of a conceptual implementation.



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