Environmental Cryptoassets
Dr. Ranulfo Paiva Sobrinho — Natus System Co-Founder
The environmental cryptoasset emerges to encourage the practice of actions that result in environmental conservation, which can, under certain conditions, generate monetary and/or non-monetary benefits to its holders.
The difference between an environmental cryptoasset and other types of mechanisms that exist, such as payments for environmental services, is that the environmental cryptoasset is created with the support of Distributed Ledger Technology (DLT), which avoids problems of corruption, double counting, and more.
In addition, the creation and management of a crypto-environmental asset does not depend on government institutions, avoiding bureaucratic red tape.
What is an asset?
An asset is something that under certain conditions provides benefits to its owner.
Let’s analyze this sentence to understand more deeply the concept of asset.
a) “An asset is something…”. What can be considered ‘something’?
The something can be of material or immaterial nature, for example digital. In other words, there can be material assets and digital assets.
Examples of material assets are homes, animals, forests, mangroves, river springs, pieces of art, precious metals, hardware, automobiles, airplanes, ships, historical artifacts, archaeological and/or architectural heritage, money in the form of cash, to name a few.
Digital assets can be songs, software, crypto-activities, cryptocurrencies, stock securities, certificates of government or corporate debt securities, patents, among others.
Whether something is considered an asset or not depends on the person’s perception of what kind of benefit is important to them.
There may be people who consider assets only something that gives them traditional financial benefits, that is, the money that they are used to using in their daily lives.
There are also people who consider assets to be things that generate benefits that go beyond money. For example, for a person an RPPN (Private Reserve of National Patrimony, a legal protection for property in Brazil) can be an asset even though it generates non-financial benefits, for example:
- conservation of carbon stocks in their forests;
- reduction of soil loss;
- increased infiltration of water into the soil;
- maintenance of habitat for wildlife;
- creation of a microclimate that alleviates the impact of high temperatures.
b) Continuing with the analysis, “Asset is something that under certain conditions provides benefits…”
This means that the benefits that an asset provides to its owner depends on ideal or favorable conditions. In the absence of such conditions all or some of the benefits may no longer be provided by the asset.
To clarify the concept let’s look at two hypothetical situations. The first one considers a digital asset expressed in the form of shares in Company A. In the second case, it is a material asset expressed in the form of a Forest Reserve that generates monetary and non-monetary benefits.
When the economy heats up, the value of Company A’s shares may increase, generating benefits expressed in monetary form to the owners. However, this benefit can disappear temporarily or permanently depending on how the company behaves when facing a strong financial crisis.
In the case of the Forest Reserve, let’s suppose that its owner has invested in infrastructure to attract people adept to ecotourism and let’s also suppose that the reserve is in the same country as Company A.
In times when the economy heats up, the reserve can generate monetary benefits through the visitation of people to its eco-tourist attractions. At the same time, the reserve also generates non-monetary benefits just by its existence.
During an economic crisis, visitation may reduce greatly and the monetary benefit may disappear. However, the non-monetary benefits continue to be generated as long as the forest reserve exists.
The conservation of the remaining natural areas on this planet requires that more people recognize these areas as assets, even if they do not generate traditional monetary benefits, also because compromising natural areas can generate a series of environmental imbalances (availability of natural resources, water availability, climate change, etc.) with the potential to interfere with the full development of Company A’s activities.
Thus, the benefits expressed in non-traditional monetary form that an RPPN offers to society as a whole, can be translated, as immaterial as they are, into environmental cryptoassets.
Furthermore, it is necessary to develop ways and methods of valuing assets that generate both monetary and non-monetary benefits. This is a topic for another discussion, as the diversity of assets that an RPPN hosts involves several attributes that deserve to be addressed independently.
What is a cryptoasset?
A cryptoasset is a type of digital asset backed by Distributed Ledger Technology (DLT).
“Backed” in the above concept is understood to mean that in this type of digital asset, their creation, transfer between people, and changes, for example, are performed by DLT software. What really matters is that because the cryptoasset is backed by DLT, they have specific characteristics that differentiate them from other types of digital assets, for example:
- They are incorruptible;
- They are directly transferable between their owners without intermediaries;
- They are traceable;
- They require their owners to be much more careful about their security.
One of the main examples of DLT is blockchain technology. This technology was born in 2008 and its first application was the cryptocurrency called Bitcoin. Just as there are several types of fruit, there are several types of blockchain, for example the Bitcoin blockchain and the EOSIO blockchain. Each of the two blockchains mentioned is represented by software that is generally open source.
Environmental cryptoasset
Environmental cryptoasset is a type of cryptoasset designed to encourage the adoption of actions aimed at the conservation of ecosystems and that can generate benefits expressed monetarily and/or non-monetarily to their holders.
Environmental cryptoasset is an innovative concept that brings novelties:
- in the way of obtaining investments for nature conservation and in obtaining profit from such investments;
- in the direct transfer of cryptoassets without the need for intermediaries;
- in the system’s security, making cybercrime more difficult;
- in the transparency of actions carried out with cryptoassets;
- in the understanding of the nature of money and its relationship with the solution of environmental problems.
These benefits are due to the fact that the environmental cryptoasset is supported by distributed ledger technology, as explained above.
Thus, depending on how it is created, the environmental cryptoasset can be (i) a type of money, or (ii) it can be an instrument that gives access to some benefit that can be traded with traditional money or other types of money.
What does it mean that the cryptoasset can be a type of money?
We understand by type of money the way it is created. And we understand that money is an agreement made by a group of people who decide to accept something standardized that serves, at least, as a means of exchange (Paiva Sobrinho and Cordoba Brenes, 2015).
According to this definition, an environmental cryptoasset is a type of money, because a group of people can create it to meet their goals and they can also create the rules for its governance.
If we were to accept the definition proposed by the central bank of England, presented below, environmental cryptoasset could not be considered a type of money because it is not created from the debt of people, companies, or governments.
According to the Central Bank of England, money is a type of debt and there are three types of money: cash, bank deposits and central bank reserves (BOE 2014). Accepting this definition would be like accepting that a group of companies that sell bananas define fruit as follows: fruit is a type of banana, there are three types of fruit: dwarf banana, apple banana and plantain. If this mistaken definition were accepted by the population, the business of banana growers would be greatly benefited, because watermelon, grapes, peaches, soursop, and guava would not be considered fruit.
Conventional money, yuan, dollars, euros, or others that represent the official currency of different nations, are all created by central banks and commercial banks when, most of the time, someone goes into debt. This money is known as fiat money.
You may be wondering why we are talking about this topic and what this has to do with environmental cryptoassets. The answer is simple. The way a type of money is created can create problems, both environmental and social.
Several researchers show that the creation of fiat money has been responsible for generating global environmental problems on this planet (Lietaer et al, 2012; Paiva Sobrinho and Cordoba Brenes, 2017). This is a fact unknown by most people, especially those who care about environmental conservation and those who share the idea that it is possible to preserve ecosystems and at the same time generate monetary benefits to those who conserve such assets that, in the end, benefit all of society.
Knowing this fact is important to understand the importance of the environmental cryptoasset that is created without the need for anyone to go into debt, and that its creation and management can be done by people who have an interest in conserving nature and generating monetary and non-monetary benefits from conservation.
Now that you understand what an environmental cryptoasset is, how about getting to know an environmental cryptoasset system created to build an environmental legacy for humanity and that you can also contribute to and benefit your finances? Get to know and participate in the Natus System.
The Natus System of environmental cryptoassets is an innovative initiative that unites entrepreneurs, owners of Private Environmental Reserves (PPAs) and people using the best of blockchain technology to strengthen the global network of PPAs.
Get involved in building environmental legacy
Visit www.sistemanatus.com for more information and to join our waiting list.
Bibliography
BOE (BANK OF ENGLAND). Money in the modern economy: an introduction. Quarterly Bulletin, Q, 2014. Available at: https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction. Accessed on: 12/05/2019.
LIETAER, B.; ARNSPERGER, C.; GOERNER, S.; BRUNNHUBER, S. Money and sustainability: the missing link. Club of Rome report, 2012.
PAIVA SOBRINHO, R.; CORDOBA BRENES, K.V. 2015. New money for sustainability. Download https://payhip.com/b/dtFf
PAIVA SOBRINHO, R.; CORDOBA BRENE, K.V. 2017. Dollar standard and the Anthropocene post-acceleration: an unseen relationship. Accessed 12/05/2019 https://medium.com/sustainability-school-blog/dollar-standard-and-the-anthropocene-post-acceleration-an-unseen-relationship-c1dc9abf912a
PAIVA SOBRINHO, R.; GARCIA, J.R.; MAIA, A.G.; ROMEIRO, A.R. 2019. Blockchain technology: innovation in payments for environmental services. Advanced Studies, 33(95): 151–175. Accessed 12/05/2019, http://www.scielo.br/pdf/ea/v33n95/0103-4014-ea-33-95-00151.pdf
