The symbiosis of Natural Capital and Blockchain technology

With Web3’s current trajectory, consumers and users are almost predestined to be swept away in the whirlwind of new digital possibilities that promise to enter into all aspects of online life. It becomes the default to zoom into our tight-knit micro worlds, with the bigger picture of natural, tangible world often fading into the background.

Natural resources provide the foundations of everyday life, and by extension the economy, meaning there is a space for economy shifting technology, such as blockchain, to provide a reinvigorated way to support natural capital management.

Akasha Rose, Digital Marketing Manager at Civic Ledger, shared with CryptoVista her understanding of natural capital and how the values of transparency, decentralisation and civil accountability that underpin blockchain tech, can fill the void of mistrust that often accompanies natural resource management.

What is natural capital?

Half of world GDP depends on nature, and natural capital is about the relationship between natural resources, wellbeing, and economy. It is about the value that is created when we interact with nature – and that interaction can be extractive, or it can be in partnership.

The more in partnership we are with natural systems, the more value we potentially can create, because, if we treat natural resources from a perspective of consumption, they are finite. But if we regard natural resources as an opportunity to create thriving systems, the potential to create and generate value mutually beneficial value is limitless.

All human life depends on natural capital. Our food, our water, our houses, and health. You will not be having any crypto, DAOs, or blockchain, without natural capital being involved somewhere in the supply chain – from the critical minerals mined for our computers and phones, to the renewable energy that powers them.

The adoption of blockchain technology and digital assets will scale in parallel with the adoption of net zero carbon – which of course is not just lingo, it is about restoring and rejuvenating natural systems – of which carbon markets will play an increasing role. So even in the crypto world, consideration of natural capital, and natural capital markets is coming to the forefront.

What are natural capital markets, and how does blockchain apply?

You can imagine the difference between a private bank account, and a DEX (decentralised exchange). On one hand, only you and the bank know what transactions took place, and how much you paid. When it comes to natural capital, just like with digital assets, there is a public benefit in having the information on an immutable, secure, transparent ledger.

This is for a couple of reasons. Firstly, we are dealing with assets that are really part of the commons. The commons relates to the idea of a natural resource that is collectively owned. Many materials that end up in the supply chain, from minerals, to water, to timber, come from resources that were collectively owned prior to the conversion for private use.

In these circumstances, the public is increasingly wanting a higher level of accountability for how collective resources are used – and purchasers and regulators want information about the sustainability of the product that is being consumed. Having this level of transparency and security is essential for future regulation and credentialing of natural resource industries. Without ESG data on blockchain, it will be difficult for organisations to prove that they are doing the right thing and the distrust for “green washing” will continue.

Secondly, if we want to protect our natural resources for future generations, and in fact incentivise the regeneration of living systems (e.g., biodiversity, regenerative agriculture, climate) we need to have an accurate, and mutual understanding, of the value of the natural resources that we are consuming as part of our supply chain. A blockchain-based market is an ideal platform for this.

What is an example of a natural capital market on blockchain?

For example, Civic Ledger has a platform, Water Ledger, that specialises in water accounting and management on blockchain. Water security is one of the pressing issues of our world – even recognised as the theme of this year’s International Day of Women and Girls in Science – “Water Unites Us”.

The reason Civic Ledger is going to market first with a water management platform is that water markets are so opaque – there is no price or market depth discoverability, sellers and buyers are highly dependent on intermediaries leading to inequities and information asymmetry, and there is no common way to determine in any region what really is the price of water or its value.

It is not so simple as installing a water market oracle API and, hey presto, here is your water price because water markets often take place on spreadsheets in private hands. So, Water Ledger focusses on onboarding strategic market operators in the water market so that we can provide a better customer experience for their users and create better conditions for sustainable innovation because there is now a trusted source of knowledge (the blockchain) about how much water we have, how much water is shared and how much water is being used.

What is next for natural capital and blockchain?

Last year, I spoke about how natural capital was going to see an explosion in funding and research, and now we are seeing that explosion. People talk about 2020 as being the year of DeFi, 2021 as the year of NFTs, and I say that 2022 will be the year of “ReFi” – regenerative finance or “green finance”.

Civic Ledger has a lot planned for 2022, such as scaling water markets in Northern Australia, and new partnerships across the globe which will be announced soon. But the basic system that has been built for Water Ledger can apply to any natural resource, so if you want to get involved in blockchain for natural capital from the ground up, we are looking for strategic partners, developers, and ESG savvy investors.

Natural capital is a concept that ties in natively to Web3 because it is not just about natural resources as material, it is a philosophy encompassing our relationship to nature, the interdependencies, and how our interactions can be mutually beneficial. Web3 is about giving ownership of data and our work back to the people who contribute it – natural capital on blockchain is about incentivising the regeneration of nature in the economy for a sustainable future.

I forecast an increase in projects giving a voice back to sovereign nature – as spoken about by Dr Erin O’Donnell at the event Making Choices About Water. If a driverless car can be self-sovereign and work for itself on the blockchain, as in the smart mobility movement, then river systems, such as Wanganui, which are identified as people at law, certainly can be represented beneficially in this way too.