IUCN lunch Blockchain for forest landscape restoration
IUCN has teamed up with Gaiachain to develop FLRchain – a blockchain-based application to follow forest landscape restoration implementation through a verifiable ledger system that traces transactions from funding source to farmer.
This decade is described as one of action, but to address the biodiversity and climate crises, and enhance food security and water supply, we must achieve forest landscape restoration (FLR) at a large scale. FLR is the most effective nature-based, carbon-drawdown solution to achieving net zero emissions goals, and can support countries to maximise their Nationally Determined Contributions (NDCs).
Efficiently applying restoration funds can be tricky business
To this end, investments to restore and protect forest landscapes are on the rise globally. For instance, dozens of corporations that depend on commodities produced in forest landscapes, such as cocoa and palm oil, have made sustainable commitments that include zero-deforestation supply chains. Other FLR investments stem from global efforts to combat climate change in the land use sector to meet the Paris Agreement. However, ensuring that these funds are applied efficiently to support FLR is where it gets tricky.
A key challenge to FLR implementation is establishing efficient, transparent and sustainable systems to monitor FLR implementation and to distribute financial incentives to those who are actually restoring landscapes, such as smallholder farmers. Current distribution systems depend mainly on opaque cash transfers that are inefficient, slow, and vulnerable to fraud – and marginalised people may not actually receive the benefits. As a result, investors are hesitant to invest, and farmers, for example, have minimal incentive to act.
With FLRchain (see below) the payment system is not only quicker and more transparent, but the specific actions in the landscapes are directly linked with the payment. The way this secure system is developed also facilitates data collection of FLR implementation in real-time through a robust database system, taking into account data protection and privacy.
FLRchain makes restoration more transparent
Today, most transactions are based on traditional contractual agreements and paperwork – often requiring trusted third parties to validate the fulfilment of terms outlined in the agreement. This method is slow and, most notably, not cost-effective.
To address this challenge, Gaiachain and IUCN are developing the FLRchain – a blockchain-based application for FLR implementation across landscapes. The FLRchain will allow restoration actors (like farmers) to distribute, track and earn funds in a way that minimises costs and maximises impact. Specifically, FLRchain will allow investors to efficiently send money to landscape committees set up to receive the funds. Smart contracts would distribute financial rewards to farmers and other beneficiaries in exchange for FLR activities verified by facilitators. FLRchain will also be able to send funds directly to individual implementors when conditions allow (for example, direct access to a smartphone).
This innovative FLR payment solution is based on the Algorand protocol blockchain and facilitates incentive payments between investors (e.g. donors or companies), facilitators (e.g. NGOs) and landscape actors (e.g. farmers and producer organisations). The FLRchain will increase investor confidence by improving transparency and efficiency of payments. Investors will be able to track payments in real time to communal basket funds and individual producers or producer organisations. Investors will also be able to immediately access data submitted by producers or producer organisations (such as photos of freshly planted and geo-located trees) to easily monitor the impact of their contribution. The FLRchain will use the smart contracts to automatically execute transactions using basic lines of code stored on the blockchain when agreement conditions are met. The FLRchain consists of a web and mobile application built on Algorand’s permission-less, fast, scalable, robust and low-cost (transaction fees are $0.001) blockchain.
How it works: A remarkably straightforward structure
Click image to expand above diagram
Self-reinforcing investment and restoration loop
Blockchain can be used by an individual investor in collaboration with a landscape facilitator for one specific investment, but in addition to this, FLRchain can be used as a platform, whether by a landscape facilitator at the start, or because a single investor in collaboration with a landscape facilitator wants to expand the financing options. Similar to a crowdfunding platform, each facilitator raises funds from private or public sector investors via the FLRchain web application. A transaction fee will be taken from the investor contribution to sustain system maintenance and growth. Facilitators and farmer producer organisations will use the FLRchain free-of-charge to drive landscape level adoption, which in turn will help drive interest at the investor level.
At the core of successful FLR are incentives strong enough to offset opportunity costs. For example, a poor farmer may need a compelling reason to avoid expanding their cropland into an existing forest. Not only does the incentive need to be strong in terms of quantity, it needs to be immediate as well: waiting 15 years for agroforestry fruit trees to provide additional income is not an option for marginalised farmers that need immediate tangible income. Obtaining financing to develop incentives to engage in FLR is arguably the easy part. The real challenge is putting in place mechanisms that efficiently distribute incentives to the increasing number of farmers and other landscape community members contributing with tangible FLR implementation in the field.
Many farmers and producer organisations can be both primary beneficiaries of, and are the key contributors to, a broad range FLR actions. Through FLRchain, incentives will be efficiently distributed to farmers, producer organisations and other landscape community members, and will include advanced rewards to help producers offset initial upfront costs of FLR implementation.
To foster local engagement, the FLRchain relies largely on data submitted by farmers and producer organisations, so that field-level data is at the core of the monitoring system. This can be linked to other solutions, such as remote sensing as required. The design of the FLRchain also responds to specific challenges facing women and youth. Youth are often the main users of new technologies, which offer plenty of opportunities for development and learning. To help ensure inclusion of women, youth and marginalised farmers, FLRChain implementation includes training sessions and consultations tailored to women and youth that ensure their active participation at the initial roll out and to facilitate ongoing engagement.
A successful rollout and uptake of the FLRchain would result in increased investor confidence by improving transparency and efficiency of payments. Investors will be able to track payments in real time to communal basket funds and individual producers. Investors will also be able to immediately access data submitted by producers to easily monitor the impact of their contribution. The FLRchain will also address challenges to scaling at the landscape level by streamlining payment distribution, data collection, monitoring and planning. Additionally, as everyone will be making decisions based on the same immutable and transparent database, there will be stronger trust in the system among all actors thus reducing risks and grievances.
There are a number of global or regional restoration initiatives such as the Bonn Challenge, UN Decade of Ecosystem Restoration, African Forest Landscape Restoration Initiative (AFR100), One Trillion Trees, global sustainable supply chain commitments, and carbon offset markets that will benefit from the increased transparency, efficiency and stronger farmer and producer organisations’ rights and incentives resulting from the FLRchain. As global investments in FLR continue to grow, so does the need to distribute those investments efficiently to hundreds of thousands of forest landscape stakeholders. FLRchain may just make this process a little easier.
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