What we'll be covering in this article:
- Why new assets should start at zero
- Mint tokens against proof of impact
- Offering STS to the offset market
- Next steps and opportunities
Our partnership with Stellar has always been an easy fit.
Stellar’s mission is to “bank the unbanked” - “to connect people to low-cost financial services to fight poverty and maximize individual potential.” Providing financial tools to communities is a driver for us at Task - and so a key question we ask is:
“If we manage to get the financial tools in the hands of the unbanked, that’s good - but how will we get liquidity to flow into these communities?”
It's no use having the tools if you have nothing to do with them.
And that's why we see “Asset marketplaces” becoming an essential element for blockchain based economies that foster social and environmental progress - rewarding change that results in the environmental outcomes we desire while supporting the communities that make it happen.
Meet Warm Heart Worldwide
When it comes to solving really big problems, Warm Heart have set their eyes on pollution reduction - specifically the reduction of crop burning which creates incredible levels of air pollution annually across Asia.
How can you encourage farmers to switch to making biochar? How can you track the production of this biochar? And most importantly, how can you verify that it’s being sequestered to provide carbon offsets?
Why is biochar important?
Biochar training for rural farming communities has become Warm Heart’s number one goal. Over the past 50 years the population in Thailand has increased 146%, from 27.4 million to 67.2 million. 40% of the population are rural farmers, who have little to no biochar training in regards to sustainable agriculture practices.
As the population has grown, so has the pollution created by the standard practice of burning crop residue after harvest. The air quality in Thailand has reached high risk levels. It is also a major contributor to global warming.
The process of burning the crop residue in the fields destroys the soils, depleting nutrients and killing off microbes necessary for healthy plant production. Chemical fertilizers and pesticides have been used as a means to improve the soils, which in turn has polluted the groundwater.
Repetitive planting of the same crop also depletes the soils, causing further low yields and poor quality to crop production. Farmers are earning less money.
Making biochar from crop waste produces no smoke and requires no wood and it can be used as fertilizer or animal food. Teaching farmers how to produce biochar provides them with an alternative to crop burning - as a result reducing the air pollution whilst providing them with an additional source of income.
A positive loop opportunity
There are challenges to developing a scheme that can be fully trusted by organisations looking to purchase offsets, especially when it comes to scale.
This is where technology like Task + Stellar combine to solve these problems. Stellar provides a decentralised paper trail of transactions, as well as cross border payments. Task grabs the essential data required to prove impact, and the application required to make it easy for farmers to get rewards in exchange for behaviour that reduces pollution.
And using custom Stellar assets that only exist to represent this value, we end up with a watertight paper trail that is attractive to investors and can scale easily.
Why new assets should start at zero
As Stellar states, “The Stellar distributed network can be used to track, hold, and transfer any type of asset: dollars, euros, bitcoin, stocks, gold, and other tokens of value. Any asset on the network can be traded and exchanged with any other using Stellar’s built-in decentralized exchange.”
The problem we’ve observed at Task is that Asset Owners create their custom asset and immediately issue (mint) a large number of them. The Owner may say “We created 1 million of our XXX tokens, but don't worry - we only reward them in event of ZZZ happening”
Minting an initial amount of tokens is really useful in many cases, but when tracking environmental impact such as carbon sequestration, it can reduce value. What happens, for example, if the Asset Owner releases tokens for sale either by accident or nefariously? Investors lose faith, and the project dies. Trust dwindles and the opportunity to create impact at scale is lost.
So start with zero
There is an easy way to solve this problem. The owner creates their new asset, but issues nothing. They tell the market “When X happens, we will mint one of these tokens with value Y”. That is, they will create a token (or some fraction of) only when good stuff happens!
Now the asset contains tokens that are only ever created against some measure of value. This is the model we have developed with Warm Heart and their new “Stop The Smoke” STS asset issued on Stellar 🚀.
Stop The Smoke (STS) Token
When you view the new STS token on Stellar, you see an authenticated overview of the asset, its value, distribution, pricing history, trade volumes and much more.
The asset is legally tied to the Warm Heart organisation through their implementation of a Stellar TOML file, increasing trust and transparency (this is how you publish information about an asset in Stellar):
The currency STS is also properly defined, letting anyone understand - for example - that “STS will be minted when CO2 is removed from the atmosphere via the production and sequestration of biochar by rural farmers and communities. The STS provides buyers of the token proof of CO2 removal while improving the lives of rural farmers and community. STS cannot be traded once purchased.”
All locked into the decentralised Stellar blockchain, any potential purchaser of STS tokens has a reliable place to understand this asset's value.
Mint tokens against proof of impact
- The first ever STS tokens were minted by Aom Kwanpirom Suksri on 4th August, 2021.
- She used the Task mobile app to record data that is publicly available for anyone to scrutinise.
- Her work was verified by the Warm Heart team.
- Once verified, Task minted new STS tokens and put them on sale for purchase against USD as a carbon offset.
The process and Co2 calculations
Let’s work through this process step by step by looking at a specific example of biochar use that leads to Warm Heart being able to offer a carbon offset to the markets.
First, Aom recorded use of the biochar via the Task mobile app - providing images, how the biochar was used (fertiliser in this case), estimated distance it had been transported, all geolocated, tracked and publicly available:
This data was sent to and verified by the Warm Heart team. Once verified, Task used a formula to issue new STS tokens and send them from the Issuer account to the Distributor account (if you aren’t clear on Issuer vs Distributor, this can help).
In our example, Task issued 0.0408 STS tokens using the following formula to calculate removal of C02:
- The amount of Biochar used was 20kg
- The C-sink potential factor* is 2.04
- The total Co2 removed (sinked) is 20 x 2.04 = 40.87kg
- 1 STS token equals 1 tonne of Co2 removed, and so 0.0408 STS were created (minted)
(*The c-sink potential factor includes CO2 removed from the atmosphere while taking into consideration emission expenditures from production and usage activities, e.g. pyrolysis, transportation, etc.)
Impact locked inside the blockchain
Task's mission is to support organisations like Warm Heart by allowing them to differentiate through transparency - as so there is one really important point to make about Aom’s Stellar transaction.
If you take a look at the image below, Task added the data “go.task.io/futth” to the Stellar memo field - that's important, because if you go visit https://go.task.io/futth you’ll find its the data that Aom collected to justify minting these tokens!
This is impact baked into the blockchain ledger - it can’t be removed or changed - and it shows justification of the value this asset represents.
Offering STS to the offset market
For Warm Heart to succeed, they need to complete the loop by introducing new liquidity into the farming communities that adopt sustainable practices - and they need funding to scale this work, to really impact pollution levels.
The carbon offsets market is fast growing - estimated to be worth $200 billion by 2050 - as countries are focused on hitting their off set targets. Much of it is driven by the business sector with companies looking to reduce their footprint and help regenerate the environment.
Perhaps the best example is Microsoft who are aiming to be carbon negative by 2050 and remove from the environment all the carbon the company has ever emitted, but there are thousands of other companies with similar missions.
USDC sales via the Stellar DEX
To address this, after minting new tokens, Task offers them out to the market using a value set by Warm Heart (in this example using a market price of $200 per tonne of CO2 removed - an introductory price for Thailand) using the Stellar Decentralized Exchange:
Using the Stellar Network, anyone can purchase these STS tokens as a transparent carbon offset. In fact, I was so excited when we saw the first tokens minted, I bought some myself and made a 45 second video to show this off :)
Next steps and opportunities
Warm Heart Worldwide now has a credible asset that can be purchased only on the basis that their team proves sequestration of biochar. The Issuer page on the Stellar network will exist for any investor or observer to check and scrutinise anytime.
This is a truly transparent organisation and the STS token is a huge opportunity. Once the Thailand project has been rolled out the team will begin implementing the same program across countries in Africa where thousands of farmers will be equipped with the tools and training enabling them to also reduce air pollution through the creation of biochar.
Not yet added at the time of writing, but coming in the next few weeks, Task will be adding Asset Regulation to the STS asset - which will ensure that only the distributor account which you can view here is allowed to sell STS tokens to buyers.
This will protect the STS token from ever being resold on the market, once it’s been purchased as an offset, it can never be traded again, and that protects the asset value in the long term..
How to purchase STS tokens
We will be adding direct purchase of STS tokens from inside the task wallet soon - but right now the easiest way is to install the Lobstr wallet.
After you set up your Lobster wallet, go to the menu, choose Assets, then press the plus “+” icon in the top right. Search on “warmheartworldwide.org” and the STS asset should appear. Tap the Add button on the right hand side.
However, STS tokens are precious. Check the distributor account to see how many STS tokens are currently available for purchase, and use USDC to trade and buy your biochar offset, providing Warm Heart with much needed support.
Creating your own asset marketplace
At Task we know many social and environmental enterprises could be changing the game and scaling their impact using similar techniques to warm Heart.
Click the button below to arrange a meeting with the team.
How to follow Warm Heart Worldwide
Scan the QR code below - if you don't yet have the Task mobile app installed, it will prompt you to do so, and it’ll ensure you are following the Warm Heart “Stop The Smoke” project.
That means you’ll see in real time the work they do, the farmers that produce the biochar, how it gets sequestered, and the biochar tokens that get minted.