Using Blockchain to Verify Carbon Offsets | Blockchain & Climate Are Compatible w/ Alan Ransil (Filecoin Green)

What if there was a way to revolutionize data storage for companies and organizations while also promoting sustainability and transparency? Join us as we chat with Alan Ransil from Filecoin Green, an initiative by Protocol Labs that aims to do just that by utilizing the power of blockchain technology.

Throughout the episode, we explore how Filecoin Green creates verifiable carbon credits, tracks trust, and accelerates the flow of information in the decarbonization process. Alan shares his experience with satellite imaging for monitoring deforestation and how programmable money can be used to create NF Trees - a unique incentive for people on the ground to protect forest regions. We also dive into the importance of trust in ESG reporting and how Zero-Knowledge Proofs, a foundation of Filecoin, can enhance the transparency and efficiency of sustainability efforts.

As we wrap up, we discuss the compatibility of blockchain technologies with sustainability goals, touching on the energy consumption of various blockchain algorithms and how Filecoin compares to Amazon Web Services. Alan emphasizes the need for regulation and shares Filecoin Green's efforts to reduce energy use and connect the network to renewable energy sources. Don't miss this enlightening conversation that delves into the potential of blockchain to transform sustainability and transparency in the fight against climate change.

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**Most Recent Episode: Dealing w/ Bandwagoning, The Value of Incubators, & Moats, with Alex Mitchell (Full Turn Capital)
**Similar Topic: Carbon Offsets; an Investment not an Expense with Demian Klenk
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Transcript

Speaker 1: 0:00

And so I was working on that collaboration when the Filecoin Network launched, it started growing really, really quickly. So it's now I think it has between five and 10 percent the storage capacity of Amazon Web Services, and it only launched in 2020, like late 2020. So it grew really, really fast.

Speaker 2: 0:20

Welcome back to Clean Techies podcast, where we interview climate tech founders and VCs to discuss all things building and investing to solve the biggest challenge of our generation climate change. Today, we are joined by a bit of a different guest, alan Ransill from Filecoin Green, and this is a pretty wide range of conversation so and also very technical in nature, so I'm going to do my best to explain that. So, filecoin Green was created by Protocol Labs and is, in essence, a blockchain protocol to store verified data so that companies can actually understand they are buying real carbon credits, or another example would be so that organizations can verify their renewable energy purchases. Those are just two examples And, in essence, this conversation covers their technology, why it's needed and kind of what the problem they are solving actually is. Then we move on to the topic of our blockchain technologies and sustainability in general compatible.

Speaker 2: 1:17

There's a lot of debate about that always, and we talk about regulation and his thoughts on that as well, since it's, you know, generally considered to be philosophically opposed in the blockchain community to the idea of regulation from an outside body. And then, finally, my favorite topic of the conversation, which is transparency and what information companies should be required to share, given that you know, businesses are still businesses and they have a competition that they need to maintain, etc. So that was a pretty fun conversation, part of the conversation as well. I hope I did a good job, asking the right questions And, without any further delay, enjoy the episode. All right, welcome to the show, alan. How are you doing today?

Speaker 1: 2:00

Really good. Nice to be here Yeah.

Speaker 2: 2:02

Super excited to have you. Obviously, we've we've chatted a little bit before, which is not always the case with a lot of the guests that have fun. Sometimes it's like just throwing into the deep end. but let's, let's, let's get started. This is a very deep topic, so we've got a lot to cover. Give us a quick intro to yourself, who you are and kind of what you're doing right now, and then we'll go from there. Yeah.

Speaker 1: 2:21

My name is Alan Alan Ratzel. I started a project called Filecoin Green, which is the sustainability initiative for Filecoin. Filecoin is the world's largest decentralized data storage network, so it's sort of like Airbnb for data storage. Anyone in the world can use extra hard drive space or set up a server to store data for other people, and you you pay in Filecoin, so it's a cryptocurrency integrated into this proof system where you store data for others. Okay.

Speaker 2: 2:52

And so how did you come to come to? I think I understood all that. So that's good, that's a good start, but can you explain to us how you ended up kind of getting to this point? How did you find Filecoin in the first place and how'd you get involved in this space?

Speaker 1: 3:03

Yes, So I've been involved in clean tech for my whole career. So I worked on batteries and solar cells in academic labs. My PhD was on structural batteries And I did some work on power grids. I started working with protocol labs because we we wanted to understand how to apply decentralization and a lot of the tools that were being developed around control systems for controlling how data is stored in a decentralized network to power grids and try to understand what can we pull from what we understand about how to design systems that don't have a central point of failure to a power grid in which we're moving from this this very sort of centralized architecture with dispatchable resources So fossil fuel plants to a more decentralized architecture with, say, non-dispatchable loads all over the place maybe home solar wind that you can't control and distributed storage. And so I started a collaboration project between protocol labs and the MIT energy initiatives to look at what were the design principles that we could pull from decentralization work that was going on and Filecoin and then Web3 and crypto generally to look at power grid control systems. And so I was working on that collaboration.

Speaker 1: 4:23

When the Filecoin network launched It started growing really, really quickly, so it's now I think it has between five and 10% the storage capacity of Amazon Web Services and only launched in 2020, like late 2020. So it grew really really fast And people started wondering, including me. You know how much electricity is this using? Right? We've all heard about Bitcoin And at that point, ethereum was still running on proof of work. We've heard about these really energy intensive systems for coming to consensus in order to back your cryptocurrency, and I wanted to understand okay, firstly, what is the energy consumption of Filecoin And, secondly, what can we do about that? How can we connect the network to renewable energy and how can we actually build systems to prove that the network is using renewable energy? And so that's how it came to Filecoin. Great is taking a lot of these design principles from decentralization and applying those to clean tech.

Speaker 2: 5:16

Hey there, quick break to remind any founders or VCs listening. If you were looking for deal flow, seeking to raise funding, looking for partners to help service your needs, or perhaps you're looking for corporate investment partners, feel free to reach out to us through our Slack channel, which can be found in the description, because we meet a lot of people in this space. We set aside time each week to make introductions to the various people that we encounter. This is something we do free of charge in order to help these incredible companies solving climate change to scale. Looking forward to hearing from you in the Slack channel.

Speaker 2: 5:43

Okay, got it, so I think that makes sense again to me. So far, so we're doing well too. For two, but I do want to back up before we get too far into it. Can you explain broadly for people what is protocol labs Like? what do they actually do, just so people understand kind of your role here, and are you an employee of them? Are you working in collaboration with them on this, specifically on the Filecoin Green project, et cetera? Yeah, so I am an employee of protocol labs.

Speaker 1: 6:08

I'm also an advisor to the Filecoin Foundation. Protocol Labs is a company that exists to build products and new networks using these decentralized design principles. So the first thing that Protocol Labs built, the first project, was a project called the Interplanetary File System or IPFS, which is named that because we're interested in these sort of extremes of decentralization. And the point of IPFS, which is called the Interplanetary File System, is that when you type a URL into a browser, you're asking for data based on where it is on the server. Ipfs lets you ask for data based on what that data is instead of where it is Right. So when you type an address into a URL, you are connecting to a server and you're just hoping that the data is going to be in a browser. So you're asking for data based on where it is on the server And you're asking for data based on where it is on the server, And you're just hoping that the data that you're asking for is on that server at the place that you asked for it. But if it's not there, you get a four or four error right. You can't find that data. Or if someone changed that data and kept it at that same place on the server, you can't tell that they changed the data right.

Speaker 1: 7:22

And that's all because of what we call location addressing, So addressing data based on where it is rather than what it is.

Speaker 1: 7:29

And so IPFS allows you to address data based on the content of that data itself.

Speaker 1: 7:35

So you say, rather than saying the data at this location on a server, you say, hey, network, anyone in the world who has this data, can you give me the data with this fingerprint? And then whoever has a copy of that data can pass it to you and you can use it and you can verify that no one tampered with it. So that was the first project of Protocol Labs, and that technology underlies most of the decentralized web. So this idea that we want to address data based on its content instead of this other sort of arbitrary parameter which is where is it on the server, And that's as we've developed a lot of these tools for connecting Filecoin to renewable energy and using decentralized data to improve other pieces of our sustainability framework, things like carbon offsets or renewable energy certificates, all this work in other areas that we've done that's really essential to it Can we build verifiability into the data that we're using by addressing it based on what it is instead of where it is.

Speaker 2: 8:38

So there's a couple of things that I'm gonna have to ask about In terms of the what versus where. Can you explain how that works? Is it? do you have to kind of index the entire web and be like, okay, well, here's how this is? I think I know the principle of vector filing. I'm not sure if it has to do with that or if there's some way you measure it. What do people type into their browser if they wanna search what versus where?

Speaker 1: 9:02

Yeah, so you take the file and you run it through a hash function, a cryptographic function that gives you a fingerprint, and so that fingerprint is only about 50 characters long, but you can take any information that you have, any file that people have generated, and you can generate that 50 character long fingerprint based on that file. And so if you wanna go to, if you wanna request data, and you have the fingerprint of the data, you have the content and address you can go through a gateway, which is a website like you would normally go to online, right, and it'll have IPFS in the URL. there are a bunch of different gateways that operate and then you can add that hash, that fingerprint or that content address to the end and it'll just see who in the world has that data and it'll fetch it for you and deliver it.

Speaker 2: 9:51

Okay, interesting. So then, going back to the point of verifiability, this has been a big issue with Carbon Credits Carbon Credits, especially in the recent past. I mean, it's been an issue for a while. But can you talk about how does that actually work, like how are you able to actually make sure it's verified before it goes on? I'm assuming it has to happen when it's going into the system, but could you kind of explain that again, like you're explaining to a three-year-old? I'm a level of a three-year-old with this stuff.

Speaker 1: 10:20

Yeah, 100%. So Carbon Credits there's a bunch of different issues, right with verifying what a Carbon Credits actually means and what's happening on the ground that justifies you selling this Carbon Credit, right. And so we work with a bunch of different companies in this space that are trying to make Carbon Credits more transparent, more interoperable and work better in service to the communities that are actually issuing them, And so one example of this is called Gainforest. So Gainforest is a company that lets you, instead of just issuing traditional Carbon Credits, they let you mint what's called an NF Tree, and so they say, okay, we have this geographic area and we can monitor that geographic area with satellite images that are just publicly available, that are taken every two weeks or so, that come from, like, the European Space Agency and NASA and these other groups that generate these satellite images, And we can take that data, store it on the decentralized web and assign it a content address and then use machine learning algorithms to see whether there was deforestation in that region, And then your NF Tree only pays out to the people on the ground if they protect that region from deforestation. So that's one example of taking programmable money, which is something that crypto enables, and taking content addressable data. So you have this data from satellites that is verifiable because you have that cryptographic hash. You can verify that it's the real data that was coming from the European Space Agency, and then you can tie that to some real-world thing on the ground. Right, You can pay people if they protect the forest and not if the forest gets cut down, And so that's one example. That's not exactly a carbon offset, right? That's one example of an instrument that you can build using these tools, which helps you incentivize the behavior that you want, which is help, you know, allow people, support people if they protect the forest rather than cut it down. So that's ultimately we wanna give people.

Speaker 1: 12:20

That's the design of carbon markets, right, We really want to give people the ability to make a living based on protecting the natural world rather than degrading it, right, And so that's part of the goal of carbon markets. That's the goal of NF trees and some of these other new instruments. That's the goal of things like establishing a green premium, So tracking the you know supply of a product across the supply chain and showing that this product that you're buying in a supermarket shelf comes from this particular farm of this particular area, where they're growing it sustainably or producing it sustainably. Right, That's the goal. Right Is to take these verifiable flows of information and use that to direct money where it needs to go in order to give people the ability to make a living by protecting the forest rather than cutting it down.

Speaker 1: 13:07

We're also another application of what GameForrest does is they have a transparency dashboard where they take that same data, that same satellite data, and they take carbon offsets from save vera, which is one of the largest carbon offset registries that's been under a lot of fire in the past couple of months, And they let you do that same type of analysis for other people's carbon credits. Right, So you can take the geolocation from vera offsets. You can then paste that on a map and GameForrest will give you a slider that lets you see okay, based on the succession of images taken over the past several years. Right, So you can go years back and say, okay, from July 2020, what did this particular area look like? Like, was there forest there? Was it at risk of being deforested? Was there deforestation happening after the offset was issued? And you can do that sort of due diligence yourself and look at these time lapse map images and see both, see their analysis of was this area actually protected, And also understand the facts on the ground for yourself, using their data.

Speaker 2: 14:20

Hey there. Are you building a climate tech business and looking for very specialized talent? Consider reaching out to our sponsors, next Wave Partners. Next Wave are experts in talent acquisition, recruitment and retention across the climate tech, renewables and ESG spaces globally. So if your team is growing or you're looking to make a career change yourself, feel free to reach out to Next Wave at next-wavepartnerscom or reach out to one of their consultants directly via their LinkedIn page. So a couple of things there. One is just to make sure I understand the example. It's say a corporate wants to purchase offsets it might go into kind of a bucket, if you will And then it's paid out over time as on, like you said, every two weeks or so, right, these images are updated and it's paid out over time to the steward of the land. So that way they're ensuring that they're not just getting a payment and then saying, okay, cool, now let's build a development here, right? Is that how it works?

Speaker 1: 15:13

Yeah, so there's different models. If you're a corporate and you're trying to buy an offset that you match to your scope three emissions, say, then you'll probably buy an offset but use their tools to monitor that offset and make sure that it actually is area that's being protected, like Vera says it's being protected, rather than just taking Vera's word for it, right? So that's probably the use case there, and there's other groups that we work with, like the Regen Network is another example That allows communities to issue their own carbon offsets, prove that they are following a methodology and then give you data that is posted directly on their blockchain in order to validate that those carbon offsets are actually meaningful, right? So if you're working within the framework of, specifically, scope three emissions mapping the carbon offsets, then you're probably gonna use some of those transparency tools. But if you're interested in other mechanisms that allow you to, say, protect a forest, then you'll use something like an NF tree.

Speaker 2: 16:16

And then so this works, specifically because I'm assuming that satellite data is obtainable. That's something that can. Hey, we can see very clearly whether or not the forest is still there. But are there other examples you guys are working on or that have been worked on? Maybe other data sets that they can prove other types of carbon offsets? I don't know what the other examples might be, but I'd be keen to understand. Beyond this problem, there's many different ways to capture that, and how else can you make sure it's verified and then put it on the chain.

Speaker 1: 16:46

So another example is measure to earn, and so that's coming back to this idea right, that we wanna give people on the ground the ability to make a living based on protecting nature rather than degrading it or deforesting. Measure to earn is a system where someone who lives in this area and wants to make some money from protecting a forest will either measure trees in the forest using a drone, so you can take drone images of the entire area that you're protecting and then upload those and content address those and make that publicly available data. That's backing a carbon offset Or you can also pay people to directly measure trees. You wanna get an idea of what the tree's health is, what the tree's density is, how many trees there are in a given area. You can have people go and physically measure trees with a flexible tape measure. You can have them geolocate trees, take pictures of trees and use that data in order to back up a carbon offset.

Speaker 1: 17:48

One of the things that we build in Valquin Green are tools for verifying the provenance of data that you take using methods like that. So there are a bunch of different ways of verifying data. So I talked about a content address and that lets you verify that the data you requested is the data that you actually received. But frequently, if you're looking to say, okay, like, is this data that I got actually accurate? Like, does it actually match the real world There, you want to be able to trace where that data came from. You wanna be able to trace the provenance of that data. That always backs up to some community, and so we've built something that we call the provenance protocol, and the provenance protocol allows you to take Contradress data, allow individual people who contributed that data to sign it cryptographically. So, say, i attest to this data, so I live in this area, i measure this tree, i'm going to cryptographically sign that information that I'm providing, and then it allows a different community So a community in that issues offset, say, in order to say, okay, we actually trust this set of people within these bounds.

Speaker 1: 19:01

So if I'm in the Philippines and I'm measuring mangrove trees, this community maybe it's Selo is another partner that we work with. They may say, okay, we know that this person with this wallet address lives in this area of the Philippines and we trust them to contribute tree data from this geographic region. But if they started contributing data from some other geographic region or they started claiming that they were auditing a data center, a different data type, then we wouldn't trust them anymore. So it says, okay, this wallet can contribute data within these certain bounds. And then you're able to go and say, okay, i have this piece of data that is backing up this offset. Right, it's giving me information, it claims to be giving me information about the actual facts on the ground underlying this carbon offset. Do I trust it? I trust this community, selo, and Selo trusts this contributor within these bounds. And then I trust it right.

Speaker 1: 20:02

And so that's one of the things that content addressing allows you to do is that if you have information that's passing through organizational boundaries, right, so say, you know a carbon offset registry might want to issue carbon offsets, that data might be backed up by data from a person who is trusted by Selo. Right, there's a bunch of different parties in there. One of the things that content addressing allows you to do is get the fingerprint of data, no matter where it came from, and say and bind your attestations to that data, regardless of who's storing it, where it is, what database it's in, what server it's on. And so we think of these sorts of tools as sort of the glue that tracks trust through all these different systems, right. So content addressing allows you, because it's decentralized, because it's built for decentralized systems, it allows you to paste on these attestations or these ways of sort of tracking trust or the provenance of data across organizational boundaries, and lets you build these networks where you can say, okay, actually trust that this offset represents the facts on the ground, because I trust this community and this community trust this contributor.

Speaker 2: 21:20

Hey, there. Are you building a climate tech business and looking for very specialized talent? Consider reaching out to our sponsors, next Wave partners. Next Wave are experts in talent acquisition, recruitment and retention across the climate tech, renewables and ESG spaces globally. So if your team is growing or you're looking to make a career change yourself, feel free to reach out to Next Wave at Next-WavePartnerscom or reach out to one of their consultants directly via their LinkedIn page. Are there certain numbers of touchpoints that have to be achieved in order for that kind of person to be trusted fully? Because obviously you know you're basically saying that the person's real world identity. If anything goes south, you can go trace it to them because they're kind of signing it right. Is there a way, is there a certain number of touchpoints required to get to that point where you say, yep, this is good. We believe that.

Speaker 1: 22:07

Yeah, i mean so that always backs up to what is the community that is establishing that trust, right? What is their trust model? And so you know the current trust model, right? So Vera is the carbon registry. They have these validation and verification bodies that come and audit the individual products or projects, right, but frequently they don't explicitly tell you, okay, this bit of data came from this person, this other bit of data came from this other person, right.

Speaker 1: 22:37

They will, you know, go through a PDF that has a summary of an entire project, right, and say we stamp this, you know entire sort of monolithic, many page document, right, and you know, that's great as far as it goes. But the value in doing things this way is the sort of decentralized way that's based on these web three tools is that you can actually aggregate trust from all of these different sources And you can see what it ladders up to, right, you can see that final conclusion. But you can also break it down into all of its component pieces and say, okay, who do I actually have to trust? to trust each of these little details, right? You don't have to take those details, aggregate them into some some big sort of monolithic chunk and just assign trust. You know, thumbs up or thumbs down based on that.

Speaker 2: 23:25

So in the situation of Vera I don't know if you're not familiar with the situation or not, probably more than I am, but do you? is it known, kind of what specifically was the issue? Because I'm assuming it wasn't Vera. you know maliciously doing this, it was just that there were some bad inputs that they maybe didn't catch or whatnot, and this would help solve that problem. what you're proposing, correct?

Speaker 1: 23:46

Yeah, i mean, it's a complicated situation. Right, there's there's a lot of questions involving sort of additionality and transparency. But yeah, so there's there's probably three different pieces to touch on. Right, one is being able to trust, to track trust, like I was just talking about, sort of very in a very granular and explicit way. Right, frequently we don't have great tools in web two for dealing with trust in a way that's more nuanced than just thumbs up, thumbs down. Right, we, we tend to say, okay, either this person has credentials to you know, log into this database and we trust this database, or they don't right. Or you know, we trust this output because auditors spent months pouring over it and we trust it completely, but we, we, you know, we don't understand the, we don't. We don't have great ways to say, okay, if I stop trusting this particular contributor, what does that mean about the final report? Right, and so that's. That's one of the three things I think.

Speaker 1: 24:52

The second thing is these additionality questions and being able to actually audit the extent to which a carbon offset is affecting the facts on the ground. And that comes back to some of these tools around. What I was talking about with gain forest right tying the offset to computable data from things like satellite images that allow you to do your own analysis and say, okay, do I actually really really trust some of the details and assumptions that went into there? And then the third that we haven't haven't touched on as much is financial transparency being able to say I made this transaction to some broker and being able to see the amount of that transaction that actually made it to the people on the ground. Frequently there are intermediaries that take a large chunk of the amount of money that the the final, you know company, pays in order to purchase a carbon offset or some other environmental product And you don't know.

Speaker 1: 25:50

Is you know 50% of my money going to the people on the ground? probably not. Is 20%, 10%, 5%, 2%, 1% right In the system that we have now, it's impossible to audit and prove or it's generally impossible to audit and prove it's not set up that way How much of your, your money as a final offset purchaser is actually going to really support the project that is having that impact versus is going to middle men. And that's another of the things that these went through tools are very good for is allowing you to audit these transactions across different steps in a supply chain and be able to track, track. You know where the money is actually flowing. So it's a. You know it's those. It's those three things right.

Speaker 2: 26:35

So, on the financial question, there's a couple. There's maybe a more philosophical question as well here. But how, how do you actually get that data then? right, how are you actually collecting it? Because it sounds like it has to be to some extent voluntary, right that people put this in there. Can you explain that process and how you can actually make that true?

Speaker 1: 26:55

Yeah, so mostly the people who are doing a really good job in financial transparency are just building a new system.

Speaker 1: 27:04

So an example of that I talked about Selo.

Speaker 1: 27:07

They are a project that we work with a lot. They're a blockchain that allows you to sign up for a crypto wallet with just a cell phone very, very easily and then transact with people all over the world without having to open a bank account or without having to go through this kind of cumbersome process sometimes of using a computer to sign up for a crypto wallet. So they're great for being able to connect with people on the ground who maybe they're a pilot. They ran a month or two ago with GameForest, connected with people in the Philippines, had them measure trees, then submit that data and get paid in order to measure those trees and measure the mangroves. So that's an example of the system that lets anyone with a smartphone, which is billions of people all over the world now to just very easily sign up for this wallet and become connected to their network, and then what that then allows you to do is, once you're part of that system, it becomes very easy to track these transactions and how money is flowing from one step to another in this blockchain.

Speaker 2: 28:15

Okay. so then that brings me to maybe a bigger question, which is, in this kind of ESG push and sustainability push, i've had some. I'm a big fan of transparency in general, but I've also had some people say, hey, you know, companies are still, they need to be competitive, so there's only so much data that can be shared. Do you have any ideas around what is the boundary on where do you draw a line of what data should be shared and shouldn't be shared in order to maintain competitiveness? Can you maybe just like talk about this broadly? I'm keen to get your thoughts on this, especially given that this is all about transparency essentially.

Speaker 1: 28:54

Yeah, this is a huge question and some way or somewhere that I think crypto is really going to unlock a lot of ability for companies to participate in ESG reporting, even when their business position doesn't allow them to actually reveal all the information underlying those reports. So there's this innovation called zero knowledge proofs, which are the basis of Filecoin, and they're getting more powerful all the time as research and development is happening in order to make more powerful systems for zero knowledge. A zero knowledge proof is this area of cryptography that lets you prove something without revealing the underlying data. So the example that people tend to give is can I prove to you that I'm over 18 or over 21 without actually telling you what my age is? And there are cryptographic techniques that let you do that. The reason this is the basis of Filecoin is Filecoin wants to allow people to prove that they're storing your data without actually transferring that entire file. Right, because that would be kind of pointless if you had to transfer that file every day and then compare it to file it stored somewhere else or something. So Filecoin allows you to create a proof that's very short compared to the file that allows you to prove that you have these gigabytes of data, or terabytes of data, peppabytes of data, and not actually transfer that entire file, but just submit the proof.

Speaker 1: 30:19

And so, as zero knowledge proofs are progressing, what this is allowing you to do is just prove that any computer program was run accurately, without actually giving you the underlying data that was fed into that program. So you could prove that the output of this program says that this company is net neutral or carbon neutral, and you can prove that that accounting was done accurately. So you can prove that the program was executed successfully on a certain set of inputs which are encrypted but signed by an auditor, right? So you can say you want to know that a company was a factory, right, was carbon neutral over a given time period. You can allow them to submit their power bill information to an auditor. You can allow them and you can have that auditor sign off on it, or you can get that directly from their power meter, but you have some data showing how much electricity they used over a given time period. You can then allow them to purchase renewable energy And again, they don't have to reveal how much energy they actually purchased. You can just have a cryptographic proof that just signs off on this encrypted data saying this represents our energy purchase. You can then feed those into a carbon ledger that you can prove is compliant with the greenhouse gas protocol. Maybe that ledger is open source, and then you can show what the output is which is that factory is net zero and prove every step along the way where that information came from and that information was processed accurately, without actually revealing what that underlying electricity use over the given time period was. And so I think that that type of technology is just coming to maturity and it's going to have a huge impact in allowing people to make these ESG claims without actually having to reveal sensitive business information.

Speaker 1: 32:24

And the place that I think that's really important is that if you think about a supply chain in which everyone's scope three emissions is someone else's scope one or two emissions, and you imagine that someone upstream in the supply chain changes something, so they change the carbon intensity of their products, right? Maybe they get more intense or less intense. Then, under the current system, they take a year to report that information, right? Everyone in the supply chain reports once a year. So someone upstream changes something, it could be up to a year before their customer knows how the carbon intensity of their inputs changed And they were on their numbers with that new input value, and it's another year before their customers know how that upstream change affected the carbon intensity of some product to hop down the supply chain.

Speaker 1: 33:18

So if we're trying to decarbonize very rapidly and we're using this type of data to guide our decarbonization efforts, that's just not going to work right. If you have to wait a year for every hop down that supply chain, yeah, exactly, to update that data, it's just we're going. That guarantees that we're going to be working with information that's out of date and not accurate. And so I think the place where zero knowledge proofs can really help is by allowing us to speed up that information flow, by letting us reveal the information that's necessary without revealing, or having to worry too much about revealing, sensitive business information.

Speaker 2: 33:58

So just out of curiosity it might be too technical to go into, but I'm kind of curious. Can you relatively easily explain how is that actually possible that you can give you know, certain amount of data and it's just basically giving you like almost like a stamp of approval? Are you actually giving it data and then, based off of a certain kind of program, it says okay, cool, you did achieve the thing, so here's your stamp, and then you use that stamp to go forward? How does it actually work that you can not give it all but still get that kind of transparency mark?

Speaker 1: 34:27

Yeah, the idea is that you encrypt the information and you someone who, who saw the non encrypted information, signs off on that. They say you know, I saw the energy bill and I sign off that when I encrypted this energy bill, this was the result, And so that's some of your input information. And then, because the encryption algorithm is is part of the zero knowledge proof system, when that information gets fed into this computer program, you're then able to prove that that computer program was run accurately without having to reveal that underlying information.

Speaker 2: 35:04

Okay, got it.

Speaker 1: 35:05

Yeah, that can make sense.

Speaker 2: 35:06

It's sort of like yeah, Yeah, it's sort of like it gives people the opportunity to not have any qualms about it, right, because then they they can assuming that they trust that the auditor who's watching isn't going to steal their data, which is most people have auditors anyways right, but assuming they trust that that gives everybody no reason to not encrypt these things, right. I think it especially comes down to the supply chain thing, right. People don't necessarily want to share, hey, how much should we pay for our, you know, for our raw goods or whatever, because that could be their, their moat from the industry or something like that, you know.

Speaker 1: 35:40

Yeah, yeah, exactly.

Speaker 2: 35:42

Yeah, sorry, you were going to say something. I interrupted you about that a bit there.

Speaker 1: 35:46

Yeah, no, i was just going to say it's sort of like if you are doing some calculations, you could add a number to all of your input data, right, and do a bunch of calculations that are, you know, all like additive or subtractive, right, and then you could subtract that number at the end And, like, the people in between wouldn't know what the actual value of the input data is. Right, yeah, and so you can. You can, like you know, correct it, you can. You can scramble it somehow and then correct, for that scrambling at the end is like that's, that's not exactly how zero knowledge proofs work, but it's, it's conceptually sort of similar.

Speaker 2: 36:25

Got it Okay, interesting, okay, so that that's.

Speaker 2: 36:29

That's fascinating about the real time data thing I think we talked about that before at one point, which was the timing here, so I guess, um, from this point, i'd be kind of curious to understand, broadly speaking.

Speaker 2: 36:42

You mentioned this in the beginning, which was because you're like, oh man, we're using this blockchain to track everything and whatever it's energy intensive. What is your thoughts on this fact that you know we're trying to use blockchain, which is somewhat energy intensive? You can maybe talk about that a bit, but the fact that we're using all this, which is actually like something we didn't necessarily need to do previously unless, of course, you decide that, hey, there's no transparency, so therefore we do need to do it, but how much energy intensity is it? And it's going to just continue to escalate, correct? Because if we, if we're trying to track everything, there's going to be a lot more of it. So can you talk about that? broadly speaking, your opinion there? and just kind of, a lot of people are skeptical of the whole blockchain thing when it comes to sustainability. For that reason, they think that they just don't match.

Speaker 1: 37:28

Yeah, so the first thing to kind of be aware of is that different blockchains function very differently. So when people talk about the energy intensity of blockchains generally, they're talking about proof of work chains, and Bitcoin is the only major chain right now that runs on proof of work. So Ethereum runs on proof of stake. A bunch of other chains, like Solana, like you know, many of the other blockchains that people use right now run using much, much less energy intensive algorithms that are comparable to the energy intensity of other networks that we use every day. So you know they may process transactions using a comparable amount of energy, to say, what Visa uses, and we should be aware of the amount of energy that all of these other technologies use. You know that payment processing platforms use Visa and PayPal. We should be aware of the amount of energy that Netflix and Google use, but it's not. We don't have the same sort of panic over that as we do over blockchains. Right? Bitcoin uses a tremendous amount of energy, and that's you know. That's absolutely fair, and people disagree about how much value we're getting out of Bitcoin and using all that energy, but just a level set, right? That is true. Bitcoin uses massively more energy per transaction than you know, traditional payment networks.

Speaker 1: 38:52

Filecoin is a case in which we want to reduce our energy use as much as possible, but there's a limit to that because we're not just processing information right. We're actually storing large amounts of data. As I said, filecoin is between 5% and 10% the size of Amazon Web Services And it's going to take energy to store all of that data and prove that that data is being stored over time. It's a bit less energy efficient than storing using a totally centralized network, because you do have to run all of these algorithms in order to prove that you're storing that data over time. We think that's really important. We think that being able to prove that you actually maintain a copy of data over time, that that data hasn't changed, that actually gives you something that allows you to design systems in a way and with more assurance than you can If you have to rely on Google or Amazon or Microsoft in order to maintain your information, not look at it and not change it. So Filecoin itself it uses about 50% more electricity than a comparable system that stores the same amount of data, and we're doing what we can to reduce the amount of energy that it uses.

Speaker 1: 40:05

We also connect Filecoin to renewable energy, and so if you store on Filecoin, if you store data on Filecoin, you're able to see who I'm storing that data with and you're able to see how much energy they use and where that energy comes from.

Speaker 1: 40:21

So you can go to a platform that my team built called Filecoinenergy and you're able to see what the energy use of the overall network is.

Speaker 1: 40:30

You're able to see where that is geographically located And, for nodes that are buying renewable energy, you're able to see how much energy are they buying, how much renewable energy they're buying And what is the source of that renewable energy.

Speaker 1: 40:43

So does it come from solar or wind or hydropower? You're also, for an increasing number of nodes that actually are willing to give us more information about their energy use, we're able to go through, submit that data to an independent auditor and then they publish public records about the amount of energy and the source of that energy for these individual Filecoin nodes, and so a major push of my team right now is to work on taking all of that data and channeling it into a green score that lets you see, if you're storing data on Filecoin with a particular number of nodes all the information that you would want to see about how much energy it's taking to do that and where that energy is coming from, as well as what the emissions are corresponding to that, and so you can choose to store your data with a node that is powered by solar energy from their own rooftop, and you can prove that using the Filecoin network.

Speaker 2: 41:43

Yeah, interesting. So next time, when people sit down to watch the office for the 15th time, am I consider, are they opposed to Bitcoin as well, because they're using energy? This is quite interesting. I wanted to throw that joke in there because I think that was a really interesting insight that I hadn't necessarily thought of. A lot of people talk about this. Right, oh, it's just a waste of energy. But there's, technically speaking, a lot of things you could say are a waste of energy. It makes me think a little bit of. I had Peter laden on a long time ago and he talked about shifting from the scarcity mindset with energy to an abundance mindset, because the sun is always well, it's always shining behind the clouds, right, so it's always shining at some point, right, and if we have enough renewables, we don't have to worry about, like, wasting electricity. Right, at some point there'll be so much electricity that will be totally fine, right? Is that kind of a similar mindset that you share?

Speaker 1: 42:38

Yeah, I think that there's a lot of dynamics at play there. Right, We need to decarbonize our entire society at record speed, right, And right now we are constrained by the rate at which supply chains can deliver more solar cells and at which we can actually interconnect more renewable resources to the grid. And even if you're not grid connected right, you're still like there's a limited rate at which we can ship solar cells over from wherever they're made and then connect them right. So I do think that energy efficiency absolutely does need to be part of the strategy, especially in the short and medium term, And we shouldn't we should be taking all of these technologies and trying to both minimize the amount of electricity that they use and, when they are using electricity, try and connect them to the cleanest sources available.

Speaker 1: 43:44

I think a really important takeaway, though, is that, because there is a range, a huge, huge range right, a factor of many thousands between the energy use of Bitcoin and the energy use of less energy intensive networks, we have a lot of ability to try to optimize our Web3 activity in order to reduce our carbon emissions. And then I think also, it's a really interesting set of questions that's a bit beyond the scope of what we're focusing on now right about, in the future are we going to have grid systems that have a lot of non-dispatchable overcapacity, right, So maybe you deploy enough solar cells that you're on average. You're hitting something a bit above the average load, and you have to make that up with some combination of storage and load shifting, as well as negative electricity prices that then funnel into all sorts of technologies like desalination and perhaps crypto mining in order to soak up some of that excess energy, because you have these massive supply spikes.

Speaker 2: 45:03

Yeah, i mean, that would be the dream, right? That'd be great if we can get to that point. I do believe we can. I'm a pretty optimistic person by nature, but what we're going to do.

Speaker 2: 45:11

One thing I want to ask, about which I'm trying to figure out how to position the question properly, is around regulation. So obviously, i think there's been a lot of people who there's been a lot of issues with crypto broadly speaking, and I think that it seems, if you I believe Brian Armstrong was asking for specific guidance from the government on regulation with crypto, because they've been trying to play by the rules for a long time. But then there's also this kind of fundamental ideology around this is supposed to be decentralized. Maybe there shouldn't be regulation because we're kind of self-regulating and the whole point of this idea is that there is no regulation needed because of the verifiability and blah, blah, blah. But then you compare the other issue of we have carbon credits that have been unverified or false, right. So I guess where do you stand in this idea of regulation as regards to blockchain technology and everything, and how it kind of pairs together with the specific issue of carbon credits and the philosophy behind decentralized networks?

Speaker 1: 46:17

Yeah, one of my friends, john from Toucan, which is one of the major projects in tokenized carbon credits, has pointed out before that in that in the space right, you sort of you get to tractors on both sides right, both from the credit off or the carbon offset side and also the crypto side. I think that There's a lot to impact there, right? I think, firstly, crypto itself is very heterogeneous and very broad, and there are many different projects along the spectrum from fully decentralized to totally compliant with a centralized model, and so I think saying should crypto be regulated or does crypto think it should be regulated is painting with a very, very broad brush, right. But I think you know we and others have been very clear that we would really like there to be a set of standards so that we can make sure that we and other people in the industry are playing by their roles, right? We think that would be really, really helpful in order to allow people to take a lot of this technology that's being developed, doing things like using content addressing to track the providence of information across different information silos, right, we think these sorts of technologies are going to be extremely powerful in allowing us to use information to do things like decarbonize the entire economy. that has a really firm foundation under it. right, because information right now is organized into silos that don't talk to each other very well, and we have a lot of tools that should allow us to fix that. and do things like move information through the economy, with decarbonization related information through the economy in minutes, not in months right, like we were talking about 10 minutes ago.

Speaker 1: 48:17

I think that on the carbon offset side, it's also really clear that we need better standards, and there are tons of groups working on that. right, like the ICBCM is working on setting better standards for carbon offsets to make it really clear to both corporate buyers and also consumers what sorts of environmental claims are actually legit based on these offsets. And so you know, i would say that philosophically right Like I want to make sure that the tools that we're building follow the best practices of both of these industries right, i'm a huge proponent of building Web3 tools that follow the greenhouse gas protocol. One of the things I'm really proud of is that we actually haven't made a net zero claim in Falcoine yet.

Speaker 1: 49:13

I wrote about this recently that most of the net zero claims being made in the crypto industry don't actually follow best practices set by the greenhouse gas protocol or the science-based targets initiative or any of the other industry bodies that tell you how to measure your emissions and actually make these claims.

Speaker 1: 49:30

And so we are building tools to track the provenance of information and the verifiability of information that you need to understand whether individual nodes in the network are carbon neutral or not. We're increasing the transparency of energies in our network and where that energy comes from, but we're not jumping to the end and saying, okay, we need to write off the bat, start making net zero claims, and so I think that's really my philosophy. right Is that there are a lot of really smart people at places like the World Resources Institute who spend all of their time thinking about how are we going to build these systems so that they're rigorous and correct and comprehensive, and, rather than sort of being cowboys out in the wild west and just taking all of these Legos and putting them together and making some new type of sustainability claim, we should take the work of those people very, very seriously and try to implement the best practices from all the industries that we touch and the tools that we build.

Speaker 2: 50:42

Yeah, i think it's interesting. There's a lot of things I would like to see that I think could be done and help to achieve through this transparency kind of methods. I appreciate your kind of angle on it. Yeah, i think it's pretty fascinating. This stuff is a lot of times, it's beyond kind of like my true comprehension. This is something I wonder. I don't know how you think about this too, but with a lot of this blockchain and kind of crypto philosophy and how the technology works, it's the same thing to the internet. Nowadays, like, a lot of people don't know how the internet actually works, myself included. Like, i have a very basic idea of it, but how do you think that you can actually get a lot of this technology adopted without the general population knowing how it works? Because, like, i think it's safe to assume less than 5% of the population will actually understand these things probably significantly less right. So what are your thoughts about that and how can you actually get these things to be adopted?

Speaker 1: 51:46

Yeah, so we're working a lot on tools that are actually approachable, where you get that verifiability. You have really good safeguards around where your information is coming from and you're protected against misinformation, but you don't actually have to know that much about crypto to use these tools. An example of this is we just ran a workshop at a conference that focused on decarbonizing your travel to the workshop. That demonstrated storing data on Filecoin and using it to prove that your travel was decarbonized, and so the way we did that is we had people enter in their travel information into a form that we built. Anyone can log on to a website that we built called co2.storage, so we're storing the data underlying carbon offsets And you can create a data type so you can create, essentially, a form that you want someone to fill out. Then you can send them that form.

Speaker 1: 52:48

They do need to have a wallet installed, so they need to be using a browser that's able to sign these records, but then it looks just like Google Forms and they can fill it out just like Google Forms, but at the end of it, you get this signed record where that person has attested to the verifiability of the correctness of that data, the veracity of that data and you're able to verify that that person actually signed that record.

Speaker 1: 53:14

So we're very interested in how do we make tools that look and feel similar to what people are already used to using but have this extra layer of verifiability on top of them so you're able to do things like build a carbon ledger proving that your travel was net zero, and have that carbon ledger not just be notes in a PDF but actually be computable. Where we're talking a few minutes ago about taking these claims and decomposing them and being able to track the provenance of the information that goes into them in this really granular way, can you take those sorts of benefits, make these machine readable and computable carbon ledgers that inherit the verifiability of the tools that they're built on?

Speaker 2: 54:02

Yeah, I can imagine It can be difficult. I'm assuming, given that you're a very partnerships led kind of company. it seems like there's a lot of partnerships you guys work on And you might, in the sustainability space, run up to these kind of zealots if you were like, oh you know, I won't touch anything that has the word blockchain in it or Web3, I won't touch it, right, And? but at the end of the day, you'll need the cooperation. I think this may be just to the audience to think about. something to think about is to not be necessarily so close minded to some of these things, right, Because maybe there's some idea that you have wrong, But at the end of the day, some of these things have to be kind of worked out And you have to have a bit of an open mind to solve them. because, at the end of the day, CTOs are probably going to be the people at these companies who can understand, who are able to understand this. whether or not they already understand it is one thing, but they are the ones who are capable of learning but also have to have kind of an openness to working together. right, And I just maybe say that to the audience to consider that, But I think it's a very fascinating problem you guys are trying to solve. I can't say I necessarily comprehend everything, but I think I have the basis of it And I think it'd be really cool to see how people start hopefully adopting it right.

Speaker 2: 55:18

Because, as we know, consumers aren't exactly, you know, they're not exactly logical. They don't think, oh, I need to do this, So therefore let me do this, this and this. They do something because it's easy or because there's some kind of you know, one of the kind of core needs that is satisfied by doing that. So I'd be curious to see how you guys continue to try to develop that So the average person can understand what is the benefit to me to do this right. And I think there's the same thing with climate tech broadly. It's like a lot of people aren't really on board with changing their lifestyle in any way because it's difficult. So any final thoughts or things you want to close off with? I think we have covered quite a lot, but I'm kind of curious to hear if you have any, any final things.

Speaker 1: 56:01

Yeah, i totally agree that both crypto and climate tech are, you know, really deep right, in the sense that to make a lot of progress, you have to have this really deep understanding of what's going on. What are the important problems to solve and what are the, what are the right avenues for attacking those problems? You've started a conference called the sustainable blockchain summit that really ends up being not just a crypto conference and not just a sustainability your ESG conference, but really tries to be both, and so we had an event recently in Boston in April. That was right after the MIT energy conference, and we had crossover between the energy community there and the sustainability community at MIT with Filecoin and Toucan and Selo and a lot of these, these projects building in web three, and it was this hugely sort of generative, really great conference.

Speaker 1: 56:55

We're going to be running another one that's totally virtual so that people aren't going to have to fly on planes and learn and lower carbon emissions, where we're going to try to connect to the actual projects on the ground as much as possible, because it's not just in one location, it's all over the world. We're calling it SBS earth, and so if you are interested in that, if you're interested in learning more about this intersection or interested in learning about tools that people are building that can really help with solving sustainability problems. You can go to SBSEarth to either propose a talk or register to attend the conference. So that's going to be totally virtual on August 16th, so in a couple of months.

Speaker 2: 57:37

Very nice. I will definitely link that in the notes. Barri man, this has been great. Well, definitely, i'm definitely keen to see how things can continue to play out and, you know, keep us updated on any new developments and we'll probably have you on again in the future. Man.

Speaker 1: 57:52

Sounds good, great technique. Thanks for watching. I'll see you in the next video. Peace out everyone.