As of July 2021, deforestation in the Brazilian Amazon rose 22% over the previous year. High levels of deforestation across the entire Amazon region are bringing the rainforest to a tipping point, with a potentially devastating effect on biodiversity, Indigenous livelihoods, climate change, and global water cycles. The cause of deforestation in the Amazon is multi-faceted, but it comes down to a single issue: many governments, businesses, and stakeholders on the ground believe the Amazon Rainforest is currently considered to be worth more cut down than preserved and standing.

Despite numerous NGOs, Indigenous communities, and advocacy groups fighting to protect the forest, there are not currently sufficient financial incentives or capital flows to flip this narrative. However, new technologies like Web3 and the blockchain, which enables rapid and transparent sharing of information and funds across borders – with no government interference – may offer a breakthrough in backing financial incentives across the whole region that would encourage and enforce forest protection.

What is blockchain technology?

The blockchain is a relatively new technology best known for its role as the backbone of cryptocurrencies like Bitcoin and Ethereum. As a result, its use has remained isolated to a select few people passionate about cryptocurrencies and their technology, with minimal clear applications in the daily lives of most people. However, investors and entrepreneurs are only beginning to explore the potential applications of blockchain technology in other fields.

In its simplest sense, the blockchain is a distributed database spread across many computers and networks that stores information in ‘blocks’ with a finite storage capacity that are permanently closed and un-editable once full. These blocks are linked in chronological order with other blocks in a ‘chain,’ providing a clear, unhackable record of everything that has happened in the program in the past. Therefore, the most common application of the blockchain today is as a ledger for financial transactions or legal agreements.

More recently, innovations in the use of blockchain have come into mainstream conversation in the form of NFTs or tokens, and DAOs, which directly connect the technology to more tangible outcomes in our existing financial systems.

An NFT (which stands for non-fungible token) is a unique digital asset registered on the blockchain that cannot be replaced directly with something of the same value (i.e. a unique piece of art that belongs to only one person). By comparison, a fungible token is a digital asset on the blockchain that can be traded directly for items of the same value (like a coin).

Meanwhile, a DAO (distributed autonomous organization) is a community hosted on the blockchain that is decentralized and collectively owned by its members. The members are united around a central mission with rules enforced on the blockchain in complete transparency, since every action is recorded on the blockchain.

These definitions will be important to understanding how blockchain technology might play a role in Amazon Rainforest conservation in the coming decade.

How could the blockchain solve the biggest problems in the Amazon region?

One of the major causes of Amazon Rainforest deforestation is a coordination failure where current financial incentives do not appropriately value the opportunity cost of losing rainforest cover to other activities such as agriculture or cattle ranching. Basically, although the rainforest provides $8.2B annually to the global economy in immediate economic benefits – not to mention secondary positive impacts on the climate worldwide – stands of forest that are not seen to be producing local economic value might be replaced by industries with clear economic outputs (like logging, mining, agriculture etc) in the short term.

Put this together with the fact that the Amazon spans nine countries with different regulations, currencies, national policies, and even languages, and it becomes clear why creating a successful, coordinated economic and conservation strategy for the rainforest has been a challenge. However, blockchain technology could potentially break through several of these barriers to provide long-term funding for protection to those on the conservation frontlines.

Interconnectivity: The blockchain and its associated tokens are not controlled or managed by any central government and have a single value that can be traded across borders with no currency controls, as long as there is Internet access. This makes it easier for remote communities to receive funds for projects without the risk of their being lost to corruption or inefficient middlemen.

Fungibility and Value-Add: One major challenge to properly valuing Amazon forest and its biodiversity is that land currently is valued relative to its immediate surroundings and cannot be easily traded, sold, or otherwise monetized in most Amazon countries due to bureaucracy and red tape. Using the blockchain, it would be possible to turn pieces of Amazon land into NFTs or even standardized tokens that would provide income for land conservation through global trade and provide access to anyone to buy into a tiny piece of the Amazon.

Personal Connection: On that note, most people in positions of power who can significantly shift global conservation in the Amazon have little to no personal connection to the rainforest, its importance to global climate, and its inherent beauty and mystery. People are more likely to care about places they have a personal connection to, and blockchain technology could make it possible for individuals to personally protect, or even restore, a small portion of the Amazon, at scale.

The blockchain startups working to save the Amazon

Although this technology is relatively young and in its early stages of development, numerous entrepreneurs have begun to explore its potential applications in the Amazon. Here are nine startups and initiatives using the blockchain to conserve the Amazon Rainforest.

Teratree: Terratree uses modern technology such as blockchain and cryptocurrencies, to provide funding to rural and Indigenous communities for forest restoration through the sale of carbon credits and agroforestry projects.

Invert: Invert is building a metaverse backed by existing land in the Brazilian and Ecuadorian Amazon to build value for land and funding for conservation through the sale of digital tokens.

Gainforest: Gainforest is a nonprofit that uses AI to measure and reward sustainable environmental stewardship in the Amazon through transparent smart contracts.

Regen Network: Regen Network allows landowners to directly sell their ecosystem services to buyers around the world using credits registered on the blockchain.

Single.Earth: Single Earth generates MERIT tokens for each 100kg of biodiverse carbon offsets by landowners, which can be sold on a marketplace to fund land conservation and monitoring.

Tupan: Tupan is a decentralized finance mechanism backed by NFTs based on a cubic meter of preserved Amazon forest and is currently offering tokens on a public market.

Moss.earth: Moss offers a number of climate tech solutions for Brazilian Amazon conservation, including Amazon Rainforest NFTs that tokenize governance and economic rights to the rainforest, as well as tokenized carbon credits (MCO2).

Seeds: Seeds is a global cryptocurrency based on the economic value of land conservation.

Open Forest Protocol: OFP is committed to providing scalable, transparent, and open-source forest monitoring and carbon financing through the blockchain.

Potential drawbacks of blockchain in the Amazon

While blockchain technology in conservation is novel and exciting, it is not a panacea for the existing coordination failures and inequities that plague the industry today. A recent Oxford study found that although smart contracts can create transparency in the transfer of payments for ecosystem services to communities and landowners, the use of the blockchain requires significant technical knowledge and access to financial infrastructure that is rarely available in many of the world’s biggest cities, let alone in rural, Indigenous territories. Cryptocurrencies and blockchain technology have also recently come under criticism for the high energy consumption required to ‘mine’ Bitcoin and Ethereum, a challenge that must be addressed if this technology is to contribute to environmental solutions.

The existence of blockchain technology does not solve the issue of how the financial benefits of conservation can be fairly shared among local stakeholders, nor how it can solve challenges around enforcement of land protection. In the Amazon, as in many areas of ecological importance, the main actors standing in the way of continued deforestation (sometimes even physically) are rural and Indigenous communities. Currently, there is little clarity about how these new systems will ensure funds reach these communities, both for reasons of equity and to enable enforcement. There is an urgent need to bring Indigenous stakeholders to the table in conversations about the use of blockchain technology to fund land conservation to ensure local landowners are equal partners in the development of new systems.

Perhaps the most significant barrier for these technologies to connect global financial systems to local forest protection is the lack of internet and other digital infrastructure throughout the Amazon region. This challenge must be resolved, likely through a combination of satellite and improved cellular networks, before a blockchain-based conservation strategy can be scaled across the region. At the same time, these new organizations must create systems that allow fully-digital payments to be transferred into local currency or benefits, as desired by each local community.

Finally, cryptocurrencies are now well-known to demand significant energy for ‘mining,’ which contributes to greenhouse gas emissions and lowers their environmental benefit. However, this energy consumption depends on the ‘consensus model’ used by the blockchain (how each block or token is created through the system) and can therefore be mitigated through using less energy-intensive models than that used by Bitcoin, the worst offender. For example, Ethereum is currently redesigning their model to use 99.95% less energy. It will be important to develop best practices for low-energy consensus models among environmentally-focused blockchain providers to ensure the technology is aligned with conservation goals across the industry.

If the blockchain and cryptocurrencies are to revolutionize Amazon Rainforest conservation, there must be a concerted effort from day one to break existing systems of inequality such that new technology does not reinforce the exclusion of rural and Indigenous communities from decision-making about their own land and territory. It will also be important to explore how and whether this technology can help combat challenges of legal enforcement and governance in the Amazon in the face of illegal deforestation, as well as how to implement systems that do not add to the global burden of fossil fuel consumption.

The future of blockchain in the Amazon

The use of the blockchain to finance and streamline conservation projects is still a relatively unexplored frontier for investors, governments, philanthropists, entrepreneurs, and local stakeholders. In the future, it may be germane to delve into the details about how – and whether – each of these groups could become involved in advancing the use of this technology for social and environmental good.

In particular, funders and founders should consider opportunities for collaboration, especially related to the creation of tokens, to work toward interoperable and inter-tradeable systems of value. During the early days of this technology, there is still an opportunity to innovate and develop pre-competitive agreements between organizations that will enable impact at scale. While Web3 may be difficult to regulate, there are still opportunities for governments to create financial standards or equity regulations that support positive outcomes for local communities. On the other hand, new startups should consider working together under a single measure of value or operating system to connect projects and generate economies of scale. While competition for funding may make it tempting for founders to create silos and proprietary value systems, it is important that entrepreneurs and investors not lose sight of the overarching goal: to equitably compensate local stewards for their tireless work of protecting the Amazon Rainforest.

The Amazon Investor Coalition, a group dedicated to ensuring that the rainforest is worth more standing than cut down, is currently hosting an ongoing dialogue with industry actors about how to solve the challenges of using blockchain to support conservation efforts. Read more about these efforts here.

Sophia Wood is a political scientist and investor turned conservation manager, currently leading biodiversity research, scientific expeditions, and blue carbon financing across the South American region for Operation Wallacea. In her spare time, she also supports the Amazon Investor Coalition, an organization dedicated to advancing forest-friendly economic development in the Amazon Rainforest.