ibiCash: Forest Backed Currency

Piero Gancia, Ricardo Machado

version 1.0

Abstract

The ibiCash Protocol serves as a mechanism for encapsulating the time value of forests within a
currency made up of units which represent the intangible value of 1 hectare of standing forest for
the period of a single day in each of the world's ecoregions. At the end of each day, the system
calculates the total amount of forested area in each of the world's 846 ecoregions and
subsequently issues an equivalent number of tokens for every hectare of forested land. Each
ecoregion possesses its own distinct currency due to the individual non-fungible characteristics
of the biodiversity found within that specific ecoregion.

The protocol effectively establishes the world’s first Decentralized Forest Central Bank capable
of issuing, entirely independently of any human influence, a currency intrinsically tied to the
existence of standing forests. To accomplish this, the protocol relies on verifiable open-source
satellite imagery, advanced classification algorithms and blockchain technology, allowing
transparent and immutable records of forest area calculations and token distribution across the
world's ecoregions throughout time.

Electronic copy available at: https://ssrn.com/abstract=4530520

Acknowledgements

We would like to thank the Atomic Fund team for their endless patience and help during the
buildup of this project.

We would also like to thank Felipe Louzas, Paulo Sobral, Marcel Frenkel and Mark Hallen for
their help in formalizing some of the concepts behind this paper.

Furthermore, we would like to recognize the Geodatin team made up of Diêgo, Iago, Matheus,
Carol, Rodrigo, Adoilton, Soltan and Pâmela for their immense contribution in this paper and the
rest of the project.

Finally, we would like to extend our gratitude to Luly Vianna, Pedro Dinucci, Pranav Singhal
and Arvind Kalra for sticking with us since the start of our journey.

Electronic copy available at: https://ssrn.com/abstract=4530520

Contents

1. Introduction.................................................................................................................................4
1.1 Vision.................................................................................................................................. 4
1.2 Motivation...........................................................................................................................4
1.3 Problem definition.............................................................................................................. 4
1.4 Proposed solution................................................................................................................4
2. Nature as an economy.................................................................................................................6
2.1 Encapsulating the time-value of forests..............................................................................6
2.2 ibiCash - ibi is Forest.......................................................................................................... 6
2.3 Blockchain and decentralization......................................................................................... 7
2.4 Open-source and verifiability............................................................................................. 7
3. Protocol design............................................................................................................................8
3.1 Rules................................................................................................................................... 8
3.2 Ecoregions...........................................................................................................................8
3.3 Determining the locations of forests................................................................................... 8
3.4 Timekeeping........................................................................................................................9
3.5 Currency allocation and issuance.....................................................................................9
3.5.1 Definitions..................................................................................................................9
3.5.2 Allocation algorithm................................................................................................ 10
3.5.3 Currency issuance.................................................................................................... 10
3.6 Known limitations.............................................................................................................10
3.6.1 Data availability and accuracy................................................................................. 10
3.6.2 Oracle decentralization............................................................................................ 11
3.6.3 Forest classification..................................................................................................11
4. Conclusion................................................................................................................................ 11
4.1 Summary........................................................................................................................... 11
4.2 Future Prospects and Applications....................................................................................11
References......................................................................................................................................12

Electronic copy available at: https://ssrn.com/abstract=4530520

 "Kids know, without knowing they know, that they can create wealth." 1

Paul Graham

1. Introduction

1.1 Vision

The ibiCash Protocol is a vision to protect forests at internet scale by bringing them onto public
blockchains.

1.2 Motivation

Forest conservation is hard. Success requires significant planning and resources, in addition to an
element of luck.

Nevertheless, most land stewards are not remunerated for conserving forests and as long as this
is not a financially profitable activity, conservation at scale is impossible.

Therefore, we need to find a way to solve an economic problem, i.e. to make forest conservation
profitable enough that land stewards choose to maintain and conserve a forest, and maybe even
reforest an area.

1.3 Problem definition

Essentially, the problem we propose to solve can be stated in basic economic terms:

For some time, t

the expected utility, U, of conserving an area of forest
must be greater than or equal to
the opportunity cost, C, of having any other type of land use in that same area.

Or simply,

For preservation to occur, Ut ≥ Ct for any given land area.

1.4 Proposed solution

We propose a possible solution to the previously defined problem with a three-step approach:

1. Create a system that captures the intangible time-value of an area of standing forest

1
Paul Graham, "How to Make Wealth", http://www.paulgraham.com/wealth.html, 2004.

Electronic copy available at: https://ssrn.com/abstract=4530520

 2. Kickstart the system to enable price discovery
3. If the system's equilibrium is not satisfactory, create more incentives

In this paper we attempt to address the first step of the proposed solution through the
development of the ibiCash Protocol.

Electronic copy available at: https://ssrn.com/abstract=4530520

 "All capitals grow through nature's efforts. If we want to rebuild society's
economy in a way that cannot only repair the damage that our economy has
caused up to now, but can also enhance the capacity of life on earth to thrive,
we can do no better than to mimic nature." 2

Graham Boyd, Jack Reardon

2. Nature as an economy

2.1 Encapsulating the time-value of forests

"Nature is an expansionary economy, as long as we have a sun."3

The concept of nature as an economy is at the core of our approach. At the heart of this vision is
the understanding that nature's value, and therefore its currency, is intrinsically intertwined with
its very existence.

Therefore, Nature's currency must be completely interwoven with nature; it must be controlled
by the sun. This means that to generate it, we must create a decentralized electronic issuance
system that allows Nature to issue this currency instead of depending on exogenous inputs
created by humans. Allowing nature to take control of the issuance of its own money is the
fundamental design innovation required for this currency to capture Nature's value and be
expansionary.

Essentially, the foundation of our proposal lies in establishing the world’s first algorithmically
controlled Decentralized Forest Central Bank via a system that tracks the amount of forested
hectares through space and time.

2.2 ibiCash - ibi is Forest

In order for individuals to properly value a forest's natural capital, we need to encapsulate it into
something.

By assigning a specific time-bound unit of currency to an area of standing forests in a specific

region, we lay the foundation for creating a unique and dynamic representation of this area's
worth.

We propose creating a Decentralized Forest Central Bank that will autonomously originate and
issue a new type of currency that accounts the areas of forest that encapsulate this natural capital

2
Boyd, G., Reardon, J., "Rebuild: the Economy, Leadership and You", Evolutesix Books, 2020.
3
Ecodao, "Introducing Ecodao",
https://eco.mirror.xyz/zhtmSvJzPvBcWut0IKHQFgP6P3bEuvte3UKZDWZenNU, 2021.

Electronic copy available at: https://ssrn.com/abstract=4530520

over time. This mechanism creates the first currency that is fully backed by forests.

The ibiCash currency design aims to satisfy the 3 fundamental functions of money:

1. Unit of account - Each unit is equivalent to 1 hectare of standing forest per day in a
given ecoregion
2. Medium of exchange - Each unit is divisible, fungible and countable and can be sold,
bought, transferred, borrowed, lent and retired
3. Store of value - Each unit stores the intangible time-value of the existence of a forested
hectare in a given ecoregion over the period of 1 day.

Every unit of ibiCash acts as a placeholder for the time-value of an area of forest. A market for
ibiCash could attribute a value to the natural intangible capital of the preservation of forests
through time.

2.3 Blockchain and decentralization

It is only possible to build Nature's currency through the use of cryptocurrencies and blockchain
technology. The foundational principles behind blockchain technology such as transparency,
immutability and decentralization are all central to our goal. This currency must be independent
from political and economic agendas. The only feasible way to achieve this is to define the
currency in a monolithic and non upgradeable way, i.e. it being programmatically defined.

2.4 Open-source and verifiability

By embracing an open-source approach, we promote transparency and collaboration ensuring a

robust and trustworthy solution. Through the use of open-source algorithms, satellite imagery
and data, we create a system that can be audited and validated by anyone. The ibiCash Protocol's
daily Forested Area calculation can be fully replicated and thus the protocol's integrity can be
independently verified. By emphasizing open-source and verifiability, we establish a foundation
of trust and accountability, inviting global participation in safeguarding the world's forests.

Electronic copy available at: https://ssrn.com/abstract=4530520

 "Excellence is knowing the truth in something. Elegance is how well you can
embody it." 4

Megha

3. Protocol design

3.1 Rules

1. Each unit of ibiCash represents 1 hectare of forest which remained standing during the
period of 1 Day in a specific Ecoregion.
2. A Day is approximately equal to 86400 seconds or 24 hours.
3. The first Day begins on March 21st 2024 00:00 UTC

3.2 Ecoregions

The concept of ecoregions serves as a foundational element in the design of the ibiCash Protocol.
Ecoregions can be defined as natural boundaries, "representing regional ecosystems with unique
ensembles of biodiversity, encompassing all taxa, not just vegetation. They offer a valuable base
map for delineating ecological territories, distinct from administrative divisions, and provide
essential insights into the biogeographic and ecological habitats within different biomes."5 We
identify 846 of these ecoregions, which define the spatial framework in which daily forest area
calculations occur, forming the vector space for our currency’s issuance.

Within each ecoregion, we encounter a diverse array of natural capital, each with its own set of
characteristics that make it non-fungible. The ibiCash Protocol acknowledges and embraces this
biodiversity-driven distinctiveness by issuing a separate and individual currency per ecoregion.
Each asset serves as a representation of the time-value of standing forests in its respective
ecoregion for a period of one day.

Ecoregion boundaries define the vector space in which forest areas are to be calculated each
day.

The ibiCash Protocol issues one currency per Ecoregion.

3.3 Determining the locations of forests

4
Megha, Tweet, https://twitter.com/meghaverma_art/status/1538826463138414594, 2022.
5
Eric Dinerstein and others, An Ecoregion-Based Approach to Protecting Half the Terrestrial
Realm, BioScience, Volume 67, Issue 6, June 2017, Pages 534–545,
https://doi.org/10.1093/biosci/bix014

Electronic copy available at: https://ssrn.com/abstract=4530520

Through the utilization of satellite imagery, it becomes possible to algorithmically define the
probability of an area's land cover type and land use over time. This process allows us to
determine, with a certain level of confidence, whether a forest exists at a specific location during
a given period. To estimate the Forested Area per Ecoregion, we employ open-source code and
satellite imagery available from programs such as the Landsat Program (USGS) or the
Copernicus Program (ESA).

The ibiCash Protocol relies on a Land Cover classification, which is represented as a geospatial
raster dataset. This classification aids in determining the presence of a forest at a particular cell
location on any given day.

The Forest Classification algorithm determines whether an area is categorized as Forested or

Non-Forested on any given day.

3.4 Timekeeping

The issuance of the ibiCash currency "requires a timekeeping mechanism and regular code
execution on the Ethereum blockchain. To achieve cost-efficiency, the ibiCash Protocol uses a
protocol-native timekeeping mechanism that incentivizes cost-efficient code execution on
Ethereum at regular intervals."6 The mechanism is inspired by the Beanstalk Protocol, which
serves as a reference for our implementation.

The ibiCash protocol defines one Day as approximately 86,400 seconds or 24 hours. The ibiCash
currency is minted by the protocol at the end of each Day and reflects the area of forested land
accounted for by the protocol in the 24h preceding the mint transaction, which occurs at 00:00
UTC.

It is also important to note, given the reliance on satellite imagery for forest area calculations,
that while the minting occurs on a daily basis, the time resolution of the underlying satellite
imagery data used for forest area calculations may be inferior, as satellite revisit times are
between 2 and 8 days. Due to this time discrepancy, the protocol adopts a pragmatic approach
that incorporates data from previous days when necessary. This approach ensures the accuracy
and reliability of the forest area calculations, even in cases where the most recent satellite data
might not yet be valid or available.

3.5 Currency allocation and issuance

3.5.1 Definitions

● The ibiCash Protocol accounts for the Forested Area per Ecoregion on Day d.
+
● Let us denote cell locations 𝑖 and cell values 𝑉𝑖, such that 𝑖 ∈ ℤ and 𝑉 ∈ ℝ
● Let us denote the raster grid 𝑁, that includes all cell locations 𝑖.
● Let 𝑉𝑖 = 𝐹 indicate the presence of forest in any cell location 𝑖.

6
Publius, "Beanstalk: A Permissionless Fiat Stablecoin Protocol", 2021.

Electronic copy available at: https://ssrn.com/abstract=4530520

 ● Finally, given a vector polygon, 𝐸 that can be defined in the plane ℝ², we define 𝐴𝐸 as a
subset of 𝑁 that contains all cell locations 𝑖 within the polygon 𝐸, such that 𝐴𝐸 ⊆ 𝑁.

3.5.2 Allocation algorithm

A hectare of forest generates one unit of ibiCash per Day.

If a satellite flyover has not happened since the previous Day, the Protocol assumes the area has
the same classification as on the previous Day.

If the classification of a cell location changes from Forested to Non-Forested before the end of a
Day 𝑑𝑛, the change will only be reflected on Day 𝑑𝑛+1.

{ }
Let 𝑆 = 𝑑1, 𝑑2, ..., 𝑑𝑛 be a set of Days. We define a function 𝑉𝑖 (𝑛): 𝐴×𝑆→𝑅 that maps each
cell location 𝑖 on Day 𝑛 to a cell value. This means that 𝑉𝑖 (𝑛) denotes the cell value at location 𝑖
at Day 𝑛.

We can then define an indicator function 𝐼𝑖 (𝑛): 𝐴×𝑆→{0, 1}, which differentiates whether a
particular location 𝑖 at a Day 𝑛 is a forest or not:

𝐼𝑖 (𝑛) = 1, if 𝑉𝑖 (𝑛) ≥ 𝐹,
𝐼𝑖 (𝑛) = 0, otherwise.

Then, the total quantity of tokens issued within vector 𝐸 for Day 𝑛, denoted as 𝐵𝐸(𝑛), is the sum
of all locations 𝑖 where 𝐼𝑖 (𝑛) = 1 for Day 𝑛:

𝐴
𝐵𝐸(𝑛) = ∑ 𝐼𝑖(𝑛)
𝑖 ∈ 𝐴𝐸

3.5.3 Currency issuance

Each Day the ibiCash Protocol mints an equivalent number of units to the Total Forested Area
𝐵𝐸(𝑛) within each Ecoregion.

These tokens are stored in the ibiCash ERC-1155 contract until they are distributed to the land
stewards or Guardians.

3.6 Known limitations

3.6.1 Data availability and accuracy

Electronic copy available at: https://ssrn.com/abstract=4530520

Available geographic open-source data and computation environments such as Google Earth
Engine have certain limitations which could generate errors in the determination of the land
cover of a certain location. As these programs and data improve so does the forest estimation.
Further, current satellite constellations might not be able to consistently provide valid
observations due to cloud cover and revisit times, existing classification algorithms may not be
able to distinguish between natural forests and commercial forest plantations, and may have
varying degrees of accuracy in different regions of the Earth.

3.6.2 Oracle decentralization

A consensus mechanism to ensure the verifiability of the satellite image oracle and of the forest
classification algorithm must be created.

3.6.3 Forest classification

At the moment, the ibiCash Protocol will use the "tree" classifications from the Dynamic World
dataset to define a cell location 𝑖 as "forest". This is problematic because:

a) trees are not an ideal proxy for primary forests. For example, an area of primary vegetation in
the Amazon Ecoregion is vastly different from an area of planted eucalyptus monoculture also in
the Amazon Ecoregion. Using the Dynamic World Classification does not account for such
differences.
b) The Dynamic World Classification does not calculate the precise forest area everyday.
c) the global nature of Dynamic World means there may be inconsistencies and inaccuracies in
identifying trees across different ecoregions.

For more information on why we are using the Dynamic World Classification now and where the
Protocol will migrate in the future, please refer to the Technical Documentation.

4. Conclusion

4.1 Summary

We have designed a protocol based on blockchain technology and open-source satellite data for
nature to issue its own currency. This currency attempts to capture the time value of standing
forests by creating a placeholder to contain their value.

4.2 Future Prospects and Applications

Although we have started with capital that is generated by forested land, we could generate
capital for any number of classifications we want, such as grass, crops, shrub and scrub, flooded
vegetation (mangroves), water (oceanic, maritime, lake, etc), built up area, snow and ice, bare
ground, crops, and from other data such as precipitation, water vapor, etc…

Electronic copy available at: https://ssrn.com/abstract=4530520

References

[1] Paul Graham, "How to Make Wealth", http://www.paulgraham.com/wealth.html, 2004.

[2] Boyd, G., Reardon, J., "Rebuild: the Economy, Leadership and You", Evolutesix Books,
2020.

[3] Ecodao, "Introducing Ecodao",

https://eco.mirror.xyz/zhtmSvJzPvBcWut0IKHQFgP6P3bEuvte3UKZDWZenNU, 2021.

[4] Megha, Tweet, https://twitter.com/meghaverma_art/status/1538826463138414594, 2022.

[5] Eric Dinerstein and others, An Ecoregion-Based Approach to Protecting Half the Terrestrial
Realm, BioScience, Volume 67, Issue 6, June 2017, Pages 534–545,
https://doi.org/10.1093/biosci/bix01

[6] Publius, "Beanstalk: A Permissionless Fiat Stablecoin Protocol", 2021.

Electronic copy available at: https://ssrn.com/abstract=4530520