Blockchain has several use cases in sustainability initiatives, thanks to its attributes of transparency, tamper-proof record-keeping and the ability to gamify participants' involvement through tokenization. The World Economic Forum identifies several areas where the application of blockchain technology can accelerate the achievement of its sustainable development goals, including building resilient supply chains and spurring responsible sourcing and consumption.
TreeCoin is one such project seeking to implement a sustainable yet profitable reforestation initiative in Paraguay. It uses a dual-token mechanism secured by the Ardor blockchain to attract investment while also establishing a payments-based economy.
Background - South America’s Deforestation Challenges
According to the Rainforest Alliance, deforestation is a significant contributor to global climate change, causing around ten percent of the world's emissions. Over recent decades, Paraguay has become one of the world's worst-affected countries by deforestation, second only to Malaysia in its rate of tree-felling. Despite initiatives to slow down deforestation, it's now estimated that only 10% of the country's primate forests remain.
Since the 1990s, the Paraguayan government has introduced subsidies of up to 75% for tree planting initiatives. However, although these have helped slow the rate of deforestation, the demand for timber in the country continues to make reforestation a challenging task. 48% of Paraguay's energy consumption is met by biomass, which includes firewood. In the industrial sector, this rises to around 74%.
The country has also fallen behind neighboring nations such as Uruguay in terms of timber production. Now, Paraguay's government has set a target of 60% for energy consumption generated by renewable sources. Therefore, sustainable forest management has a critical role to play in meeting the nation's energy needs in the future.
How TreeCoin is Helping to Meet the Challenge
The team behind TreeCoin has recognized a significant opportunity to improve reforestation efforts in a sustainable way while capitalizing on the market opportunities in meeting Paraguay's demand for timber. A significant enabler for this is the development in crypto assets, tokenizing securities and making them available to investors while ensuring transparency and accountability via distributed ledgers.
TreeCoin is a Swiss reforestation project that has partnered with Grupo Empresarial La Rivera S.A. Paraguay, which currently manages 3,000 hectares of land. Over the last ten years, La Rivera has developed hybrid eucalyptus trees that offer a high growth yield of around 5-7 meters per year, thanks to their strength and pest-resistant characteristics. The trees provide versatile timber that can be used for many industrial and commercial applications. The land on which they grow is fallow and cannot be used for any other agricultural purposes.
Working with La Rivera, TreeCoin has earmarked 12,500 hectares of land in which it will plant 10 million trees to be harvested over the next 23 years. Throughout that time, TreeCoin will reinvest 50% of the profits from its timber harvest to purchase additional land and tree planting. Of the remaining profit, 40% will be redistributed to investors, while 10% will be directed into social projects in the local area.
The project predicts that in total, it will acquire close to 60,000 hectares and generate a projected profit of USD 1.1 billion, depending on the achievement of TreeCoin meeting its initial USD 230 million funding threshold through a sale of its security token, TREE. The token sale is conducted by the Swiss entity for the project, Global TREE Project AG, and is fully regulated by FINMA, the Swiss financial market authority.
A Dual Token Mechanism and Blockchain for Transparency
TreeCoin will operate two tokens. TREE is a security token, representing a non-voting stake in a share of the 40% profit distribution generated by TreeCoin. Profits will be distributed in the project's payment currency, TreeCoin (TXC), and paid out according to the harvest cycle laid down by the project. For each TREE sold during the token sale, TreeCoin will plant one eucalyptus tree in Paraguay.
TXC will also be used as a payment currency within the plantation in Paraguay, with all employees receiving a voluntary allowance equivalent to 20% of their salary in TXC, paid above their salary. TreeCoin will also operate several other initiatives to generate a payment economy around TXC, including a hotel close to the plantation, which will only accept payment in TXC. There will also be an online store selling local South American products, including organic honey, tea, herbs and textiles, among others. The store will accept payments in TXC.
Because TreeCoin's investors will, for the most part, be based in locations remote from the plantation itself, the project is placing significant focus on the use of blockchain to ensure transparency and accountability over the way it uses investor's funds.
The tokens will be issued using Ignis, the main child chain of the Ardor blockchain. Ignis offers out-of-the-box functionality for projects like TreeChain to issue assets and means that investors can view fund allocation via the Ardor block explorer. The TREE tokens will also be tradeable via the Ardor decentralized exchange, and users will undergo all necessary KYC checks via the platform to satisfy FINMA investment requirements.
The team behind TreeCoin is multi-disciplined, reflecting the project's desire to ensure sustainable investment in a long-term agricultural project. CEO and co-founder Jörg Schäfer has worked on renewable energy projects for over three decades. Andreas Jelinek joins TreeCoin in the capacity of his role leading the project's partner, La Rivera, which has been operating for over a decade in Paraguay performing reforestation initiatives.
Other co-founders bring experience in finance and capital markets and corporate strategy.
TreeCoin is a truly global project, leveraging Switzerland's crypto-friendly regulatory environment to launch a sustainable reforestation project to a global investor base. It wouldn't be possible to enable such an ambitious initiative without blockchain underpinning it - otherwise, investors would have no way of being assured of the security of their funds or the integrity with which they're being used. Therefore, TreeCoin is one example of a project showcasing how blockchain and tokenization can be deployed for maximum effect in sustainable development. If it's successful, it could prove to be a blueprint for many similar projects in the future.