The Yun Foundation recently choose the winners of the Incentive Prize in early January 2020.
We would like to congratulate Anthony Myint and Joshua Seims for their stellar contributions, which you can read more about below. We would like to thank everyone for their incredible contributions.
Anthony Myint: Restore California
Restore California is a statewide program launching in January 2020 to engage the public in creating a renewable food system by making direct payments of a few cents per meal, enabling farmers to reverse global warming.
New science is showing that the 8 billion acres of grassland and farmland represent a massive opportunity to sequester carbon and move toward drawdown. But society is not viewing the necessary transition on farmland and soil in the same way it views the transition when it comes to renewable energy. Restore California proposes to apply some of the same principles of Consumer Choice Aggregation and the Business Model of companies like Solar City, to the issue of scaling up carbon farming.
Presently the connections between food and climate and the food and land-related solutions get a disproportionately low amount of funding. In Drawdown, food and land use represent about 45% of the solution set, but in the State of CA, as an example, the Healthy Soils Program receives only ~2% of the state Cap And Trade funds.
Meanwhile, the Federal Farm Bill and nationwide crop insurance policies essentially reward unsustainable farming and preclude conservation or regenerative agriculture.
Restore California is the first program to begin aligning market incentives with soil health and the implementation of conservation practices. It is a private sector complement to the State's Healthy Soils Program, overseen by the CA Dept of Food and Ag. Unfortunately, the CDFA's program is not accessible to many farmers because the application process is onerous, and heavily weighted toward native English speakers. The Restore CA program will be available in multiple languages and will be very streamlined.
The program involves a modest 1% surcharge on bills at restaurant and retail which will be passed through directly to farmers who have signed contracts agreeing to implement carbon farming practices upon receipt of funds. The money will fund practices like compost application, cover cropping, silvopasture, etc. All of which improve soil health, increase soil organic matter and improve flavor, nutrient density, water conservation, climate resilience and ultimately pull tons of CO2e out of the atmosphere.
According to Drawdown, each $1 spent on food and land-related climate solutions creates over $13 in public benefit ($11T in benefit for $840B in cost).
There are no risks and no downside to this approach since many consumers are actively seeking ways to effectively "vote with their dollar" and are trying to do their part in re: the climate crisis.
The implementation strategy is to use incoming funds to reward on-boarding restaurants and retail locations. The non-profit project is a collaboration with the CA Dept of Food and Agriculture and the CA Air Resources Board to drive capital toward climate solutions. We are actively broadening this movement and need funding to conduct outreach, pay for marketing and PR for the participating restaurants and to fund platform creation and events.
Josh Seims: Blockchain Incentives
A singularly powerful leverage point to introduce incentives is how money is created. And blockchain technologies allow for incentive design in money creation that was never before possible.
Most countries create money through central banks. This ability gives governments the power to stimulate their economies, fight wars, and otherwise pursue national interests.
There are, however, some downsides. Much of the benefits go to the banking sector, as they have first access to the new capital before inflation sets in (aka the Cantillon Effect). Governments are monolithic institutions with opaque decision-making processes, susceptible to capture by interest groups. Even government actions suffer from tragedy of the commons around global issues (ex: excessive CO2 in the atmosphere). And usually the creation of money coincides with debt that requires repayment plus interest. Charles Eisenstein argues that paying this interest mandates an exponentially growing economy. This relentless need to grow the economy leads to many adverse consequences, such as turning forests into lumber, fish into food, and social interactions into transactional ones.
Blockchains allows us to reimagine how money creation could work. Bitcoin is the first example of a blockchain-based currency. The Bitcoin protocol rewards new bitcoins to anyone who can solve a mathematical puzzle that has no utility outside the protocol itself (known as mining). The benefit of Bitcoin’s design is it requires very little trust. Every participant on the network can verify a valid block was mined through pure computational analysis. The downside is all this computation effort is effectively wasted. Bitcoin miners spend an estimated $3-4 billion per year on electricity costs.
Could these $3-4 billion per year be directed in socially positive ways? What if we consider a design that involves more trust than Bitcoin, but less than fiat currencies?
If we allow a medium level of required trust, newly created money could be directed toward anything. For example, instead of rewarding a miner for solving useless puzzles, the protocol could reward the miner for acts of public good.
To imagine how this could work:
• The protocol would allow token holders to vote on how many “utility points” to assign specific acts. This voting process would allow for inclusive stakeholding and result in a map from acts to utility points. Ex: sending a mosquito net to a malaria prone area is 10 points, capturing 1 ton of CO2 is 200 points, releasing a certain medical patent into public domain is 500,000 points.
• Workers would perform benevolent acts. They would self-report their performance and receive shares of new tokens in proportion to the utility points they earned. The first level of security is (we hope) most workers are honest.
• The protocol could punish workers who cheat by incentivizing whistleblowers or independent investigators to uncover bad actors with a percentage of tokens the worker would have earned. The second level of security is that investigators and whistleblowers are financially incentivized to challenge acts of workers.
• Once a challenge is declared, a judge determines whether the worker or the challenger is right. Both the worker and challenger pay some fee for this adjudication, to support this real-world service of examining evidence, as well as to have some skin in the game to discourage frivolous challenges. The third level of security are these judges, and they need to be trusted members of the token community.
• It’s possible a judge may be corrupt. To mitigate this danger, the judges bond large amounts of tokens that would be destroyed should they lose the confidence of the wider token community. The fourth level of security is community consensus around trusting judges.
• If any of these layers become hopelessly corrupt, some subset of the token community can fork the blockchain and recreate a version of these institutions de novo. This final layer of security would be extremely expensive to exercise but is ultimately the most powerful.
Until blockchains, it was impossible to explore this design space. All successful forms of money required the state backing to instill high enough trust for people to consider them valuable. Blockchains use cryptographic guarantees of immutability to create this trust.
There are various risks. This approach requires building a large community that can agree on goals (and agree to a level of specificity that maps positive actions to precise numbers). It requires financial speculators to impute a monetary value upon the tokens. There would be a constant cat-and-mouse game to subvert investigators and judges. And if it becomes too successful, nation states may fight having their power of seigniorage taken away.
The technical aspects of building this type of money are well understood. If we could organize a community enrolled in this vision, and get financial speculators on board, we could unlock a huge force for social good.