Interview with the Lykke Team – Alan Laubsch
Question: What is blockchain?
Alan: So what is blockchain? Blockchain is an Internet-based notary service that is powered by peer-to-peer technology. So what blockchain does is it creates an Internet of Trust. You can transfer value over this network, and this Internet of Trust means that it can be used as an Internet of Value to transfer value. It can be connected to the Internet of Things, which is also connected to the Internet of Nature. So the potential is to create a global network of trust where we can move resources around with minimal friction, all powered by peer-to-peer technology.
Question: What do you mean by minimal friction?
Alan: Minimal friction means that because the blockchain is a peer-to-peer network, there’s no central counterparty that takes a large fee out of it, so the fees are very, very small. It’s based on market dynamics, but typically right now you can very efficiently move value around for a few cents per transaction.
Question: What are the advantages of blockchain?
Alan: So a major advantage of blockchain is that it’s a secure network, so all the information is encrypted. And also it is a distributed ledger technology, which means that all the information is shared everywhere in the network. If there’s a massive solar storm, and all the Bitcoin and Ethereum wallets essentially go offline, a cold storage with one Ethereum or Bitcoin wallet left can restore the entire network. All the data is replicated everywhere in the entire network. It’s a very secure system.
Question: How is it revolutionizing finance?
Alan: It’s revolutionizing finance because it does not rely on the central counterparty. By being able to create this network of trust we can send value to each other without going through an intermediary, which is risky – there could be a credit risk, as well as the intermediaries take quite a bit of money. For example, global payments alone amount to 1.7 trillion dollars a year. So that’s a large friction cost. And for doing overseas transfers, for example, remittances, these transfers can be up to 10% of the amount transferred.
Question: What’s wrong with the system today?
Alan: The system today is archaic. Banks were invented hundreds of years ago. All of our government structures are ancient, they’re sequential, they’re centralized and, quite often, they’re crumbling. Furthermore, the most important thing is that our Commons are not protected. It’s no one’s job to protect the deep oceans or it’s no one’s job to protect the earth from climate change. There are global issues that are not addressed. And, finally, there are certain externalities that are not included in the financial system and one of those externalities is Earth. You have China that’s an economic growth miracle, but you can’t breathe in their cities because clean air is not included in the formula. Our idea is to reinvent money to be able to include these externalities and include natural capital.
Question: What is natural capital?
Alan: Picture the Earth. The Earth produces free ecosystem services for all of us that amounted to 150 trillion dollars a year. That’s twice the global GDP, but all for free. So that’s natural capital. Natural capital is what produces clean air, water, sustainable food.
Question: How can a single individual play a role?
Alan: The question is: How can we make a difference in these big global problems? What’s amazing is that as humans we have incredible power as networks. There are certain problems that none of us can address individually, but if we can find a way to cooperate and to define a shared language for value, for example, like launch a new currency that’s backed by natural capital, we can change the world. For example, why not launch a Bitcoin backed by trees? That’s what we’ve done. We’ve created a digital token that represents a mangrove tree planted on one square meter into our Heyerdahl Climate Park. That mangrove in 20 years sequesters one ton of CO2. The implication is that an average American needs to plant only about 20 trees a year in order to be net positive. It means that for the price of an iPhone any human being can be net positive. This is the amazing thing that out of the entire economy in our world, there are negative externalities of about seven trillion dollars per year because we’re not paying for some of the damage that we’re causing. For example, from flying and carbon emissions that are resulting from that. But for just 1% of average consumer spending we can actually pay for all the carbon emissions, pay for impact on biodiversity, and actually be net positive, and that’s an amazing idea that as humans, we don’t have to feel ashamed that we have a negative impact. We will always have some negative impact, but we can make sure that we have more of a positive impact than negative impact, and it’s all about where we put our money. If you put your money to restore a mangrove ecosystem you can be net positive for the price of an iPhone.
Question: How is the Lykke architecture making this possible?
Alan: So, Lykke is a global exchange, a global marketplace for any asset. That’s currencies, that will be stocks and bonds, but we’re also introducing natural capital as an emerging asset class, and we are powering the ability to provide liquidity for major currencies based on Richard Olsen’s algorithms. We’re using those same algorithms to provide liquidity for, say, Lykke Coin which represents equity in Lykke, for our mangrove tree token which represents trees in Myanmar, so you can literally use the same technology to provide liquidity for any digital token, and the future that we’re moving to is that everything will become digitized. That means everything will become a means of payment. Every individual can issue their own digital token. It’s a matter of “Are we a trustworthy individual?” If we are a trustworthy individual organization, the currency that we launch will have a greater value and we can essentially – through big data and through feedback effects – discover which individuals in which organizations are trustworthy and worth supporting.
Question: Can you elaborate on TREE?
Alan: So one of the great challenges that we have is that we need to act very decisively to reverse carbon emissions. Some pretty scary things happen if carbon emissions hit 450 parts per million, which is, for example, a level at which coral reefs start to collapse. The ocean acidification will be so high that the new corals can’t form, and they’ll literally dissolve, and that’s the food source for close to a billion people in the world and 25% of marine species depend on coral reefs as a home. So, what can we do to save the corals? Well, we can reduce CO2 emissions. And what’s the most effective way to reduce CO2 emissions? The biggest impact on CO2 is actually land use, so deforestation. If we stop deforestation that’s like taking every car off the road for the next decade. Mangroves are deforested at three times the rate of rainforests. It’s less than 1% of trees that are mangroves and they pack in a super punch in terms of climate mitigation. They protect local communities from flooding, soil erosion, they also play a keystone role in being able to filter water for seagrasses and coral reefs to survive. Altogether, this coastal ecosystem is responsible for a tremendous amount of blue carbon sequestration. So by restoring mangroves, we’re investing in an asset, natural capital asset, that’s incredibly powerful at sequestering CO2, at keeping that in the ground permanently in the marine realm, and as well, powering an entire system that is vital for food security and for human livelihood. So, in short, what is TREE? TREE is a digital token backed by a mangrove planted on one square meter in Thor Heyerdahl Climate Park in Myanmar. The project is managed by Worldview International Foundation. The founder, Dr. Arne Fjørtoft, is an amazing individual who founded that organization with the legendary pioneer Thor Heyerdahl and Arthur C. Clarke, the father of the telecommunications revolution. The park was named in honor of Thor Heyerdahl, who was Arne’s good friend and who pioneered crossing the Pacific on a raft in a voyage that has inspired so many people. So what we are hoping to do here with pioneering this digital asset that is backed by natural capital is to start the movement to invest in nature.
Question: Could this be replicated on a smaller scale, such as an urban garden?
Alan: The amazing thing with the digital economy is that you can create good money, like literally money as an incentive system for right behavior. We are seeing the emergence of local currencies, for example. Essentially we’re moving to a local barter society, and anything can be digitized. It could be the tomato production – your friends buy tomato coupons from you. So the technology allows you to create a marketplace and have a secure way of transmitting value.
Question: How can one person possibly make a difference?
Alan: Over the last year I’ve talked to so many people, and asked them questions, for example, “What do you think is your ecological impact? How much would it cost to offset that?” The answers I’ve gotten have been pretty amazing. People estimate that the damage that they caused is in the tens of thousands of dollars which is actually accurate but the amazing thing is that for a very small fraction of that we can actually do more good than harm. So the concept of what can we do personally to make an impact is we can all pledge to be net positive. It’s as simple as that. We do certain things that harm the environment, like fly airplanes, but we like to visit our friends, sometimes we have to fly. It’s okay, as long as we invest in a natural ecosystem which sequesters more CO2 than we’re actually emitting. So the amazing thing is that we’re living with this guilt that was causing this damage leaving the future generations a worse world when actually it costs cents of the dollar for us to do that. So for $50 a year, anyone in the world can get net positive. For the price of an iPhone, you can plant a forest of a thousand mangrove trees that will sequester a thousand tons of CO2. That’s something that will pay for your carbon footprint, even if you’re a frequent traveler for, say, 20 years. But the amazing thing is every 20 years that forest keeps on growing, so you are really investing in a forest that is producing life and making you net positive. The amazing thing is that 1% of us on earth can actually make a difference. If that 1% of us decides to get net positive, we can pay for the rest of the planet to be net positive.
Question: How can one get started?
Alan: The amazing thing is that blockchain, it’s a global movement, there are meetups all around the world. You can go to Lykke.com and start a meet-up in your local community as well, and you can download Lykke Wallet for free. We’re also working on an initiative called Blue Life as an entry-level digital wallet that is really easy to get on, where you can simply invest in mangrove trees in Ethereum or other digital tokens with a press of a button.
Question: How did you get involved with Lykke?
Alan: I met Richard Olsen in Moscow in 2015 where Sergey Ivliev invited us both to speak at the Russia Risk Conference. It was a beautiful weekend where Lykke had its first hackathon. There was also the first snowfall in Moscow so very memorable. A little while later I had the idea to list forestry credits on the Lykke exchange to create good money, Bitcoin backed by carbon credits, and a lot of the inspiration came actually from my children and from wanting to leave them a more sustainable world. I called Sergey and Richard up to discuss this idea and they thought it was a wonderful idea and supported it. I started the Natural Capital Alliance as an organization that supports eco-heroes with capital to protect vital ecosystems. And Richard and Sergey thought “Why not to join us at Lykke to build up a sustainable global marketplace?” And I haven’t looked back since.