The Future of Economy and Nature Preservation: MERIT Tokens

Single.Earth is building a nature-backed economy to solve one of the most critical challenges humankind currently faces: the destruction of natural ecosystems.

Our founders Merit Valdsalu and Andrus Aaslaid took the hot seat during yet another vivid Ask Me Anything session on August 4, 2022. The session was live-streamed from the Earthsavers community on Discord to our Youtube, LinkedIN, and Facebook channels. The engaging discussion is available as a recording on all three platforms. 

Our viewers asked a variety of questions about Single.Earth in general, when and who can join the platform, and much more. Watch the recording or read the summarized recap below to find out when and who can already join forces with Single.Earth. 

What is Single.Earth?

Single.Earth is a company that is creating the world's first nature-backed currency to save the world from climate change and biodiversity loss.

Why do you use crypto?

In the beginning, we didn’t define ourselves as a crypto company. We started using blockchain as a technology because it makes a lot of sense if you want to quantify, for example, the ecosystem services of nature. Blockchain is the perfect way to do that in a very transparent and traceable way. The idea of turning towards crypto and creating a payment instrument came later when we understood that if we want to save the world, expecting companies only to buy offsets or other contribution solutions is not enough.

We realized that we have to change the entire economy into a fully sustainable one. Introducing a new currency is the easiest way to do that, because it is something that is connected to every single transaction that we do, and it connects all the players in the economy: the consumers, the businesses, and everybody else. By switching the underlying currency that is used in all of our transactions, we’re able to turn the economy around – from a very consumption-oriented and destructive economy into something that supports nature protection and is fully sustainable.

Crypto has become a manifestation of technology and a synonym for blockchain, which is not entirely accurate because it is just one possible use case for the blockchain. Almost three years ago, during our first founders’ meeting, it was already clear that we were going to use blockchain because it was one of the first use cases where we saw that the blockchain could act as a glue to hold a variety of different components together: e.g. the digital twin, the tradability, reflecting the value of nature, etc.

So, yes, the blockchain has been part of what we do since the beginning, and the crypto element was added when we realized that issuing our own currency is an opportunity to solve a problem or two. 

Is there a way to use blockchain for good?

I presume the question comes from the conception that blockchain is something generally bad because it is believed to use huge amounts of energy and thus eventually it will destroy everything. Since crypto is often considered synonymous with the blockchain, we hear talks of, for example, the energy use of bitcoins being comparable to that of Argentina, etc. 

So why was something that seems so incredibly wasteful from the energy perspective even created? Blockchain technology was invented sometime in the early 2000s. It was decided that there is a need for an environment where the tamper-proofness or the data integrity would be assured by the laws of physics. These laws would mathematically translate into energy that one wouldn’t be able to recalculate and reproduce as anything else in the blockchain without wasting a huge amount of energy, preferably more energy than exist in the whole solar system, at least.

Since people didn’t have that much energy on their hands, the data integrity part worked rather well for more than a decade. The side effect of it was that putting stuff in there was also incredibly expensive from the energy perspective. The early innovators of the blockchain probably never thought that it would be used for such rapid transactions as the ones in use today. 

But now, we have new layers of the blockchain, new implementations that don’t rely as heavily on energy anymore, but rely rather on agreements between stakeholders. The proof of work has gradually turned into proof of stake, which makes putting transactions into this ecosystem thousands, if not tens of thousands of times less expensive from the energy perspective. And this is what we at Single.Earth use as well.  

How do you use blockchain to support ecosystems and nature?

Blockchain is a tool. Everything we can do with the blockchain, we can do with something else. The question is whether blockchain is better for some reason, and it is.  

We’ve been building stock exchanges, banks, and all kinds of infrastructures that have gone to a lot of trouble in creating tamper-proof and verifiable infosystems. Blockchain takes care of all of that, and it’s almost free. People often don’t realize that there hasn’t been a time in history when we’ve had an instrument that allows us to put data into a system this cost-efficiently for public use with close to 100% integrity proof. 

This is a huge advantage and it shows why blockchain is important. Building an infrastructure that would guarantee stakeholders that the data is there, it can be proved that it existed in a particular configuration at a particular time, and it hasn’t been tampered with, would otherwise be a very expensive affair. 

Putting all this to work for nature is important because, although a lot of effort has gone into elaborating all kinds of research, people have not yet reached a way to document it all in a commonly agreeable or verifiable way. Many opposing sides keep questioning each other’s work and methodologies, which is also necessary for good research, but a lot of good work is also just out there, waiting. The data is there, but nobody believes it enough to start acting.

We’re now holistically approaching the same things, putting all the data into the blockchain, so that our models and everything else could be validated at any point, that they existed at a particular point in time, etc. In this way, we are creating almost like a climate proof-ness or whatever the word would be.

What’s the news today on August 4, 2022? Why are we holding this Ask Me Anything session?

The news is that we’re launching!

The last Asked Me Anything was about us minting the first tokens, but today we are very excited to announce that we are very close to making the first token sales happen. 

It will happen in the second half of the month, right now we have all the tokens ready, we are finishing the last details, and then we will open sales to the people on the waiting list first. 

If you want to be included there and receive the email in the last week of August saying that it’s time to come on board and start buying those tokens, you should go to Single.Earth, sign up for the waiting list, and we will get in touch with you. 

Everyone else who is not on the waiting list will have to wait a couple of months to get their hands on the MERIT tokens.

What is the price of a MERIT token? 

The official answer is 3 euros today (August 4, 2022).

How was the price determined?

One of the big questions that we had to solve was figuring out a fair price for the MERIT token. When we started the company, the main aim was to pay landowners enough for them to be motivated to keep the natural resources intact. There is a certain cost to keeping the forest growing and what they would expect. If the sum is too small, they would eventually still cut the forest down to earn a reasonable income. 

We realized quite quickly that the only way we could find a good answer to this puzzle is by talking to the landowners. We did that and based on their estimations, we counted backward and got the number 3. That is the opening price which will stay the same until the token becomes fully tradable.

Why should the launching of MERIT tokens matter to me?

For the last couple of decades, there has been a lot of talk about the need to protect the planet at almost a citizen level. There are small things and suggestions, such as “don’t use plastic bags” or “don’t eat this, prefer that” – all of which are good aims but, extremely difficult to measure and implement. 

So far, there hasn’t been an instrument that, backed by science, would first allow you to see where you are contributing, and then calculate what good your money has done – what have you kept in existence because you paid 3 euros per MERIT to somebody.

Many projects use money to create something new or to repair the damage which has already been done, for example, planting trees, reforestation projects, land recalculation, etc. However, as a society, we have failed to acknowledge that the existing ecosystems should be supported as well. If the forest is there, then it should be there anyway. We take the forest for granted until the owner cuts the trees down and sells them for timber. Then we start pointing fingers and call them a bad person, but neglect to acknowledge the fact that it is their only way to earn a living.

As a society, it has never occurred to us that maybe we should pay them before they see the need to take the forest down because maybe, for example, they need money to put their kids in college. Do we need to pay people for “just keeping the forest there”? We could apply the same logic to people’s salaries: if you have savings, we should probably pay you less because it seems you’re not using it all.

It's important to highlight that the forest, whether or not somebody intends to cut it down, is providing us with critical vital ecosystem services. It’s not about just us wanting to keep the forest there because we like forests, which we do, but we also want them to be there because they are keeping the ecosystem on this planet intact. They are keeping us alive. Without them, we won’t be able to survive on this planet.

Forest owners have been keeping so much forest there for so little money that they could now keep entire forests there forever in exchange for nothing and everybody should be happy about it. That is what we are fixing. That’s why launching the MERIT token is an important milestone. It’s a scientific model describing what your money has saved, when, and where.

Why is MERIT better than carbon credits?

Carbon credits were created for a completely different purpose. Companies that want to create more greenhouse gas emissions use carbon credits to compensate for their activity. It’s looking at the emissions side and trying to find ways how to mitigate it, whereas we aim to save nature. 

Carbon removal is a great part of what nature does, but there’s so much more. If we were to, for example, only look at carbon when creating tokens, then you could easily come up with crazy concepts where it would make sense to cut down a perfectly healthy old forest and replant a new one because then you would generate a lot of new carbon credits. After all, young forests and young trees sequester a lot of new carbon. That doesn't make sense because it would mean we define forests through only one very niche parameter. 

We are planning to add carbon sinks and biodiversity to the equation as well, because we could already see that if you cut down an old forest, you lose biodiversity, and you lose the carbon sink as well. Without these two other parameters, we don’t get a full understanding of the good service nature is providing for us.

There is a lot that we like about carbon credits and there are also many things that we don’t think are the best solution for the world. It’s not that we don’t know how to do carbon credits, it’s the fact that we want to do more. 

In our big concept of this nature-based economy, the number of MERITs in circulation is always limited to how much nature can sustain. In a way, carbon credits enable increased emissions, while our tokens force everybody to emit less because the economy can never grow beyond the number of tokens in circulation, which reflects through this digital twin and the science of how much nature can sustain. 

Can MERIT tokens be used for carbon offsetting? 

No.

What does MERIT represent today in carbon, biodiversity, or other services?

Today one MERIT token symbolizes 100 kg of carbon removed from the atmosphere in a biodiverse forest. But that’s the first iteration of the token. We can already say that the next generation of the token, or the next methodology, will add carbon sinks and biodiversity into the equation. So it will have at least these three aspects and then we will add other ecosystem services to that as well.

How far away are those other services? Are we talking about decades or dreams, or are they currently in the works and coming out soon?

They are coming out very soon, the first targets being set for this autumn. One of the coolest parts, our scientists will probably be mad at me for sharing this, but I will, is that our scientists are working on a scientific paper as well and will be publishing on the topic that tackles our holistic assessment. 

Is there going to be some limit to the volatility of the price of the MERIT token? Will there be a stabilization mechanism?

Yes and yes.

There will be a stabilization mechanism and we try to fight volatility for more reasons than one. First of all, we want the MERIT token to represent an actual value of the ecosystem services which means that if it gets too speculative, it will no longer reflect those values correctly. 

There are stabilization mechanisms designed in the tokenomics, which control both the emission price and the amount which is burnt regularly, and some other methodologies behind it, so that the general price would stay stable. 

Does stable mean a range or will it be 3 euros forever?

It will not necessarily be the same number mathematically. One of the reasons is that adding new models to the mix will also affect the existing token pool. It will change over time depending on what new values will be attached to the models and how they reflect the general ecosystem services. This means that the mix of values the tokens represent increases over time as more valuable stuff is added. 

The question of when this will happen is not linked to technology – it’s a question of getting scientists inside and outside the company to agree on how we measure these values and define what those values are in the first place. 

Three years ago, when we started the company, nobody was publicly talking about the monetary value of ecosystem services. People were working on it at universities, but it was and still is a very controversial topic. There are disagreements on what should be measured and how, and one of the biggest debates is whether nature should have a price tag at all. 

Cementing the science behind it is a slow and painful process – that’s why it takes time. 

What about the number of tokens? Will it be capped, or how are they created?

The number of MERIT tokens is always determined by how much nature can sustain. That’s a very important part of what we do, and this comes back to the comparison with the carbon credits. If you can create an infinite amount of carbon credits and thus increase the amount of emissions that can be created, then we say that it’s not infinite.

Nature has a very certain limit to how much CO₂ it can sequester naturally, and how much raw material people can take out of it without destroying the whole ecosystem. Nature on this planet is limited, and the ecosystem services that it provides are limited, so our consumption should also be limited. This is the fundamental thing that we aim to achieve, which is the long vision – we limit the number of MERITs in circulation with how much nature can sustain at that point in time.

In short, it’s a new financial system where the more nature we have, the richer we are, and the more of it we destroy, the less wealthy we become. 

But how are MERITs created? The MERIT token will be minted based on the work that has happened, the ecosystem service. The land has done something, like sequestering 100 kg of carbon, and then 1 MERIT token is minted.

Now two things happen: If we wouldn’t have any mechanisms behind it that take those tokens away from the market, we would have an infinite supply because, hopefully, the planet will infinitely provide those services. This would mean that there would be more and more money and inflation would also continue rising.

However, at the same time, the fact that something has sequestered 100 kg of carbon doesn’t have an eternal impact either. We are very good at using up that sequestration, so it must have a time aspect in its value. There is a mechanism built into the crypto instrument itself that during each exchange against goods and transactions, it will deplete some of its value. Ideally, in a couple of years, the token will have totally depleted its usefulness and value.

On the one hand, we have nature that is creating these good ecosystem services and is enabling us to produce goods out of that. On the other hand, when we consume these goods, we need these natural resources to be extracted. This is the place where the money should also go back to nature and the circle can begin again. It’s a very fundamentally nature-based economy.

It’s also important to distinguish between two different use case scenarios of the MERIT tokens. One is that, when you buy the tokens, you can immediately burn them, and they become a measurement instrument of what services you were contributing to, and a landowner gets their money. The other model is when you use them for investing in a kind of green bond, which you can later exchange with other people for goods and services, and they can exchange with the next people for goods and services, so it gradually becomes a monetary system.

What’s the lifespan of a MERIT token?

Let’s add a use case to the explanations already given above. One use case where somebody would want to burn MERIT tokens immediately, which means that the life cycle ends there, is when a company wants to contribute – it’s the ESG strategies that they want to achieve or they want to contribute to global climate or biodiversity goals. They can just purchase the tokens, the tokens will be burned, and that’s when the tokens’ life cycle ends.

The other approach would be when we actually want to roll this out as a currency and then the lifespan eventually depends on what the things are that you consume. If you buy things that have a big footprint, then the lifespan of the money will also be shorter because it requires more natural resources to provide you with these services. If you buy a lot of, for example, second-hand goods, the money will stay in circulation for a longer period because you don’t need as much new raw materials to sustain your lifestyle.

Which blockchain is the MERIT token built upon?

Solana.

100 kg CO₂ removed gives you a MERIT token which is equal to 3 euros or 3 dollars?

It’s 3 euros as we are in the eurozone.

How do you regulate the token price? How can you control it?

That's a wonderful thing called tokenomics and stability mechanisms. In the cryptocurrency world, a lot of things that would put you in jail very fast in the stock market, are considered good practices and legal. One of them is manipulating your own market so that your price remains within the margin that you want it to be, and that is how you build a stability mechanism. You have liquidity-providing pools which you either create or print or use or come to some other deals, and then those liquidity pools will counteract the market forces depending on how you want your price to be moved.

Where can I buy and trade MERIT tokens?

In the first phase, you will be able to do that on our platform with fiat money, which is a bit unique to what we do as well. This is something that we decided in the very beginning when we understood that, first of all, we need to pay the landowners in fiat money, e.g. in euros or dollars, and for that, we had to build our own marketplace. 

The first transaction always has to happen in a way that we don’t send landowners to some external crypto exchanges because they might not know how to operate there. But the same applies to consumers as well, we don’t want this to become a niche or an elite cryptocurrency that is only traded among the crypto traders. We want this to become a currency which means that everybody should have access to it, and everybody should be able to purchase it.

However, issuing an instrument, especially one of a new category of assets, needs a very careful entry into the market, which means that:

• in the first iteration we are selling MERIT tokens at a fixed price; 
• in the second, the landowners themselves will have a type of reverse bidding mechanism, where batches of the tokens are auctioned off;
• and the third one will be an open market approach, which is then issued as a normal cryptocurrency to the normal crypto markets.

How long each of the steps will take is difficult to say. It depends a lot on how the instrument behaves and what we learn from this market because we are creating a new asset class and learning to trade with it, and that’s not going to be smooth sailing necessarily.

Who should buy MERIT tokens, and why?

It is important to note that the instrument itself, although it is a cryptocurrency, shouldn’t be bought by people who think that it will make a hundredfold raise in the next few months or years – it’s not meant to be that. Think of it as a sort of green security or green bond which reflects your values or need to do something. 

For companies, it is to be able to mitigate their ESG requirements which are getting more and more biodiversity focused around the world. Rather than being just about carbon, it’s going to be about the general well-being of nature. 

And also about the general well-being of people. There are many initiatives across the world paying a lot of attention to saving wild animals, but there are people who in many places of the world are in a much worse situation than the animals in the same region. ESG doesn’t only mean that we should protect plants and animals. We should protect people as well, otherwise we will face a huge socioeconomic disaster very soon. In short, the aim of the instrument is that whoever needs to be responsible, would be able to exercise that responsibility.

It is for individuals who want our planet to continue existing, as it is, for generations to come, who want to make sustainable and conscious choices. These people probably want to drive an electric vehicle, for example, or want to purchase second-hand clothes because they want to have a smaller impact on the world. As a private person, if you feel that your consumption should be somehow driven on a different path, then this is for you. 

What kind of nature or forest are you aiming to get on board?

We’re looking at the drivers in a specific region. For example, in Europe, it’s mostly forestry, so here we look at mature forests that could potentially be cut down and those we can easily bring on board. If we look outside of Europe, then we see a lot of other drivers of deforestation as well, for example, the expansion of agriculture – there the age of the forest is not such an important part anymore, and there we can onboard other forests as well.

We have opened the land management platform publicly. If you are in the EEA (the European Economic Area), you can get onboarded automatically with lands the size of or larger than 3 ha (the minimum requirement for all lands currently). If you’re outside the EEA, then we currently need to run a few procedures in the onboarding process with you manually, but that doesn’t necessarily limit anything. 

Also, if you submit forest land, we would preferably expect one with trees. We have a data science department of 10, and a total scientific department of 20 people, and believe us, we will figure it out. There have been a couple of cases recently where people have been submitting lands as a forest and claiming it is an actual forest, but the area is rather a nicely leveled empty space which probably statistically count as forests in some places. But, yes, the land has to have some trees on it.

Single.Earth is probably one of the very few companies in the world at the moment that knows exactly how much forest there is on the planet.

How will landowners in, for example, Tanzania or Chile get onto the platform?

You can reach out to us directly, tell your story, and we’ll try to do whatever we can to manually onboard you.

We have to, because of the nature of the business of what we do and that we are mitigating money between whoever contributes and whoever gets paid eventually. We have to run everybody through a lot of KYC (Know your customer) procedures, and it’s very difficult to do it flat out across the world. 

The countries in our current selection does not depend on our willingness to do business there, it’s mostly because the KYC assessment partners we use have their list of countries where the procedures are already automatic. That is why we have opened a limited number of countries for automatic onboarding, but that doesn’t mean that we don't do business in any other place in the world. 

For example, there’s a landowner from Brazil, whom we were able to process manually. They are on board right now, and some of the first tokens have been minted off those lands. 

One user is asking that they understand the token and the business, but they are not sure how the funds end up assisting the farmer. How will you control the legitimacy?

We don’t issue the tokens to ourselves, we issue the tokens to the landowners’ wallets. They are the ones receiving all the tokens and, yes, we take a small cut from there, but they are the main beneficiaries of the entire system. When we started the company, that was one of the very fundamental things – we knew that it all has to go to the landowner because that’s where the impact happens. 

In other projects out there, there are often a lot of middle players in the game: agencies, brokers, and others who take their cut. Eventually, the landowner is the one who receives the smallest amount of money from the entire transaction. We don’t think that is right. 

This is why we are opening wallets to landowners, we’re issuing tokens there and they are the ones who receive the funds. We are not taking the tokens and selling them, we are minting tokens on their behalf. Our money comes from mediating it and taking a service fee, but the business is concluded between the landowner and whoever wants to have that token. 

When and where can I access the tokenomics paper and is there a white paper on the MERIT token?

Both exist, and the first version that we will most likely publish together with the token sales is the light paper that also includes a tokenomics section. It is not going to be final, it probably never will be, because we have a bunch of talented people who continue to come up with new concepts and crazy ideas about what to add and how to evolve it. But the first version will be there right before the token sale starts.

Can governments benefit from the MERIT token by claiming ecosystem services through their ownership of nature reserves and wildlife parks? Do you expect any support from the government and is this model feasible without authorities regulating the process?

To the first question, can we work with governments who are also landowners, the answer is yes. We can and we already do. There are sometimes governmental agencies or companies that manage lands, and we can work with them as well. They have to follow the same procedures, we have to check that they have the right to represent these lands, that they have the right to put them on the platform, etc.

Do we need governmental approval for what we do? It depends on which aspect you look at. We are a virtual asset service provider licensed from Estonia and that is for issuing a virtual asset. For that we do need approval, which we have. 

Governments operate very differently in different countries, so this question doesn’t translate to one specific answer because there are countries where the ownership of the land and what you can and cannot do with that land is quite straightforward. In some countries, the government owns everything related to land and everything is only rented out to the communities. It’s a very diverse mixture of legislation and in some regions, we do need to cooperate with the governments because there are growing interests in claiming carbon as a natural resource. It’s a legislatively very diverse environment and there are probably a couple of countries we will never be able to do business with because they want to do it on the governmental level by themselves.

How do you measure the financial contribution of biodiversity?

That is a very complex question and a very good question because this is something that universities and scientists all over the world are trying to figure out. After all, unfortunately, it turns out that if something doesn’t have financial value then it doesn’t have value for mankind.  

I think the most holistic way to explain our perspective on this is that we look at nature and the intactness of this ecosystem. Let’s put it on a scale from zero to a hundred percent. If it’s one hundred percent intact nature, it hasn’t been altered by humans at all, it’s untouched, and it’s perfect as it should be. If it’s zero, then it has been completely destroyed. We are putting together a kind of biodiversity index that is indicating this intactness.

It's not entirely rocket science as we have invented it, because there are people who are educated and trained or even have a degree in something which is called ecosystem services accounting. That is a known practice and discipline, except all the experts are mainly embedded in systems that have to deal with the environmental impact of different large-scale projects. For example, if we want to build a hydroelectric dam and have to destroy ten small lakes, 50 rivers, and 100 households – how do we put a price tag on it? They will assess what it will cost and what it will cost to make it socially and environmentally less dangerous. These people have been doing it for decades, throughout the 20th and 21st centuries. Except that we never hear about them because most of these stacks of paper are getting embedded somewhere in the governmental decisions and we don’t get to see them as a part of a daily process.

Now we’re trying to get all this knowledge and research which has been gathered and put it into our everyday lives so that the cost of cutting down a forest can be calculated as a monetary value in the same way as building a hydroelectric dam. 

Do you consider partnerships with aligned projects? What’s the best way to contact you about this?

Yes, we do. Reach out to Maarika for partnerships: maarika@single.earth

In Finland, and presumably in other European countries, there are often government-funded models to preserve forests and nature. How does your token fit in with these models?

We do check if the land is already receiving some financing. In some instances, we might not be able to create additional funding, but in others where the financing is very small or non-existing, we will be able to work with that. If you have a very specific case, you should contact us and we will look into it. 

I understand how landowners would be tempted to get on board, financial incentives, etc. But how do you ensure that they stay on board? What legal means do you implement to keep them locked in, for example, so that they cannot change their mind and chop their forest down a couple of years down the line?

If we were to, for example, have a legal contract that says that you may not cut down the forest in the next 20 years, does that prohibit the landowner from cutting it down? Probably not. If they do cut it down, then whoever signed the contract will probably not have any rights to get anything back from them as well. 

Contracts have never disabled anybody from doing anything. If people want to break agreements, then they will do it anyway. It’s sad, but it’s true. We have come to terms with that and we understood that if legal obligations would not keep people motivated to stay on board, then financial incentives actually might. Our goal is always to pay landowners enough that they will never want to leave, that they will continue to stay because they want to earn this money. That’s probably the strongest incentive that you can create.

Is the onboarding process working in Ukraine now?

Ukraine can be included manually, so reach out to us. Some Ukrainian lands are already in the onboarding process. 

If the farmers are expected to sell the tokens for fiat to be able to spend their money, why would the tokens maintain any value?

Because somebody needs them for something. The ground zero is the companies’ need for an ESG contribution. Everything else is in a way an auxiliary to that. But the ground zero value is that there's a growing demand for instruments that would allow you to put something back into society and the environment.

Name some of the first use cases of the MERIT token that Single.Earth foresees in the future?

We already have the contribution option for companies. The next phase will bring the tokens on sale for individuals who can buy and hold the tokens because they believe that this is the currency of the future. 

In the future, anything that you can do with money today, you will be able to do with MERIT because it’s a currency.

We are facing a shortage of the instruments which need to exist for mankind to be able to mitigate climate change and biodiversity loss. Eventually, although the token represents what nature is worth, the inherent worth of nature itself will become a lot more expensive. We wouldn’t have thought that electricity or gas could be multiple times more expensive than a couple of years ago. It will be the same with nature and all kinds of instruments because it’s inevitable. 

In many ways, we are currently only scratching the surface with companies needing to give back to nature for the destruction they have caused, not because of bad intentions but just because they use natural resources. This shortage will start pushing prices up for the tokens as well. We’re not advertising MERIT tokens as an investment instrument, but they will gain value over time. 

Sign up for the waiting list at Single.Earth and be among the first people to own the currency of the future, the world’s first nature-backed currency!

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