As Web3 and environmental responsibility trends collide, Filecoin Green could be the solution to show which companies are backing their pledges with action.
Developed by Protocol Labs, Filecoin Green is an effort to leverage the power of Web3 to deliver rich environmental accounting systems. Led by Alan Ransil, the project shows tremendous promise.
Ransil draws on a solid background. Armed with a Ph.D. from MIT and a Bachelor of Science in Materials Science and Engineering from Stanford, he has researched solar cells, new battery chemistries, and how distributed storage interacts with power grids.
Integrating global environmental standards, beginning with Filecoin’s decentralized storage network
The concept begins by incorporating the Greenhouse Gas (GHG) Protocol into Web3. Developed by the World Resources Institute and the World Business Council for Sustainable Development, the GHG Protocol provides comprehensive global standardized frameworks to measure and manage greenhouse gas emissions from private and public sector operations, value chains, and mitigation actions.
Modern finance has to address three fundamental problems, Ransil said. The cryptocurrency sector must measure, reduce and mitigate its environmental impacts. Success must be supported with granular and publicly available data.
Companies face more pressure to detail the environmental footprints of their investments, thanks to regulations and the ESG trends. Given the speed at which we are used to having data at our disposal, results must be near-instantaneous.
The natural world needs more sophisticated and timely tools to assess environmental impacts. Annual reports don’t cut it for many reasons.
How Filecoin works
Filecoin Green initially focuses on Filecoin’s decentralized storage network, Ransil said. Founded two years ago, it is now 1/11th the size of AWS. It represents close to 1% of global data storage.
The process begins with people wanting to store data on the network and accepting bids from those with available capacity. Upon agreement, the client sends the data to be stored. When storage providers prove they are safely storing data, they earn Filecoin cryptocurrency. The network verifies the process through cryptographic proofs. Storage providers sent their proofs into the grid while validating others’ proofs. Storage providers make the agreed-upon storage fee and can win block rewards.
When a client wants to retrieve a file, it locates those who may have it and selects the fastest or most affordable option. The storage provider is paid, and the file is retrieved. As more people request the file, others can add it to their storage, bringing the file closer to the owner. Data flows to demand.
The emergence of Filecoin Green
As Filecoin’s popularity grew, customers began questioning its environmental impact, Ransil said. That started a path of evaluating how much energy is consumed along with how to provide the most helpful consumption information.
The network is connected to renewable energy. Each node can prove where the power it used is generated and how much it takes to store client data. Storage providers receive sustainability assistance and grant opportunities. A Web3 developer community is being developed through meetups, hackathons, and grants.
Filecoin’s storage uses electricity at two main points, Ransil explained. It occurs when data is onboarded (“sealed”) onto the network. Zero-knowledge proofs that attest the energy is safely stored require storage, as does the storage.
Making data more granular, usable
Traditional networks often only show when people are transacting and not when they are mining, Ransil said. To provide an accurate picture of energy use, it is imperative to catalog the energy consumed at every stage in the process, down to the individual user.
Filecoin Green’s dashboard does just that, Ransil said. It establishes upper and lower bounds for the entire network and individual users. Those interested can view a specific node’s energy use for a time period of their choice.
Using each node’s location and energy use, Filecoin can assess the distribution of network energy use on the power grid. This fosters a genuinely transparent and granular link between Filecoin’s network and renewable energy production.
“Because we have granular energy estimates, node by node, we can estimate where that node is,” Ransil explained. “Then we can connect them to renewable energy certificates sold in some existing renewable energy markets and say this node is buying renewable energy from the source.”
Filecoin is patiently developing a sustainable system
Does that lay the groundwork for governments and utilities to offer incentives for renewable energy use? It does, but down the road, Ransil said. The priority is to provide strong visibility into renewable energy use before developing an incentive structure.
“We’re laying the groundwork to help understand it better,” Ransil said. “There’s a lot of impetus to move fast in this industry clearly, but we want to ensure that we’re doing an excellent job incentivizing the right things.”
The Filecoin network has purchased 1.5 terawatt hours of renewable energy so far, Ransil said. That’s enough to power more than 100,000 homes for a year. Much of the network is in China, where they access wind energy.
The model scales well; the more extensive the network, the better it functions.
“You are connected to a renewable energy grid, and you want to buy power from a renewable producer on the same grid,” Ransil said. “Buy that power through your average utility, and they can mint renewable energy certificates. Buy those from a producer in your same geographic region.
“That gives you the right to claim that you used that energy. It’s a way that your money is going into that renewable energy producer. You are giving them this extra revenue stream and pulling energy from the same power grid. You’d have to change the wires, but you’re purchasing renewable energy from them.”
Providing readily accessible, granular data that allows increasingly conscious consumers to both see their impacts and select energy providers and services that also work to minimize their impact.
Filecoin is also developing the ability for users to supply hourly measurements of their actual use from server racks and rooftop solar production. The data can be sent to auditors and stored in Web3-native data formats.
How more accessible data improve auditing
The foundation for government tax credits goes to those doing what they claim. It’s not a PDF but a rich data set describing an entity’s emissions. That allows other stakeholders to conduct timely due diligence on corporate performance.
That’s usually a time-consuming and ineffective process, Ransil said. If Company A publishes its emissions once a year and sells services to Company B, Company B has the wait for that data and incorporate it. Company C, which deals with Company B, has to wait for them. The process gets longer the further you get from the source.
In a fully functioning Web3 system, that time frame shrinks to minutes or even seconds. Filecoin Green is building a system where auditors can access rich data sets.
The Crypto Climate Accord’s goal is to be carbon net zero by 2030, with full decarbonization by 2040. Filecoin hopes to get there faster. The network has consumed 1.65 terawatt hours and purchased 1.5 terawatt hours. Ransil conceded there are a few caveats to that. Some nodes may have overbought renewable energy, and some underbought. Still, the entire network should be connected to renewable energy by the end of this year.
The Filecoin Foundation provides grants that encourage responsible energy use like solar installations. They also offer assistance to grow their decentralized network and improve its sustainability.
Energy markets a mix of good, bad news
Ransil said the energy markets are delivering both good and bad news. On the negative side, coal supplies in Europe are increasing by 7% this year due to fears of a natural gas shortage.
On the positive, people do not realize the significance of decoupling emissions from economic growth. There’s significant work being done to set up systems that provide visibility into how we interact with value chains and how they are tied to emissions.
“This is what we’re trying to build within the Filecoin value chain,” Ransil said. “We want to preserve that degree of granularity as it’s passed through the value chain so that no matter who you are, you’re able to see what are going to be the effects of my actions.
“We need that decision-making to be enabled at all the different points in the value chain. And I think we’re making much progress toward doing that within Web3. We want to build the best environmental accounting tools to do this sort of thing in Web3 with the idea that they will expand the rest of the economy because they will enable governments to verify ESG reporting.”
Another trend to watch is the relationship between energy prices and hourly consumption levels, Ransil said. Prices are wild in Europe, with electricity prices varying based on when it is consumed. When renewable energy levels are high, prices are lower. That increases the feasibility of a universal solar supply with batteries to store excess capacity. That surplus can be deployed when demand rises.
“That’s one of the things that it’s actually at the point where for that data center, it would be economically feasible for them to buy a bunch of batteries so that they can produce power one hour and then use it five hours later,” Ransil said. “It’s like decentralized grid infrastructure and load shifting infrastructure that we need to build (while offering) incentives.”