Filecoin Green Introduction

Real World Assets Intros & Opportunities
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Hey everyone, my name is Marc Johnson and I’m an Environmental Solutions Architect at Protocol Labs, working specifically on Filecoin Green.

Filecoin Green is an initiative to (1) make Filecoin verifiably sustainable, but also (2) to build the world’s best tools to measure and reduce environmental impacts. The Filecoin network recently celebrated its second anniversary, and in that time it has grown to approximately 18.8 EiB of storage capacity, spread across +4,000 Storage Providers around the world.

Storage Providers (SPs) are one of the most critical stakeholders in the Filecoin network. These individuals are responsible for ensuring that the system remains efficient by providing storage to clients, but they also improve and test the protocol as well as buy and sell tokens.

To achieve our objectives, Filecoin Green works closely with Storage Providers (SPs) to decarbonize their operations. Through this work we’ve come to realize that SPs need access to capital to assist in their energy efficiency and decarbonization efforts, and SPs already demonstrating a high degree of environmental sustainability require additional capital to secure FIL collateral and expand their operations.

We believe that a loan vehicle may be the appropriate funding mechanism for these operational upgrades, as SPs predictable revenue streams and our Energy Use Audit process provide useful metrics and evaluators for this type of financial structure.

With that in mind, and drawing inspiration from ‘The Case for Clean Money’, we have been working on a proposal for a loan mechanism that SPs may access to secure funds for their energy, hardware, and FIL collateral capital expenditures.

With this proposed loan mechanism, capital will be used to achieve the objectives of decarbonizing and maximizing the efficiency of the Filecoin network. Through these efforts, we’ll help create a more sustainable, stable, and self-sufficient system.

If this is of interest to you, please feel free to comment below, or reach out to me directly.

LinkedIn: https://www.linkedin.com/in/marc--johnson/
Email: marc.johnson@protocol.ai

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Marc,

This is super cool to see and a couple of thoughts / questions from my side.

Over the past couple of years, I’ve seen a lot of different interest in funding bitcoin mining operations and bitcoin ATMs. I think lenders like these opportunities for a mix of reasons.

How would you compare this opportunity to those bitcoin operations above?

This is interesting - how much of this can you share publicly with our community? Understanding the details and scope of such an opportunity could help the community better understand this stuff.

Finally, how successful / active have you been in engaging potential investors for this opportunity? I find that most groups have the ambition to finance it, but perhaps the capital markets side of this may not be yet concrete.

Thanks for this post and bringing it to us here on our Forum and excited to learn more.

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@mj-pl this is great. I’m a fan of Filecoin and Filecoin Green sounds like a needed initiative.

The opportunity for financing SPs sounds large and promising!

Some questions:
What are the incentives for SPs to decarbonize?
How would borrowers repay their loans?

Many thanks and looking forward to continuing the conversation

If you can, please join our Governance Call on Thursday at 18 CET - one of the agenda points is ‘Are RWAs ReFi’? It would be interesting to hear your thoughts on this!

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@Flowcarbon may have some thoughts here specific to the green angle / decarbonization piece of this puzzle? :slight_smile:

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Hi Marc, lovely to see you here! signaling my support :slight_smile:

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Great to see you here too, Beth! The Centrifuge team is top-notch!

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Hey @ctcunning thanks for the great questions! See my quick responses below:

How would you compare this opportunity to those bitcoin operations above?

There are similarities between what we’re proposing vs other initiatives focused on providing capital and hardware to energy efficient BTC Miners. However, a lending program for BTC would operate with little/no on-chain transparency, because there are no easy to use on-chain staking solutions built on Bitcoin.

The solution we’re proposing would be significantly more transparent and verifiable, due to the inherent nature of the Filecoin network, as well as the fact that SPs predictable revenue streams and our Energy Use Audit process provide useful metrics and evaluators for this type of financial structure.

This is interesting - how much of this can you share publicly with our community?

We’ll share our full proposal with the Centrifuge community soon! At a high level, we are proposing a mechanism for SPs to access secure funds for their energy & hardware related capital expenditures. A core aspect of the proposal we have in mind is that the loan vehicle be overseen, and individual loans administered by, a Steering Group composed of three representatives: (1) Centrifuge representative, (2) Filecoin Green Representative (3) Independent Loan Administrator. The Independent Loan Administrator should have specific experience working on structured financial products for renewable energy and/or data center energy efficiency expertise. Together, these three representatives will assess loan requests, and administer loans to SPs.

With this structure, loans will be used to achieve the objectives of decarbonizing and maximizing the efficiency of the Filecoin network. Through these efforts, we’ll help create a more sustainable, stable, and self-sufficient system.

Finally, how successful / active have you been in engaging potential investors for this opportunity?

Apart from holding a few initial conversations with MakerDAO and BlockTower, we have not engaged with any potential investors at this point. We’re very excited about the prospect of working with the Centrifuge community to bring this opportunity to life.

Please let me know if you have any questions, keen to hear your thoughts!

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Hey @Kate_Bee, thanks for the awesome questions! See my quick responses below:

What are the incentives for SPs to decarbonize?

The incentives for decarbonization are not yet formally defined, but we are actively exploring the appropriate economic benefits for SPs to decarbonize, and plan to release more details later this spring. These incentives will be tied to our continuous assessment of how SPs are performing from an environmental basis, which will be conveyed through our Green Score credentials. These credentials will likely be packaged as Hypercerts, and I’ll share more on these Green Scores in a later post. The incentives for decarbonization may take the form of a boost in a SPs reputation score, larger datacap allocations for FIL+, increased block rewards, or potentially something else entirely.

In addition, we strongly believe that creating a loan mechanism for SPs to access capital from Centrifuge could be a strong incentive in and of itself. SPs incur capital expenses to create a robust storage operation, including dedicated hardware, and the FIL an SP posts as collateral in a Storage Deal. The energy use associated with hardware operation is a significant fraction of an SP’s recurring cost structure. For many SPs, especially those in Europe, the cost of energy consumption has become increasingly high and uncertain due to the energy crisis the region is currently experiencing.

Due to these dynamics, SPs are already seeking capital to assist in their energy efficiency and decarbonization efforts, and SPs seeking to expand their operations require additional capital to secure FIL collateral. By working with Centrifuge to funnel capital to SPs that demonstrate a high degree of environmental sustainability we would assist SPs in meeting their growth requirements while also helping the network decarbonize.

How would borrowers repay their loans?

Awesome question! The GLIF team, led by Jonathan Schwartz, has been working on a new set of tools for the Filecoin Network called GLIF Pools, which would be the way loan repayment & monitoring would be conducted. At a high-level, every SP who borrows within GLIF Pool owes a payment once every 3 weeks. If the Protocol does not receive payment within the window, it can take action on the SP to recoup funds if necessary.

I believe Jonathan is going to write a post on the Centrifuge forum about the GLIF Pools soon. I’ll link it here when live!

Please let me know if you have any questions. Keen to hear your thoughts!

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I think there are two key pieces to this that should/could inform a direction forward:

  1. The Independent Loan Admin
  2. The Senior Lender

Sounds like you’re still putting together a more concrete proposal.

I think this proposal is good in theory, but in practice the counter-parties participating above I believe will provide much insight into that proposal’s depth/detail and feasibility.

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@Kate_Bee as mentioned in my last comment, I’m reposting the GLIF intro post here. Super excited to further explore how Centrifuge <> Filecoin Green <> GLIF could all work together on this idea.

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@ctcunning absolutely - the counter-parties involved will be crucial components of this structure.

We’re currently drafting a detailed proposal and are eager to share with the community. Do you have any advice or guidance on how to develop a great proposal? Thanks in advance!

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@ctcunning echoing @mj-pl sentiment - would be great to learn more about how Centrifuge is evaluating proposals (feel free to link to any existing blogs, docs…etc). We’d like to make sure we spend our time designing the proposal around the things that matter most!

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Hi Jonathan and Marc. There are two processes which do have an overlap:

1.) Pool Onboarding Process (POP) which is currently live in V1 The POP is a multi stage process meant for onboarding of RWAs through the Centrifuge protocol. Currently submitted proposals can be found in the Pool Onboarding Proposals subcategory.
The next version V2 of the process has the goal to increase the community engagement and participation is currently in progress and supposed to go live in a while.

2.) The recently established Centrifuge Credit Group (CCG) is facilitated by DeFi Capital markets and consists of credit experts with specializations in different asset classes. The goal is to provide the Centrifuge community and partners with reviews of pool onboarding proposals . Additionally, the CCG will support the community with all questions around the setup, assets, and risks of proposed new and existing pools.

If you are interested I recommend to join the next governance call on February 16 with the presentation of the Credit group and their members.

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Hey @Tjure07 thanks for this comment! For clarity, are you referring to a presentation that the Centrifuge Credit Group will make during the governance call on Feb 16th?

OR would you like us to give a presentation?

If the latter, can you let me know how much time we might have for the presentation?

Thanks in advance!

Best,
Marc

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Hi Marc.

The Credit group will be present in the next governance call in February and most likely introduce the members. I don’t know if a formal presentation of the group is planned

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Got it! Thanks, very helpful. Looking forward to the Gov call on the 16th!

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Hi @schwartz and @mj-pl we’re in the process of making our proposal evaluation and pool on boarding as decentralized as possible - by that I mean a platform where community members and token holders decide which opportunities grow Centrifuge’s goals and mission.

The next Governance Call (you wouldn’t be presenting, just the credit group) is a good one to attend.

But there’s also the Community Call this Thursday at 6pm where one of our Issuers, Blocktower is going to do a ‘Pool Party’ - this is essentially where they present their business and answer any questions about their four pools which will soon be deployed.

It would be good if you can attend and get a sense of the process and see the types of questions they receive.

Then the next step is to pass through the Pool Onboarding Proposal (POPV2) as @Tjure07 mentioned. There’s a small pause on this though as Version 2 is about to ‘go through governance’ (i.e. be discussed and voted on as the process for new pools to launch). This is happening in a couple of weeks and once that is live you should have a clear process to follow and detailed requisite steps as set out in the diagram below and in the documentation on the POP V2

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Hope that helps. If it’s still not clear keep asking questions :grinning:

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As @Kate_Bee mentioned the community call gives the chance to ask questions to one of the biggest issuers in Tinlake.
Please feel free to post your questions in the forum below if you have any already :point_down:

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@mj-pl

I’m quite excited to see this proposal and I think many other Community members are as well!

I would review the proposals in the section above. I think they could be directionally helpful in bringing some substance to a draft proposal, before you submit a more formal proposal.

I think it’s important to put some context around

  1. Senior capital and financing sources you’re engaging with
  2. Who will manage this Pool/fund on your behalf?

Either way, when the proposal is ready, I would encourage you to share it in this thread for review and debate.

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Hey @mj-pl!!

I just wanted to reach out here to gather your thoughts on continuing through the POP process. Feel free to reach out to me directly on the forum or post your questions here.

It was great to meet Lauren at Outer Edge LA this past week and would like to get the momentum on this going again!!

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