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Climate Bond Platform
Help build a platform that can streamline the issuance and monitoring of climate bonds
Prompt CF3: Help build a platform that can streamline the issuance and monitoring of climate bonds

Introduction

Climate bonds are fixed income financial instruments that are linked to climate change solutions. Green and Sustainable Bond issuances represent just 2% of the total bond market share (USD 167.3 billion as of 2018) and the key barriers to scaling up rest upon issuance complexity, time and comparably higher certification and monitoring costs. However, the core opportunity and need lies in establishing credibility for Proof of Impact, including integrating IoT and AI to automatically report and to increase tractability of the performance of the green assets by applying blockchain and adjacent technologies already in use elsewhere

Background

The idea behind "climate bonds" is to “digitize trust” and validate transactions, reduce the overall costs and complexity of green bond issuance and governance, (needing fewer and different participants) and impact the minimum coupon size (meaning there would be no difference between a 20 dollar and 20 million dollar investment). These shifts would increase the supply side by reducing the threshold for issuers, particularly in developing countries. On the demand side, the green bond market opens up to a wider investor base where everyone could become a green asset owner. Digitisation using blockchain is an avenue to accelerate scaling of the Green Bond market. According to the SDFA and HSBC Digital Green Bonds Report three main areas of opportunity have been identified including:
1) Structuring, issuance and distribution
2) Transfer of ownership, payment and settlement
3) Reporting on Use of Proceeds and Proof of Impact.
While blockchain technology has been applied to the first two areas for offering digital utility tokens (over 2000 Initial Coin Offerings (ICOs issued to date) little has evolved on the reporting and proof of impact side and the key challenge rests on the Proof of Impact through data architecture and traceability.
Data from the real economy can be uploaded directly to the distributed ledger from IoT sensors in a green asset and exposed to investors in real-time, demonstrating Proof of Impact. Analytical algorithms or AI can interpret messy or difficult to interpret data before it arrives in the digital wallet of the investor.
Key Data Parameters to consider (practical measurement of impact on the ground is a much overlooked and crucial part to the ‘automation’ and ‘transparency’ of digital finance/bonds so here are some insights as to how a project may operate). These are part of the overall structures for the later third party validation considerations.
  1. 1.
    Data Capture: Data comes in from various sources including IoT devices. For example human capture is used in one project uses a free app called CyberTracker which was originally developed for the bushman in the Kalahari and has proven itself over the past 15 years of use globally https://gdmplus.com/
  2. 2.
    Selecting apps that are language agnostic and so people from of different languages from across the globe are able to use it is important. Special interfaces have and can be built in which enable real time geospatial transmission of data including images from the ground.
  3. 3.
    Data Transmission: Special agreements have been established with authorities to allow communications to be setup from anywhere a project operates.
  4. 4.
    Data Ingestion: Critical to the success is to be able to ingest vast quantities of data (as this is/will grow more than exponentially). Some projects focus on ‘serverless’ architecture on AWS which can automatically scale up to whatever size is needed and then scale down based on consumption of data.
  5. 5.
    Proving of impact: this is the crucial issue and the lynchpin upon which smart contracts will be triggered (i.e. how do you truly know that ‘x’ happened in a remote part of the world? )
  6. 6.
    Security: Security is vital and DID (decentralized identifiers) secure devices and data to enable ‘trust’

Goal

The goal of this prompt is not on issuance but on creating a platform and process for providing the proof and monitoring of impact in real time for projects underlying a digital climate bonds issuance by creating a reliable data layer through connecting blockchain technology, IoT sensors and AI.
The frontend for this platform should be designed in a simple and minimalistic fashion, and in such a way that it can potentially interface with multiple systems. The frontend must be integrated with the backend and you are required to visualize how the platform would handle real time data.
The data itself need not be generated or pulled in from external sources, it can be streamed from a source and then displayed on the platform accordingly for the purpose of development and demonstration (see data parameters above).
The idea is to show a proof of concept of how such a platform would work and could be incorporated rather than develop a robust platform that is s scheduled to go live immediately.
It is also worth considering tokenomics to incentivise network participants as applied to securitised project value chains i.e. transmission of value vs transmission of witness proof, and how these could be combined based on a variety of fiat value, natural capital and social capital value systems to aggregate PoI and value data.
A key design element is scalability and that's where service or project aligned microservices with encapsulated data, similar to the core principles of blockchain distribution, could be integrated as an element of the blockchain platform architecture.

Architecture

Given the platform deals with live data and inputs on a growing scale, and given that data management and analysis will need to be highly scalable, we suggest that the platform be written using a Python microservices backend in order to enable easy communication between the data and API layers.
For the frontend, we suggest using ReactJS, owing to its large community and developer support. You may also use frameworks like Django or Ruby on Rails on the backend, or use NodeJS on the backend powered by a ReactJS frontend.
For the storage architecture of the platform, we suggest using a distributed approach to create containerised data entities which can be queried through standard APIs across a microservice or distributed architecture.

Blockchain

If you plan to use the blockchain for the benchmarking and monitoring of proof of impact we suggest Hyperledger Fabric or similar. The blockchain should be looped into plugins on a public blockchain such as Ethereum for registration or recording, as in the first stage of platform development a consortium based initiative focused on a small group of trusted input partners or projects where data has been verified. These would then connected to scale to the issuance platform.
If you don't plan to use a blockchain for issuance or proofs of impact, we highly recommend providing proofs of execution and committing them to the blockchain. This way, people know that the proofs were generated at a specific point in time and need not entirely trust what the platform tells them (the trust model in this case is weaker than directly inserting the data into a native blockchain).
Last modified 1yr ago