Project

General

Profile

Overview

NOTE: This is draft text. Please share comments with Joseph jpotvin@xalgorithms.org or open an issue here: https://xalgorithms.redminepro.net/projects/deposit-receipt-agricultural-topsoil/issues/new


We are designing, documenting and validating a new type of tradable deposit receipt.

The business and technical structure of this new financial instrument is an adaptation of the conventional "Negotiable Warehouse Receipt" (NWR) originally introduced in the 1880s by farmers in France to postpone the sale of their harvest to a later period with more favorable prices. (About NWRs: https://xalgorithms.redminepro.net/documents/23 )

Our new instrument, instead of being issued for primary commodities deposited into a secure warehouse, will be issued for increased agricultural topsoil quantity and/or quality deposited onto the land, so long as its productive capacity is assured into the future with resilient landscape and legal protections.

The Earth Reserve Assurance deposit receipt (ERA-dr) arises from the well-known permaculture concept that: “the farmer grows the soil; the soil grows the crops”.

The ERA-dr will be detailed in a ‘framework agreement’ which provides that any registered farm that has increased and assured the quantity and/or quality of topsoil infrastructure, will be issued an ERA-dr that acknowledges the genuine biogeophysical increment to the productive infrastructure of the economy as a whole. In law, a contract must be fully specified. Since the framework agreement specifies that the price of the ERA-dr is expressed by multiplying the Earth Reserve Index by the opening value stated on the ERA-dr, it falls short of being a contract until it is offered for sale at the indexed price. At that point it is a contractual offer, leading to a transaction.

There are some similarities and differences between NWRs and ERA-drs regarding 'ownership':

  • When a grain farmer uploads a standardized product into a shared grain elevator, they obtain an NWR for the physical quantity and quality of grain. Each farmer retains ownership of that stated amount of that type and quality of grain in the elevator. The general commodity market price could go up or down, so their deposit receipt is a tradable instrument which can be bought and sold like any other financial instrument in the open market. When they sell the NWR, they sell their grain.
  • When a farmer increases the agricultural topsoil quantity and/or quality deposited onto the land, they obtain an ERA-dr for the measurable biogeophysical benefit to the productive infrastructure of the economy as a whole. Each farmer retains ownership of their land and their soil. All parties understand that the macroeconomic value that the issuer pays towards the biogeophysical increment to the productive capacity of the economy as a whole may go up or down. This makes the ERA-dr a tradable instrument which can be bought and sold like any other financial instrument in the open market. When a farmer sells an ERA-dr, they only sell the ERA-dr which is redeemable in the form of currency; they do not sell the land or the soil – instead the owner of that land is the steward of that ‘vault’.

This deposit receipt would be issued by the operator of a special purpose ledger. The numeric value in that ledger will represent a methodologically-agreed and fully transparent estimate of the increment to the 75-year macroeconomic security of society. Each ERA-dr is calibrated upon issuance to the Earth Reserve Index of Ecosystems (ERiE; proportionally the 'ecosystem functional groups within its shape file, refined by 'soil map unit' if helpful), and to any chosen reference currency that is also calibrated to the Earth Reserve Index (ERiC; proportionally the 'ecosystem functional groups weighted by national currency of transaction data). The initial value of an ERA-dr expresses the Issuer's estimate of the aggregate 75-year undiscounted increment to productive capacity based on current net income factors. The issuer is always prepared to purchase the ERA-dr at its official price, and its official estimate of the aggregate 75-year undiscounted increment to productive capacity will evolve through time. But once issued, an ERA-dr can then be bought and sold on the open market without restriction of price or currency.

An ERA-dr (deposit receipt) record can be stored and traded off-line as an ERA-dr.op (offline physical; pronounced "an era drop"). When and ERA-dr is stored or traded in digital form, this is an ERA-dr.etr (electronic transferable record, pronounced "an era dreeter").

This new financial instrument is being designed to resolve market distortions that degrade the productive capacity of a countrys’ agricultural land due to the incumbent system ignoring as “externalities” the positive macroeconomic benefits of topsoil quantity and quality. By shifting the warehouse concept back one stage in the value chain, and doing so in conformance with existing laws and practices around negotiable warehouse receipts, the capacity of soil to produce primary commodities will be internalized to the financial considerations of all stakeholders, regardless of their background concerns for ecological integrity and resource availability. The system will be validated through modelling, experimentation and independent review.

The Xalgorithms ERA Working Group intends to meet the criteria of the International Organization of Securities Commissions (IOSCO). Our eventual submission will include:

  1. A formal regulatory submission
  2. Articles in business publications
  3. Articles in academic publications
  4. Explanatory videos
  5. Technical documentation

All implementation elements (text, graphics, data, software) are being shared via free/libre/open source licensing:

  • CC-by 4.0: Text, graphics, data
  • Apache 2.0: Default software licence for client applications, except when AGPL 3.0 is specified;
  • AGPL 3.0: Default software license for network service applications, except when Apache 2.0 is specified.

Issue tracking  Details

open closed Total
Bug 0 0 0
Feature 6 0 6
Support 0 0 0

View all issues | Summary | Calendar | Gantt