[CHAINALYSIS PODCAST EPISODE 56] How Sustainable Blockchains Are Offsetting Their Carbon Footprint

Episode 56 of the Public Key podcast is here! With major blockchains moving to Proof of Stake (POS), we speak with Jane Khodarkovsky (General Counsel of the Celo Foundation), one of the most notable carbon-negative, mobile-first blockchain ecosystems, to understand sustainability and banking the unbanked globally using blockchain.  

You can listen or subscribe now on Spotify, Apple, or Audible. Keep reading for a full preview of episode 56.

Public Key Episode 56 preview: Sustainability, diversity, and banking the unbanked using mobile-first blockchain ecosystem

As Bitcoin started gaining popularity during the last bull run, many critics were quick to point out the issue of energy consumption during the Proof of Work Mining process. 

In this episode, Ian Andrews is joined by Jane Khodarkovsky (General Counsel, Celo Foundation), who will be educating us on what a carbon-negative and mobile-first blockchain ecosystem looks like and explain why this could be a solution to the growing dilemma of the underbanked and unbanked in the USA and around the world. 

Jane touches on her time at the Department of Justice and how the transparency of the blockchain is an attractive feature for identifying illicit activity and also tokenization of real-world assets.  

Quote of the episode

“But what is really interesting is that blockchain technology, right, allows transparency in a way that if a company says they don’t have forced labor in their supply chain if you’re using an open, transparent, immutable blockchain and that technology, it’s much easier to trace for that and identify that, in a way that our current infrastructure of technology makes it much harder.” – Jane Khodarkovsky (General Counsel, Celo Foundation)

Minute-by-minute episode breakdown

• (2:15) – What is Celo, the mobile-first and carbon-negative blockchain?
• (8:15) – Where does real-world asset tokenization fit into sustainable blockchain projects  
• (12:35) – The challenge with sending fiat money to war-torn nations or those affected by natural disasters
• (16:31) – Jane’s crypto origin story of tracing digital assets while working for the Department of Justice 
• (19:40) – What does the future hold for blockchain and cryptocurrency amidst recent failures 
• (23:25) –The importance of diversity in blockchain with organizations like the Association For Women In Crypto 

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Speakers on today’s episode

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Transcript

Ian:

All right. We’re back at Links, live. I’m joined by Jane Khodarkovsky.

Jane:

Very good. That was great. You did a great job. I’m very impressed.

Ian:

Thank you so much for joining us, Jane.

Jane:

Thank you for having me. I’m glad to be here.

Ian:

You’re with Celo?

Jane:

Yes, foundation.

Ian:

The foundation.

Jane:

Yep.

Ian:

I’ve heard a lot about Celo, but I’m guessing there’s some people listening who are going, Cee-Lo Green?

Jane:

Yeah, the artist. Not the artist. The mobile first blockchain.

Ian:

Yeah.

Jane:

So I am the general counsel at the foundation, and the foundation is a grant giving organization that supports the Celo ecosystem. And I know we’ll talk more about it but basically, the blockchain was started with a goal of achieving financial inclusion and sustainability. It actually launched on Earth Day, which is coming up, which is exciting.

Ian:

That’s amazing.

Jane:

And that was done very thoughtfully by the core contributors because the idea was to have a mobile first blockchain that was carbon negative, and what perfect day to do that, to launch as on Earth Day? And since then, a lot of the grants that the foundation gives and supports projects are focused on climate and bringing real world use cases and real world assets on chain, and doing adoption in a very thoughtful and mission oriented way. Which is really why I joined the foundation from my background of mission oriented work on the government side. So yeah, so happy to be here and talk about it.

Ian:

I love all these things. The climate negative statement on the website, this is one of the first things that stood out to me when I was doing some research for the podcast, because there’s a lot of organizations out there that have these, I think good and certainly well intended climate neutral or carbon-neutral goals. Usually, they have a date far out in the distant future, 2030, 2040, 2050. But the organization is very upfront about carbon negative. So how do you go about doing that? Because I think crypto blockchains in general have this reputation of unnecessary power consumption as part of the core technical design.

Jane:

Yeah.

Ian:

Can you talk a little bit about how you get to the carbon negative?

Jane:

Sure, yeah. I think one of the first things I always talk about is educating about what different types of digital assets there are, different types of protocols, what the technology does. And so at its core, when people think about crypto, and I put that in quotes, it’s a very broad term, is they think sometimes Bitcoin, and Bitcoin is mined and it takes a lot of energy to mine that Bitcoin. And there’s been a lot of, I’m sure, conversations about proof of work versus proof of stake, and so Celo, the blockchain, is a proof of stake protocol. The proof of stake is different fundamentally from the technology side than proof of work, and so Ethereum moved, had the merge, there was a lot of discussion. You had people on your podcast talking about it, and I’m sure.

And so the idea, and I think what is different about Celo the protocol but also the projects that are building on it, is that fundamentally, it’s proof of stake and the thought around was how do we take the Celo that’s staked right on the protocol and turn it into something that is positive for the climate, so has positive externalities. How do we motivate and provide support to projects that are doing the same thing? Whether it’s through carbon offsets or preservation of forests in a small community in Chile. And those are hard things to do, and they don’t happen overnight. But they’re also things that you have to build an infrastructure that is secure and you have to build trust for people to want to support it and to build on it. And I think that’s generally one of the biggest things the industry wants to foster, is more engagement around not just talking about innovation, but putting actual work into how do you make that infrastructure secure enough for people to feel like they should be working and building for positive externalities in this space, but also for the community.

And I think the other big focus is not just narrowly. We live in a global world. A decentralized protocol like Celo is accessible to anyone in the world that wants to build on it, which is a really important thing because you’re talking about communities in the Philippines, you’re talking about communities in Sub-Saharan Africa, you’re talking about communities in the US, and I think that there’s a lot of great use cases that can be built around that, with the focus of what is that positive externality? How do we preserve the climate? How do we preserve rainforest? How do you preserve water?

I was just in Arizona a few weeks ago and there are communities within Arizona that do not have running water, so they’re building and they have to bring water in. How do we use blockchain? How do we use this technology to solve for those issues? And I think that’s really interesting. I think this is why I’m really excited to be in this space, because there are real world problems that can be solved with this technology and we just have to lean in to identifying those problems and then identifying solutions for them.

Ian:

Our CEO, Michael Gronager in his opening keynote this morning brought up these real world assets, real things, not just a cryptocurrency or an NFT, being the next wave of innovation in this ecosystem. It sounds like you’ve been thinking about this a lot at the foundation. You just touched on water as being a very real thing to a lot of people, a source of life. When you say real world assets coming on chain, it’s actually like a water credit? Unpack that for me.

Jane:

So that’s a great question. So there’s a lot of different projects. I just think about water, what farmers need. How do you build sustainability with smaller scale farmers? How do you preserve parts of land in community is where the green, the grass, that forest is really important, and how do we tokenize that? Can you tokenize that and ensure that there is buy-in from the community to preserve that land or preserve that forest or preserve ways for water to be distributed within communities? And one of the things also that drew me to the foundation was that there was a lot of research done on the ground in communities about why mobile first? How do people use money? How do they feel safe using it?

The idea with a mobile device is most people in the world have one. They’re not necessarily sophisticated, Apple 15 or whatever the latest is, but it’s much easier to remember a public key that is your phone number or that you know is your mother’s, your sister’s, your friend’s number, and send them instantaneously to your phone, something, than what you touched on, which is what a lot of attention is around is the speculative aspect of, quote, crypto. And how do we shift the conversation to when people talk about mass adoption and when will this kind of wave of innovation touch ordinary people? And I think the way to do that is when you are solving ordinary people’s problems.

And just taking a step back, part of that, when I was at the Justice Department, I worked on a lot of cases involving forced labor, human trafficking, money laundering in that space. But what is really interesting is that blockchain technology allows transparency in a way that if a company says they don’t have forced labor in their supply chain, if you’re using an open, transparent, immutable blockchain and that technology, it’s much easier to trace for that and identify that in a way that our current infrastructure of technology makes it much harder. Because there is a lot of layers if you’re a CEO sitting in the US and there’s someone picking cotton in another country versus, as I said, a decentralized open platform that is available and you can see every transaction as it’s happening. I think that’s pretty powerful, and that goes back to bringing real world assets on chain.

There’s a lot of conversations about how do you do that to ensure that you’re not double counting? That if it’s carbon offsets that you have something that is visible, and if it’s happening in real time and if someone changes it improperly, that will also be visible. It’s visible to you, Ian, just like it’s visible to me, and it doesn’t matter where we are in the world. I think those are things that, again, build that trust and accountability that you have to build when you’re trying to educate communities that may not know anything about blockchain about what this technology can really do and how it can positively change their lives.

But we have to do a better job, I think, as an industry in doing that education and spending the time on the ground, and showing people how to have a digital wallet. What does it look like to not just use an NFT as a cool social symbol, but what does that NFT mean if it means that you are tokenizing a tree that’s really important to a community that is suffering from deforestation? How do we do that? And there are projects on Celo like EthicHub, focusing on farmers, Good Dollar, focusing on universal basic income. Those are really powerful and thoughtful ways that really transform people’s lives on the ground and may not be as cool to talk about because it’s less speculative.

Ian:

I think UBI is very cool.

Jane:

Yeah, I do too.

Ian:

So the idea with the UBI project is they’re actually using the chain to distribute the UBI payments.

Jane:

Right, to people around the world. And it really, I think, saw a real big need, both internationally in the context of what happened in Afghanistan and then what happened in Ukraine and these monumental shifts within days, or even with the earthquakes in Turkey of how do you get funds to people in a secure and quick way? And I think one of the biggest things that even I saw in my former life is how cost expensive it is for everyday people to send funds through the money service businesses that we’re mostly familiar with, where there’s a very large increase or percentage that you’re paying. So if I was to try to send money home to Ukraine, and I’m sending, let’s say for argument’s sake, $500 and there’s a 20% increase, then that’s a lot of money if I’m a daily laborer. That’s very significant.

And it’s also really significant that, and I saw again, saw the impact of people doing it where if you’re sending it to vulnerable populations and they have to go to a brick and mortar location to pick that up, you may be putting them in a more vulnerable position than if it is secure on their phone and nobody necessarily sees that those funds are coming there. And then they know that it really is going to them or to their families, and they can use it as they need.

And I think the other other thing I should point out is also this foundation also works a lot on a lot of support and grant funding for on and off-ramps, which I think is really critical. So how do you actually transform your Celo, the digital asset, to something that you can use in your local community? And for that, you need to have interoperability and you need to have those secure on and off-ramps, and that’s where finding those partners around the world that are building that infrastructure and bridging the gap between web 2 and web 3 is so really important. Because that’s also part of how do you get adoption? You need people to be able to use those funds.

Ian:

That’s right. Are those banks or are those payment processors, or who?

Jane:

So some of them are payment processors. Some of them are also in the decentralized finance world where they either partner. The business models can differ. They may partner with a local community bank, maybe a local bank. Some of them are peer-to-peer. So just like you have a peer-to-peer exchange, this would be a peer-to-peer, secure, self-hosted wallet. And a lot of that also requires a lot of education, so a lot of what the foundation does is also partner with nonprofits who are doing the work on the ground to actually teach the communities and invest in those communities learning and sharing that information with each other.

Ian:

This idea of financial education and financial inclusion, the people of the Southern Hemisphere. How do we bring them off to the standard? Yeah. It’s such a compelling mission to take on. I’m really curious. So you were at Department of Justice before taking on this role.

Jane:

I was.

Ian:

We know a lot of people at Department of Justice through our work here at Chainanalysis.

Jane:

Yeah, I do too. I like them very much, yes.

Ian:

I do as well. I would categorize, if I could take the average across people that we get to interact with at DOJ, as being kind of skeptical of the cryptocurrency ecosystem. And so I feel like you’ve taken the not obvious path to take on this role. I’d love to hear how you first encountered cryptocurrency and then what led you into to job you have today?

Jane:

Yeah, I think it’s probably accurate to say I had a unique transition, but I actually think it was really quite organic. Most of my career as a prosecutor was working on white collar investigations but very focused on victims, whether victims of human trafficking or child exploitation or victims of crime, and focusing on following the money and trying to identify how do you best dismantle criminal organizations and then identify their assets, seize their assets, restrain their assets, and use restitution to make victims whole? So a two prong approach. And there were several cases that involved digital currency or exchanges that were how I first touched this space. And-

Ian:

What timeframe was that, if you remember?

Jane:

So I think my first investigations were probably ’18 and on. When I was at the Manhattan DA’s office, there were some Bitcoin ATM cases that colleagues worked on, and I feel like in the ’16, ’17, now looking back, seems so pedestrian versus what we see now. But what was interesting about the cases I worked on was, again, that point about how quickly you can trace assets and how the tools like those, and full transparency, I used a lot of Chainanalysis tools when I was in government and we use them at Celo now. But it was really eye-opening to see how quickly I could get information in real time or my investigators could get information in real time using analytical tools, but it also forced me to learn, and learning about how to use the tools, what is the information that is being gathered, how it’s verified.

But then at the same time, I also saw the struggles of a lot of the victims I worked with with access. And it’s interesting you talk about the global South, but when I first moved to DC from New York, someone talked to me about food deserts and I didn’t understand what that really was because in New York, we have everything from a bodega to a real supermarket. But as I dug into this world and this space and interact and doing a lot of investigations, there’s also a lot of financial deserts in the US. And I think we have a privilege of living here that we trust that our money will be in a bank, but there are a lot of communities and victims that I worked with that became survivors that didn’t have that easy access, that didn’t have that identification to just go to a bank and open an account. And I really thought about what does this technology do? How can digital ID be something that blockchain technology can help with? How do we do compliance better with blockchain technology? And I think that’s really interesting.

And I was driven by the mission. I care very deeply about the cases that I did, the cases I left behind, but I think that I found that the mission at the foundation and what projects are building, and the thought leadership around how do we make things better but sometimes by rolling up your sleeves and doing the hard work is a lot harder. And it’s not as, to use the term, sexy, it’s not always so sexy. And I used to do that when I used to train investigators on how do you follow the money and Excel spreadsheets. When you become an FBI agent, you’re looking to bang down a door. You’re not meeting with Jane, the former prosecutor and saying, “I’d like to look at some Excel spreadsheets today.” No, no, no.

Ian:

That was not top of the list at the academy.

Jane:

That was not top of the list. They were like, “No, I don’t want this trial attorney. I want a different prosecutor.” So I’m very objective about that. But I think it was an organic process where I feel like I found a home where the mission drives a lot of the work, and that has been really important to me throughout my career. And I do think that we have to do a better job to innovate, but in a way that we get the technology to the people that need it most, whether it’s in the US or abroad.

Ian:

I completely agree. I was stunned. Maybe a year and a half ago, I was given data that 5 million people in the United States are totally unbanked adults.

Jane:

Yes.

Ian:

Which blew my mind because I come from a place of extreme privilege, I think, relative to most people on the planet, and it just wasn’t in my awareness that we had that big a problem just in the United States. And then obviously as you go abroad, it’s significantly greater, so if we can solve that and improve financial inclusion, I’m on board with that mission. So obviously, it’s been a rocky last year for the cryptocurrency industry as a whole. I’m curious, as you look to the future, what’s on the horizon? What’s got you excited about coming in the next 12 months? I’m looking for some good news.

Jane:

I think just the conversations are starting to really get meatier in terms of how do we do better or how do we talk about the technology versus the speculation? And really not just doing the talking but really doing the work, and the work takes time. And so I’ll talk about this a little bit tomorrow, but really finding those partners within the industry and outside of the industry that are committed to whatever the principles that are being built, whether it’s to increase diversity, whether it’s to get more different types of people with different perspectives into the room to help build. I think that’s great. I think it’s really important. I think it’s interesting how organically projects develop all over the world and what they think about, and how people are creating climate dashboards to actually keep accountability. Or even how courts have started to accept NFTs as a method of service. If someone had said this to me five years ago, I probably would never believe it, but it’s happening.

And I think that’s interesting. I think that there’s a lot of innovation, it’s moving faster. We’re in a very global world. People are talking, they’re using their phones. Social media changes things and I think that that’s going to continue, and I think with thoughtful leadership and regulation around it, it will evolve and I think it will evolve in a mature way. Otherwise, those projects, they won’t be around if it doesn’t to be honest.

Ian:

A lot of people have talked about this being a great moment to clean up some of the things that probably shouldn’t have been here or weren’t for the greater good, but it seems like your organization is here for the long run doing some important stuff.

Jane:

We hope so, and I think it’s more about the projects and the builders that are on who are doing the hard work. We’re just here to support them and I think part of that is finding those projects and having them come to us, but also feel like they can continue building in a safe and secure way and that’s really, I think, important. And one last thing I will say is that I think there has to be the funding model, the investment piece that goes into, not necessarily from the foundation, but just outside in the industry, also has to expand. There have to be more projects that are supported, whether they’re female run or focused on really increasing who is getting that funding and who is getting that attention and education, and who’s part of those sprints. And I think that will be really important as well because the more you have different voices, the better hopefully the dialogue will be, and I think you build better when you have different perspectives pushing to improve what the end result looks like and who it’s supposed to benefit.

Ian:

There’s such a gender imbalance in tech generally, and then in a lot of crypto tech rooms, it goes even further in the wrong direction. So I think you’re doing some work with the Association for Women in Crypto.

Jane:

And I think you had Amanda Wick on the podcast.

Ian:

Yeah.

Jane:

Yes. So I’m a proud board member for AWIC, Association for Women in Crypto, and I think the goal really was to not just have another association, but to have something where women from all parts of Web 3, blockchain technology, not just lawyers, not just compliance, but marketing investors, founders, had a safe space. And I remember I was told once by someone to take a seat at the table, to own my seat at the table, and I think that that’s partially right, but I think it’s more than just taking a seat at the table. It’s making room for others at the table once you have that seat, and I think that’s what Amanda and the association is really trying to do, is to not just be mentors, but to be champions for one another and support each other.

And I think that is really important because that also helps people feel like they can take that step if they’re thinking about starting their own company or building a project or seeking funding from a VC firm. And it’s been really amazing to see how many different women around the world are doing something in this space and how often their experiences are similar, and how we can support that. So it’s been an exciting last six months,

Ian:

I’ve been watching Amanda’s LinkedIn posts. She’s traveled around the globe carrying that message and it’s great. She used to work at Chainanalysis. We talked about this idea almost two years ago of her wanting to start this association, her passion for it and that mission you just described, and then obviously, she went off and did a pretty important job for a year working with the House of Representatives. And then to see this thing come to life is just so exciting.

Jane:

Yeah. And we’re very lucky. Just to see how many people, Amanda has been the tip of the spear and I think being genuine and authentic about who you are and what you’re trying to build is also so important, because people have to trust that and they have to feel comfortable and secure to be their genuine selves. And the only way to do that is if you really feel like you’re pulling people up with you.

Ian:

Yeah. Well, Jane, this was amazing. Thank so much for-

Jane:

Thank you so much for having me.

Ian:

Yeah.

Jane:

Yeah.

Ian:

Enjoy the rest of the conference.

Jane:

Thank you. Yeah. Congratulations on all of this.

Ian:

Thank you.

Jane:

Yep.