Hashkey Grant Application: On-chain ESG and Green RWA Protocol

[Lu-Derik]

Grant Type

Session 1

Email

[email protected]

Telegram

https://t.me/arkreen_network

X/Twitter Handle

https://x.com/arkreen_network

Discord/Community

https://discord.com/invite/j5fSNRKGme

Previous Application

N/A

Code Audit

Yes. This is the code audit report:
https://github.com/arkreen/ArkreenCore/blob/main/audit/Arkreen%20NetWork%20Audit%20Report.pdf

Project Information

1. Project Description and Objectives

The AREC Protocol is an advanced on-chain solution designed to digitize green carbon assets, offering full life cycle management, including verification, registration, issuance, trading, consumption, and certification. By leveraging blockchain technology, AREC enhances transparency, accountability, and efficiency in managing green carbon assets, enabling the integration of Regenerative Finance (ReFi) applications and the tokenization of Real-World Assets (RWA) in the sustainability sector.

Deploying AREC on the Hashkey Chain will enrich the Hashkey ecosystem with a comprehensive, mature, and commercially proven green asset protocol. This deployment not only aligns with global and regional priorities for sustainable finance but also positions Hashkey Chain as a leader in green finance innovation. AREC’s functionality will empower developers and institutions to build applications that address green finance, RWA, and ReFi use cases, driving long-term adoption and value creation.

Through this initiative, our objectives are:

• To create a robust foundation for green asset tokenization and lifecycle management within the Hashkey ecosystem.
• To support Hong Kong’s green finance ambitions by enabling applications that meet the strategic goals outlined by regulators and industry leaders.
• To foster ecosystem-wide innovation by providing tools for developers and organizations to create impactful and scalable green finance solutions.

For more details, please refer to https://www.arkreen.com/ and https://docs.arkreen.com/arec/arec-overview.

2. Success Potential: - Explain why your project is likely to succeed (consider market demand, technical feasibility, and team capability)

The success of the AREC Protocol on Hashkey Chain is underpinned by three key factors:

• Market Demand:
  Global interest in ReFi and carbon markets is accelerating, fueled by regulatory support, corporate ESG mandates, and the emergence of blockchain-based sustainability applications. In Hong Kong, the government has emphasized sustainable finance as a cornerstone of its financial strategy, creating a fertile ground for AREC deployment.
• Technical Feasibility:
  AREC’s design has already proven effective in bridging green assets to blockchain ecosystems. It has been successfully piloted within the Polygon and Celo ecosystem, demonstrating its scalability and adaptability. The protocol’s compatibility with EVM ecosystems ensures that it can be rapidly integrated with Hashkey Chain.
• Team Capability:
  Arkreen, one of the earliest pioneers in this field, has been recognized by the ESG-focused blockchain Celo. AREC was chosen as the green certificate protocol for the Celo ecosystem, and Celo continues to procure green certificates issued via AREC to offset its ecosystem’s carbon footprint. （https://www.arkreen.com/blog/celo-carbon-offsetting-fund-selects-arkreen-for-on-chain-offsets-via-tokenized-recs/)

3. Mission Alignment: - Describe how your project aligns with Hashkey's goals

AREC aligns seamlessly with Hashkey Group’s and Hong Kong’s strategic goals:

• Regulatory Fit:
  Hong Kong’s Monetary Authority (HKMA) Ensemble sandbox identifies carbon assets and sustainable finance as priority areas for Web3 innovation. As one of the participants in the Architecture Community with a comprehensive global Web3 ecosystem, HashKey will conduct pilots exploring the tokenisation and trading of real world assets (RWAs), including carbon credits, green assets, and Money Market Fund (MMF). （https://group.hashkey.com/en/newsroom/hashkey-group-project-ensemble-sandbox). AREC can provide the blockchain infrastructure needed to address these goals.
• Strategic Synergy:
  Hashkey Chain, as a Hong Kong-native blockchain ecosystem, has a unique opportunity to lead the development of sustainable finance infrastructure. Deploying AREC will reinforce Hashkey’s position as a key enabler of green finance in the region and beyond.
  Deploying AREC on Hashkey Chain aligns perfectly with Hashkey Group’s goals by building the foundational infrastructure for carbon assets and sustainable finance, positioning Hashkey Chain as a leader in this strategic domain.

4. Innovation: - Highlight what makes your project unique or innovative

AREC is the most advanced on-chain digital green carbon asset protocol to date:

• Proven Adoption:
  It has been deployed on Celo, one of the leading ESG blockchains, where it supports carbon offset initiatives for the ecosystem.
• Impact at Scale:
  To date, AREC has facilitated the on-chain offsetting of over 1 billion kWh of electricity consumption and enabled more than 700,000 climate actions globally.
• Holistic Approach:
  Unlike other solutions, AREC offers end-to-end lifecycle management, integrating seamlessly with ReFi and RWA applications while maintaining a strong focus on environmental impact.
  Selected by InvestHK in HongKongFintechWeek as Web3 Show Case（https://www.arkreen.com/blog/investhk-presents-web3-showcase-at-hong-kong-fintech-week-2023-arkreen-a-leading-depin-project/)

5. Is it open source?

AREC protocol smart contracts are already open-sourced. AREC protocol has been deployed on Polygon and Celo blockchain, and has been successfully running for over a year. All the smart contract are verified within the blockchain explorer.

6. Free or fee-based for end users?

AREC protocol charge end users a few AREC issuance fee and AREC offset service fee, which accounts for about 10% of the value of the involved AREC asset. These fee constitute the revenue of the AREC protocol, assuring the stable operation of the AREC protocol, as well as its continuous technical evolution.

7. Interoperability with the Hashkey ecosystem

AREC’s technical framework is inherently compatible with EVM ecosystems, making it ideally suited for integration with Hashkey Chain. This compatibility ensures seamless deployment and interoperability with other projects and applications within the Hashkey ecosystem.

Market Analysis

1. Competitors and Differentiation

Toucan is one of the main competitors in the green carbon asset space, primarily focusing on bridging traditional centralized carbon certificates (carbon credits) to the blockchain. While Toucan’s approach centers around tokenizing existing carbon credits, AREC distinguishes itself in several key ways:

• Core Focus:
  Toucan is focused on carbon certificates (carbon credits), which are traditionally issued for reducing or offsetting carbon emissions. Their platform essentially bridges carbon credits from centralized systems to decentralized blockchain ecosystems.

  AREC, on the other hand, is focused on green energy certificates (green certificates), specifically for renewable energy assets like solar and wind power, aligning with the growing demand for decentralized renewable energy (green energy) solutions and the ReFi (Regenerative Finance) movement.

• Tokenization Method:
  Toucan bridges centralized carbon credits onto the blockchain, which means it still relies on the validity and verification processes of centralized systems. This introduces potential inefficiencies and trust challenges, as it essentially mirrors a centralized process on the blockchain.

  AREC takes a dual approach:
  It can bridge traditional centralized green certificates onto the blockchain, just like Toucan does with carbon credits.
  Additionally, it supports the native issuance of green certificates directly on-chain through a self-certification mechanism. This process allows renewable energy producers or asset owners to directly issue green certificates without needing a centralized authority to validate them. This self-certification method adds a layer of flexibility and decentralization that Toucan lacks, empowering users to create, manage, and trade their certificates autonomously.

• Market Focus:
  Toucan primarily focuses on the wholesale market, serving enterprise-level buyers who typically purchase carbon credits in large quantities for offsetting emissions. This means their user base is predominantly composed of large corporations and institutions. AREC, however, has broadened its scope to serve both wholesale and retail markets. AREC has become the largest protocol for retail green certificate trading globally, providing opportunities for small-scale buyers, such as individuals, small enterprises, and decentralized energy producers, to engage in green asset transactions. This makes AREC more accessible to a wider range of users and enables more widespread adoption.

In summary, AREC offers a more flexible, decentralized, and accessible solution for green asset tokenization compared to Toucan. While Toucan focuses mainly on carbon credits and large-scale buyers, AREC supports both carbon and green energy certificates, integrates native on-chain issuance, and caters to both wholesale and retail markets.

2. Current User Base and Estimation Method

The AREC protocol has already established significant traction in the green finance space, with the following key metrics:

1. Over 100 GWh of green certificates have been issued and consumed on-chain, signaling strong adoption of the protocol for tracking renewable energy usage and offsets. This metric demonstrates the protocol's ability to scale in terms of asset issuance and consumption.
2. The protocol has successfully facilitated more than 700,000 on-chain transactions, showcasing the robust activity and growing user engagement within the ecosystem.
3. Over 10,000 active trading addresses have interacted with the AREC protocol, reflecting its broad adoption across various stakeholders, including individuals, businesses, and institutional buyers.

These metrics illustrate not only the protocol’s scalability but also its wide-reaching impact across different user segments. By serving both wholesale and retail markets, AREC is positioned as a leading player in the global green finance ecosystem.

• Estimation Method
  The user base and activity metrics are primarily measured through on-chain transaction data, which records every asset issuance, transfer, and consumption event. This data is accessible via blockchain explorers and provides an accurate reflection of user engagement. The number of active addresses is determined by tracking unique wallet addresses interacting with the protocol. This gives a clear picture of the protocol’s reach and adoption across different market segments. The total GWh of green certificates issued and consumed is based on data from the protocol’s transaction ledger, which records the issuance and consumption of energy-related green certificates on the blockchain.

Recipient Address

0xA997bF1f0678B63815fBabe573825170715eBecc

Budget and Plan

1. Grant Size and Justification

We are seeking a grant of 100,000 HSK to support the upgrading, testing, launching, and scaling of AREC Protocol on HashKey Chain and platform. With this support, we will accomplish the following 4 tasks:

1. Design and implement a new version of AREC issuance and offset process to simplify the complexity of user operations involved in AREC issuance and offset, based on current AREC protocol implementation.

2. Upgrade AREC Dapp to support the new AREC issuance and offset process.

3. Migrate and launch new version of AREC protocol and AREC Dapp on HashKey Chain Mainnet. Setup AREC-paired liquidity pools to provide AREC asset liquidity to HashKey ecosystem.

4. Develop AREC integration SDK for third-party projects within HashKey ecosystem to easily integrate AREC asset to meet their needs of carbon offset.

2. Project Execution Plan (Roadmap)

• Phase 1: Smart contract development and security audit (0~2 months)

  Design and implement enhancements to the AREC issuance and offset process to simplify user operations. Currently, the AREC protocol and application are deployed on the Polygon and Celo networks. After more than a year of operation, we have identified points for improvement.

  1. In the current process, issuing ART tokens involves three on-chain transactions: a) Issuing an AREC NFT; b) Waiting for approval of the AREC NFT issuance by Arkreen; c) Liquidating AREC NFTs into ART tokens. This multi-step process may be complex and challenging for users. To address this, we plan to design a new the process, allowing users to issue ART tokens with their power generation data in a single on-chain transaction. This streamlined approach will significantly enhance user experience.
  2. In the current version of the AREC protocol, offsetting ART tokens involves logical tracking back to the associated liquidated AREC NFTs. While this ensures traceability, it can be costly in certain use cases. To address this, we aim to implement an optional tracking mechanism that will significantly reduce the cost of on-chain ART offset transactions while maintaining flexibility.
  3. We will introduce a proxy issuance mechanism to issue AREC NFTs on behalf of users, with their explicit permission. This feature is designed to encourage users to more actively monetize their green energy generation data through the issuance of carbon assets.

  We will upgrade the AREC protocol’s smart contracts to incorporate these three new features, accompanied by a rigorous, comprehensive, and in-depth testing campaign to ensure their reliability and functionality.

  Furthermore, the updated smart contract implementation will undergo a thorough security audit by a reputable third-party auditing firm. This process will ensure the security, integrity, and credibility of the AREC assets issued through the protocol.

• Phase 2: AREC Dapp upgrading phase (1~2.5 months)

  To incorporate the three new features mentioned above, the AREC Dapp will also be upgraded accordingly. As part of this grant , we will redesign and restructure the existing Dapp using a new UI framework. This upgrade aims to enhance the overall user experience, particularly for participants in the HashKey Chain ecosystem, by providing a more seamless and efficient platform for AREC distribution and consumption.

  Accordingly, we will upgrade the current AREC issuance service platform to support:

  1. Issuing AREC assets on the HashKey Chain, leveraging renewable energy generation data from the Arkreen Network.
  2. Bridging traditional REC assets to the HashKey Chain and tokenizing them as AREC assets.

• Phase 3: AREC Protocol launch on HashKey Chain Mainnet (2.5~3 months)

  Deploy and launch the upgraded version of AREC protocol smart contracts and the enhanced AREC Dapp on HashKey Chain Mainnet.

  Bridge more than 10,000 RECs (equivalent to 10 GWh) onto HashKey Chain, and setup 2-3 ART liquidity pools to ensure the availability of AREC assets for HashKey Chain ecosystem.

• Phase 4: Develop AREC SDK and integrate with 3rd party projects. (2~3 months)

  Develop a versatile SDK to enable third-party applications to easily integrate ART offset functionalities, addressing the carbon neutrality requirements of both the projects themselves and the users within their ecosystems.

  Target to collaborate with and integrate AREC solutions into more than five projects actively pursuing carbon neutrality initiatives.

  Actively promote awareness and understanding of AREC issuance and offset mechanisms within the HashKey Chain community. By encouraging users to adopt the concept of personal carbon neutrality, we aim to expand the market for AREC assets and foster growth within the HashKey ecosystem.

3. Token Distribution (Percentages and Initiatives)

• 40,000 HSK (40%): AREC protocol new feature upgrade and security audit.
• 30,000 HSK (30%): AREC Dapp restructure and new feature interface.
• 15,000 HSK (15%): Launch AREC protocol and supply ART liquidity to HashKey ecosystem.
• 15,000 HSK (15%): Develop AREC SDK and scale AREC asset adoption within HashKey ecosystem.

4. Token Distribution Timeline

• Month 1: 40% allocated for AREC smart contract development and test campaign.
• Month 2: 30% allocated for AREC Dapp development and integration test.
• Month 3: 30% allocated for AREC protocol launch, liquidity supply, and SDK development.

5. Post-Incentives Sustainability

The AREC protocol charges around 10% of the AREC issuance fee and ART offset fee, which will generate sustainable revenue for the AREC application.

6. Additional Accountability Info (Smart Contract Addresses, Wallet Addresses, etc.)

All smart contracts of AREC protocol will be open-sourced in GitHub, and the code of the smart contracts deployed on HashKey Chain will pass the code verification within the blockchain explorer.

All smart contracts of AREC protocol will be audited by professional security audit lab, and the audit report will be open publicly.

All deployed smart contract addresses of AREC protocol will be published in the Arkreen website.

Hashkey Relationship

1. Problem Solved for Hashkey

AREC can provide Hashkey Chain with a strategic edge in sustainable and green finance. By deploying AREC, Hashkey addresses key gaps in its ecosystem, including:

• The lack of a robust protocol for carbon and green asset management and tokenization.
• The need to align with regulatory and market trends in sustainability-focused finance.
• Enhancing Hashkey’s positioning as a leader in the HKMA Ensemble sandbox by integrating cutting-edge green finance technology.

AREC protocol has been stably running on the Polygon and Celo network for over a year, circulating millions dollars green assets and accumulating over tens of thousands of users. The deployment of AREC protocol on HashKey Chain can help to enable a large number of ESG, Green Finance and Green RWA users and partners to the HashKey ecosystem.

2. Value Proposition

The AREC deployment will unlock significant value for Hashkey Chain by enabling:

• Scalable applications in green finance and RWA tokenization.
• Broader adoption of Hashkey Chain as the go-to platform for sustainability-focused Web3 solutions.
• Differentiation of Hashkey Chain within the competitive blockchain landscape through its leadership in sustainable finance.

3. Growth Potential for Hashkey

AREC is committed to fostering growth in the Hashkey ecosystem by:

• Driving several big corporates to initiate flag PoC energy and carbon RWA projects to onboard and tokenize their green assets like solar panel, storage battery, charge station and related carbon assets based on HashkeyChain AREC protocol.
• Supporting the development of 100+ Web3 projects focused on green and energy related RWA with regenerative finance.
• Engaging 1 to 5 million users, including institutions, developers, and individual users, within the first three years of deployment.
• Driving innovation in ReFi and RWA applications, creating a vibrant and dynamic ecosystem.

4. Commitment to Building on Hashkey

Our team is dedicated to the ongoing development and maintenance of the AREC Protocol on Hashkey Chain. We will actively collaborate with the Hashkey ecosystem to:

• Expand green finance applications.
• Support developer and community engagement through grants, tools, and resources.
• Explore innovative use cases that leverage the unique capabilities of AREC and Hashkey Chain.

5. Deployment Status

The deployment is at the preparatory stage. Given AREC’s compatibility with EVM ecosystems, we anticipate completing the deployment rapidly once initiated. Our team has the expertise and resources to ensure a seamless integration process.

Milestones

• Milestone 1: End of Feb. 2025
  Finish new version AREC protocol design, implementing and testing. Ready for security audit and AREC Dapp integration.

• Milestone 2: End of Mar. 2025
  Finish the AREC Dapp integration with the new AREC protocol, supporting the new features,

• Milestone 3: Mid of April, 2025
  Launch the new AREC bridge protocol on HashKey Chain mainnet.

• Milestone 4: End of April, 2025
  Release the AREC integration SDK.

Terms Confirmation

• I confirm that all information provided is true and accurate
• I understand and agree to comply with the grant policies
• I understand the KYC requirements
• I confirm token distribution complies with legal requirements