Regenerative Finance 101: A Guide to Crypto’s ReFi Movement

To understand a practical implementation of ReFi, we will explore the implementation of tokenized carbon credits, what problems these tokenized credits solve, and common-sense approaches to regulation. Protocols like Toucan, Flowcarbon and Nori are working to build the Web3 carbon market, each with slightly different approaches. What they share in common are providing openly verifiable, transparent, and liquid carbon credits that resolve the inefficiencies in today’s markets, potentially incentivizing tokenized carbon credits Initial exchange offering in many different contexts. At a time when companies and individuals are highly motivated to take action to combat climate change, the opacity of current carbon markets reduces the tangible action companies can take to offset their carbon emissions.

Step 1: Pricing Natural Assets by Their Value as Carbon Sinks

Prior to leading Network Goods, Evan completed a BS and MS in Materials Science and Engineering from Stanford University and completed a Ph.D. in Applied Physics at the California Institute of Technology before leading PL Research. In a ReFi system, financial capital https://www.xcritical.com/ is not an end in itself but is employed in service of each of the other forms of capital. Regenerative economics works to strengthen of the world’s systems by systemic issues, driving innovation, and learning.

Quick comparison — DeFi and TradFi (or “finance as we know it”)

As finance use cases in Web3 continue what is regenerative finance to evolve, there is one relatively new concept called Regenerative Finance (ReFi) that is gaining significant traction. This combines Decentralised Finance (DeFi) with positive social-economic and environmental goals – such as removing carbon dioxide from the atmosphere. Users can log into a chosen web app, connect a digital wallet, and deposit crypto onto the platform to use regenerative finance and can choose from a list of supported crypto to borrow against the collateral deposited when the funds are deposited. Regenerative finance is ultimately designed to create a more balanced, nondestructive economy that incentivizes social and environmental good. Michael Kramer, managing partner and director of social research at Natural Investment Services, introduced the concept of “regenerative investing” in 2003.

• They stated that, rather than attempt to account for CO2’s negative externalities downstream (e.g. as a carbon tax), they should be accounted for in our currency—and thus our economy—itself.
• ReFi users also often value safety over experimental services with potentially high returns, and prefer knowing who they’re dealing with over prizing anonymity.
• The third most popular quadrant, top-right, contains approaches where regenerative sustainability and ReFi are reliant on Web2 technologies but are geared toward developing new business models in which new sources of value capture are tied to achieving regenerative sustainability.
• This is a crypto investment that prioritizes sustainability and environmental protection.
• The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Regenerative Finance: Using Financial Motivation to Incentivize the Regeneration of Natural Resources

Regenerative Finance is supporting the efforts to create a sustainable economy, propelling interest, investment, and innovation. Its data storage structure reduces risk of fraud and foul play in regenerative projects and Impact Investments. Universal basic income, or UBI, is a system where everyone is given a set amount of money on a regular basis.

New Trends in Gender-Responsive Digital Economies in the Global South

As a result, forests, oceans, and other natural resources can be valued according to the amount of carbon they capture. For example, the higher the price per ton of carbon, the more attractive it becomes to get into the business of planting new forests (and deriving income from carbon credits) instead of cutting down the trees for timber. Regenerative Finance, or ReFi, is an experiment to create financial incentives to draw down carbon emissions, “regenerate” the environment and ultimately reverse climate change. Our complex, systemic problems are proving resistant to simple solutions; andeach one has its own web of complexities to unwind. One thing they all have incommon, though, is that you can’t fix a broken [name any system] with a brokenfinance system. That’s why regenerativefinance— a concept that’s been percolating at the edges of impact investing andsustainable business since at least 2015, when JohnFullerton laid out theprinciples of regenerativeeconomics — isemerging as an essential strategy.

This has led to a growing wealth disparity, escalating environmental crises, and widespread financial exclusion. There is a need for a more holistic approach to finance — one that promotes sustainability, inclusivity, and transparency. In the aftermath of conflict, economies are often shattered, with infrastructure destroyed, markets disrupted, and communities left grappling with profound losses. Traditional aid models, while valuable, can sometimes fail to address the root causes of economic fragility.

Local currencies can support businesses, create jobs, and build resilience against external influences. By using local currencies, communities can also take control of their own economic destiny, and promote their unique culture and identity. SEEDS, for example, are seeking to build a regenerative economy in which participants earn citizenship by sharing and investing ‘Seeds’ (their currency) into regenerative projects around the world. A regenerative economic system actively works towards restoring and replenishing natural resources and ecosystems, instead of exploiting them for short-term gains. It prioritizes creating sustainable and equitable prosperity for all, while preserving the planet’s natural resources.

The open nature of DAOs and the position of members as key stakeholders based on their token holdings means that investment opportunities are not a closed shop, and everyone can feel like they’re doing their bit for causes that they care deeply about. One of the largest exchanges in the world, FTX, went bust and its owner was brought up on fraud charges. The media coverage of this was extensive, and doubts were raised over the volatile, turbulent nature of the cryptocurrency market. However, just because a crypto project labels itself “regenerative,” it doesn’t mean it’s a good investment.

I also share Santi’s enthusiasm that gaming will continue to grow more than other parts of crypto in 2023. Combining ReFi and gaming has the power to accelerate behavioral change towards the future we want by making it fun and rewarding to do so. In a simple form, this could be the tokenization of data or assets from a centralized registry (e.g., Verra) that are converted into blockchain-based tokens (e.g., through Toucan Protocol, Hedera Hashgraph, or TYMLEZ) for tracking and trading. Two types of actions should be taken in parallel and at an unprecedented scale to achieve sustainability.

These centralized ReFi approaches pave the way for companies to capture value from restoring earth’s natural resources. Ant Forest has proven to be the most impactful loyalty program imaginable, ensuring that users use the app daily, often as one of the first things they do after waking up, to avoid friends stealing their energy points. For example, ReFi components could enable systems in which governance is not monopolized but inclusive. ReFi could also facilitate integration between environmental and social impact metrics and financial models, bridging the gap between economic outcomes and tangible sustainable efforts. Conventional growth capital options — privateequity, public offerings, acquisition by a large corporation — typically don’talign with the goals of mission-first businesses.

The first condition is “Resource Unit Subtractability.” A resource is subtractable if harvesting by one appropriator of a unit of the resource makes a unit of that resource unavailable to another appropriator (e.g., subtracting a ton of fish from a fishing ground). This further assumes that multiple appropriators must exist (aka. the “multiple appropriators” condition). A CPR will include resources whose appropriation will be carried out by changing the “flow” of the resource (e.g., fishing more at one spot) or changing the stock extraction (e.g., killing fishing spots).

These microfinance institutions (MFIs) offer not just loans but also financial literacy training, community savings programs, and access to agricultural inputs, which have contributed to local economic growth. These institutions, embedded within the community, have been instrumental in promoting inclusivity, ensuring that marginalized groups are active participants in the economic rebuilding process. Evidence shows that the negative externalities of global agrifood systems outstrip the global market value of agricultural production by a ratio of two to one. Our food system has become value destroying as measured in climate change, water scarcity, biodiversity loss, diet related disease, and erosion of farmer well-being– all of which threaten the resilience of agrifood supply chains.

Decentralized governance serves as the overarching system that intersects both information transparency and accountability. The academic literature underscores the crucial role of information transparency in enabling effective governance by granting stakeholders access to accurate and timely information, thus facilitating informed decision-making and reducing information asymmetry. Moreover, transparent information serves as the foundation for holding individuals and organizations accountable for their actions and outcomes, thereby cultivating trust and legitimacy within governance processes. Conversely, financial mechanisms play a pivotal role in shaping governance incentives through concepts such as incentive structures, risk management, and performance-based compensation. These mechanisms incentivize individuals and organizations to make responsible decisions and pursue long-term value creation. The fragmentation of global carbon pricing systems can be interpreted as a market failure because it leads to a socially suboptimal distribution of goods and services.