From Degen to Regen

Saving the world might not be the number 1 concern of crypto bros, but wouldn’t it be nice if some of the lambo funds generated via speculation could positively impact the world around us? 

Regen = Degens active in ReFi 

That’s the question Regens asks. After all, no one will oppose making the world a better place, and we’re facing sufficient challenges requiring immediate action - such as climate change or increasing geopolitical tensions. 

While crypto isn’t a panacea for these issues, it could provide a pillar to enable a different economic system: one that’s regenerative rather than extractive. 

Sounds very hippie? Yes and no. 

Regens aren’t just about spreading good vibes, breathwork, and sipping yogi tea. They also understand that money makes the world go round. 

So, how does Regenerative Finance (ReFi) put a spin on speculative tendencies and funnel them into actions for good? 

Let’s start with what a regenerative economy could look like. 

Regenerative economy 

If you look at any country’s top agenda point, chances are it’s GDP growth. Everyone always asks, “What is the GDP Growth rate?” when really they might want to ask, “Why is that our number one goal?”

One could go further and ask how GDP is calculated and shake one’s head at how all of the care work and babysitting that enables the economy to grow isn’t included. For the sake of this post, though, it’s enough to understand that it’s paradoxical to assume that things could continue growing forever - when our planet has only limited resources. 

And no, colonizing Mars won’t fix it since it merely extends the issue to yet another planet. 

Regenerative economy suggests a system that designs processes to extend the lifespan of products and restore natural resources. Instead of a take-make-waste system, it follows an approach that allows the environment to regenerate natural resources while incentivizing the reduction of the global carbon footprint. 

"Regeneration means putting life at the center of every action and decision." - Paul Hawken.

Regenerative economists acknowledge that short-term growth maximization often comes at the cost of long-term damage. 

Take Avocados (sorry, hipsters).  🥑

The increase in demand for the green fruit has led to massive deforestation in Mexico and increased organized crime. The uncontrolled water use necessary to produce the green gold aggravates the damage done. As one farmer put it, “They export our water in the form of fruit.”

And yet, the Marketing agency Avocados from Mexico brands their avocados as the most sustainable. Something doesn’t add up - yet it perfectly illustrates the extractive nature of our current systems. 

Add to that a lack of transparency on the supply side, and it’s nearly impossible for consumers to pick an avocado that’s been produced fairly. 

How can crypto fix this? 

While I’m still waiting for a crypto project to fix the avocado issue, ReFi projects already leverage blockchain to take a more holistic approach to financial systems. Instead of just looking at providing high APYs, they consider the interdependence of economic, social, and environmental issues. 

As such, they align with the social ecologist Bookshin, who postulated that the most significant issue of current-day environmentalists is their lack of understanding that they need to treat the root cause of the problem - and not the symptoms. 

According to Bookshin, the root cause is the belief that humans control nature, which he considers a destructive byproduct of social hierarchies. 

If only there were a system where we could re-think social hierarchies.

ReFi focuses on creating systems that value the circulation of goods over accumulation. Regens consider money a powerful instrument to address systemic inequities. Although many associate ReFi largely with climate change and addressing Earth’s depleting resources, the area also includes public goods funding and general initiatives benefitting humanity. 

Initiatives focus on: 

• Climate initiatives 
• Cultural Heritage preservation 
• Funding public goods & more. 

To run a thought experiment on how the avocados could be harvested in a regenerative system.

Instead of having big corporations or mafia run the plants, refi funding mechanisms like Gitcoin could be used to fund local farmers directly to use their existing plots of land. In collaboration with IoT networks, the growth of the fruits could be surveilled - all while updating metadata on the progress. 

Then, once harvested, there is an immutable track record of how this avocado came to be and how much resources it consumed. Part of the price consumers pay could be funneled back to reforestation efforts. 

Note that this doesn’t address the problem of increased water use or reduce organized crime. We might just have to eat less avocados. 

Moving beyond the hypothetical, here are a few projects already active in ReFi and making a difference. 

ReFi Projects & What They Do

EthicHub is a blockchain-based crowdfunding platform that connects investors with unbanked small farmholders. Many of these farm owners can only access loans at horrible interest rates or not at all. By crowdfunding initial funding, EthicHub allows them to get the start capital necessary to farm coffee while also providing them with a way to build their credit score. So far, more than 2000 people have backed small farmers, with more than 3.5 million leading to 500 projects receiving funding. 

And the best part is one can even enjoy the outcome of one’s loans in the form of coffee. 

Kyoto Protocol 

Carbon credits allow individuals and companies to offset their emissions. However, the market is plagued by opacity, a lack of verification, and double-counting. 

Kyoto Protocol, a blockchain solution, aims to change that by scaling the voluntary carbon market with the transparency of Web3. The team is committed to becoming the most sustainable blockchain and has planted over 1 million trees before its launch. Additionally, 25% of gas fees go toward offsetting carbon. 

By storing data on the blockchain, Kyoto enables the tracking and monitoring of registries and eases access. Regardless of whether you think carbon credits are modern-day letters of indulgences or a solid market-based incentive for companies to do better, you have to admit that an increase in transparency and a reduction of double-counting are benefits. 

Gitcoin 

Gitcoin is a platform that supports builders developing open-source software and a place to fundraise for regenerative projects. Launched in 2017, Gitcoin has become the go-to place for funding public goods and pioneering sustainable models for developers. Quadratic funding has become a core mechanism of allocating funds in crypto. During quadratic funding rounds, individuals’ contributions are matched. What matters more than having one big donation in QF is having many individuals vote for you. This is meant to encourage funding for projects that benefit communities. 

During QF, it’s better to have 100 backers invest $1 than having one who allocates $100. The idea behind it is to align the needs and incentives of donors. In the Regen context, it’s worth highlighting that Gitcoin Founder Kevin Owocki is also an outspoken proponent of taking the “Green Pill,” aka using crypto, to create a more regenerative economic system. 

Despite some positive impacts from projects like the above, ReFi still faces an uphill battle and its own challenges. 

Challenges 

Whenever there is a new feel-good space, it’s just a question of time until less well-intentioned characters leverage the narrative for their benefit. ReFi is no exception and has been riddled with shady projects. Ironically, opacity is a big issue in ReFi. 

Data

The data landscape isn’t organized, leaving investors in the dark regarding the quality of their investment. It’s a similar struggle faced by companies trying to invest with ESG in mind. 

A second data-related challenge is the need for more standardization. Since each project implements its own framework, it’s nearly impossible to compare. Take carbon credits; as long as an agreed-upon rating system is missing, you can’t differentiate between good and bad. 

Financial Viability 

Even though it’d be great if sustainability were as profitable as buying DogWifHat early, investments focusing on impact might not be able to compete with the 1000% APY farms or with the promise of life-changing money made in just a week. 

Of course, it also goes without saying that many projects in crypto aren’t generating revenue to begin with. Still, ReFi products that find product-market fit can showcase a path to being financially feasible without sacrificing their values. And not everyone is a degen looking to speculate on funny memes. Some people also want to put their money where they feel it has the most significant impact. 

Lastly, the broader question with some ReFi projects that simply tokenize existing financial instruments is whether that is the right approach or falling short of the bigger ambition. After all, with blockchain, we have a tool that allows thousands of people to coordinate - while aligning incentives to foster positive-sum games. 

Where does that leave us? 

The future 

ReFi aims to funnel people’s degen tendencies into a force for good. That is a worthy pursuit, and despite initial challenges, the real-life impact of ReFi projects might even spark a more positive view of outsiders on crypto. 

We're on a good path if we can leverage the tech to do things that are only possible onchain while contributing to solving more significant global issues. 

Some of the aforementioned data issues might be mitigated by the spread of IoT devices that can verify the quality of carbon offset created in a square mile of forest and write it onchain. Others will require social coordination to agree and establish rating frameworks. 

“Anything worth doing is going to be difficult.” - Fauja Singh 

Overall, we’re pretty sure that ReFi will continue to grow. We're happy to provide leading Regen projects like Kyoto Protocol with all the onchain data they need. If you are a ReFi project in need of onchain data, get in touch!