Better still, imagine it was financially attractive to seek out barren land and actively invest in reforesting it. Once a local resource has been depleted, civilizations start to look https://www.xcritical.com/ elsewhere to replenish those resources, often by expanding their empires through trade or, worse yet, military force. We have two dichotomies to examine humanity’s relationship with the environment’s finite resources—Man vs. Man and Nature vs. Man.

Unleashing the Power of DAOs: The Benefits of Decentralized Autonomous Organizations in the Pacific

These systems are also being used to track supply chain usage, alongside things such as environmental impact, in what is regenerative finance order to create a verifiable understanding of how resources are being used in a sustainable manner and by whom. The first thing to understand about Regenerative Finance (ReFi) is that it seeks to invert the extractive economic systems that we currently have. There is a promising trend of environmental, social, and governance (ESG) factors in the investment world. Unfortunately, the focus is still too much on reducing detrimental impacts rather than achieving positive impacts. Even when investing is concentrated on making a positive net impact, it focuses too narrowly when it defines its targets.

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

In this ReFi example, the regenerative land management outcomes are minted by Earthbanc as eco-credits on Regen Network’s ledger and its meta-registry, which can then be sold. Companies such as Microsoft and large investment platforms currently buy carbon credits from Regen Registry, which is produced by a team of regenerative actors, including developers, ecologists and scientists. Traditionally these outcomes would only have been achieved if a government taxed the negative externalities and redistributed the funds to replenish that which was extracted or degraded. There is a role for the capital markets to make restoration, regeneration and healing possible at scale. We can no longer hide from systemic racism, growing inequality or the climate emergency that impacts everyone—although not everyone equally.

• For users of these new systems, it’s key to be cautious and aware and to do your due diligence before using a ReFi (or any Web3) service.
• Layer 1s are carbon-neutral or -negative proof-of-stake blockchains like Solana that are highly energy efficient.
• In regenerative finance the goal is to make positive change possible, with the financial return as a by-product.
• In 2017 Tom Duncan, CEO of Earthbanc, developed a simple narrative about how it would function from a first principles basis, meaning the core truths regenerative economics would be built from.
• While early, tokens represent an alternative method to NFTs as a way to access positive impact projects through crypto.

Regenerative Finance projects – use cases

The notion that this regenerative approach could represent a ‘new stage of capitalism’ found traction within the decentralised, self-organising leanings of the crypto sector. Suddenly I was seeing #ReFi everywhere, a refreshing change from the usual degen shill posts and engagement traps. Here were people using finance, crypto and web3 to change the world for the better. People more concerned about the positive impact they were making for the planet as a whole than filling their own bank accounts. Applications on a blockchain could be poorly designed or malicious — after all, access is open so anyone can create a decentralized application. Not many regulations are in place yet, so users of DeFi products need to carefully evaluate which services are safe to use and trustworthy.

In a regenerative financial system, economic activity benefits all of the system’s living participants, instead of unsustainably extracting resources, unfairly distributing profits, and ignoring the value of living ecosystems. Regenerative Finance, or ReFi, is based on this theory of regenerative economics. ReFi is the regenerative finance movement forming at the intersection of the third evolution of the internet (Web3).

Decentralization, by design, also accelerates diversity and enables anyone interested to participate in the system, regardless of who they are and where they are from. In DeFi, services often offered by companies or other centralized parties (i.e. banks or stock exchanges) are replaced by smart contract applications. These computer programs can run and maintain different financial products such as single and joint bank accounts, lending services, or currency exchanges. Smart contracts are essentially small computer programs that are stored and run on the blockchain, and they can interact with information that has been saved on-chain. Smart contracts can execute a variety of actions based on predefined conditions. A smart contract could, for example, automatically buy and retire tokenized carbon credits whenever a user sends funds from one account to the other.

ReFi has the potential to transform how we use money and finance as tools to support life on our planet. Financial tools with open access, open code and open data unlock unbridled innovation, but openness can also allow bad actors to join that are trying to abuse the system. For users of these new systems, it’s key to be cautious and aware and to do your due diligence before using a ReFi (or any Web3) service.

Everyone can leverage ReFi’s digital infrastructure to coordinate and pool resources across borders, design products that serve key needs for local communities, or build services that accelerate climate action. Some crypto projects are focused on reducing carbon emissions as well as helping community-led initiatives fight climate change. Organizations such as the Climate Collective help raise awareness for projects that use blockchain technology to deploy regenerative financial solutions. A circular economy is a systemic approach to economic development designed to benefit businesses, society, and the environment whilst living within planetary boundaries. It is regenerative by design and aims to gradually decouple growth from the consumption of finite resources³. In a circular economy, just as in our current economy, shared perceived value drives profit — meaning that regenerative activities can become core business and finance activities.

This enables long-term value generation for all to be achieved and the conservation and restoration of natural resources. The aim is to create a self-regenerating, sustainable system without relying on scarcity or exploitation. In regenerative practice, places are described as having a unique bio-cultural identity and potential. ReFi has the potential to deal with all aspects of restoring our economies into localised living entities.

Blockchain technology is a helpful tool in leveraging ReFi to its full potential. All that is left now is the desire to make meaningful change and benefit from the financial, social, and environmental success that will follow. There is a strong and close relationship between ReFi and decentralized systems. Since the goal of regenerative finance is to leverage emerging technologies to adequately incentivize coordination of environment-improving technologies and policies, blockchain technology is seen as a great tool in this endeavor. Digital tools like blockchains are giving us advanced ways to design and reprogram value exchange mechanisms and money flows, and let us include what we value in our financial systems. Decentralized exchanges (DEXes) let users trade cryptocurrencies without the need for intermediaries.

Instead of matching buy and sell orders, often DEXes enable exchanges with “liquidity pools”. Users deposit funds into a pool (these users are called Liquidity Providers or LPs), and everyone can freely trade their funds with what’s in the pool. Exchange rates are calculated based on supply and demand by the DEX smart contracts, and conditions like trading fees are set transparently.

By reducing costs for businesses and allowing natural resources to regenerative more, we get to enjoy a win-win for profits and people. Many cryptocurrency, regenerative finance, and blockchain projects are working on technology that follows the above principles. At its core, this approach implies a change of paradigm and the ability to articulate a complex systems solution. Regenerative economics incentivizes actions that increase systemic health, and disincentivizes actions that lead to systemic degradation.

They provide the logic behind the 10 principles of systemic, socio-economic health. In socio-economic systems, these network science concepts demonstrate how regenerative economics requires regular investment in human, social, natural, and physical capital. In the financial industry, environmental issues (Environment), social aspects (Social), and responsible corporate governance (Governance) have played a central role for several years. The ESG criteria are used to assess the sustainability of a company and can be taken into account when making investment decisions.

Open conversations with different parties help us understand each side’s pain points, and aid us in bridging the gap between legacy actors and new market participants. It was mostly dominated by white men, on the investor- as well as on the founder side. Between 2012 and 2018, only 18% of founding teams had a woman on board, and just 8% of founding teams were women-only. The obvious use case is to take the tokenized carbon itself and send it directly to the existing buyers’ market (large enterprises).

Are you interested in learning more about regenerative finance and how your organization or business can benefit from and apply it? Traditional finance approaches the very dire problems facing civilization as we know it too myopically. There are systemic failures occurring across all sectors of society, and the easiest way to have somewhat of a smooth transition is to transition to a regenerative financial system. The overall goal is to shift the global economy from being degenerative or sustainable to being regenerative so that shared value can be created. Part of this shift involves shifting from endless accumulation and throwaway culture to a circular economy.

Since sustainability challenges stem from fragmented thinking and systems incentivizing degenerative behavior, holistic thinking and regenerative incentive systems need to replace them. Many ReFi projects, like Toucan, are taking additional steps to keep users safe, and they are ensuring that processes are executed in a fully compliant way, for example by collaborating closely with relevant financial authorities or industry bodies. Carbon isn’t materially underpinning these organizations, but DAOs and other crypto-based collectives aggregate voice, influence, and marketing with basic blockchain-based infrastructure support. At the time of writing, its community has “adopted” 3,187 animals, planted 18,300 IRL trees, and created 183 employment workdays for real people on the ground.

This can include money earned from crypto token sales or additional funds raised within the project for specific purposes. Earthbanc has signed a world-first partnership with the United Nations Convention to Combat Desertification (UNCCD) to finance 100M hectares of land restoration — which we will share the details of in our next blog. Carbon offsetting is just one part of a much larger picture when it comes to reaching net zero. Regenerative Finance (ReFi) represents an economic evolution in both mindset and technology that can enable the rapid scaling of climate action required.

Regenerative finance leverages money as a tool for solving systemic issues, as well as community and environmental problems. It uses decentralized finance (DeFi) and blockchain technology to assist in reversing the damaging effects of industrialization, along with systemic financial imbalances. Web3 technologies could be leveraged to support the improvement of ecological and social issues, be it deforestation, food scarcity, or something else. ReFi actively encourages investment in regenerative projects, which then leads to the regenerative movement spreading globally until a critical tipping point is reached. Everything in a public blockchain is recorded in a transparent way, ensuring all contributions are being tracked for all to see how impactful those investments truly are.