Regenerative Finance (ReFi). What is it and is it worth investing?
The unprecedented pressure exerted recently by regulators on the crypto business in its various manifestations, ranging from centralized exchanges to banks working with cryptocurrencies, can be explained by various reasons. This is partly due to the collapse of Terra and FTX, partly, probably, with plans to clear a springboard for the introduction of CBDC, as happened in China. Be that as it may, repressive measures so far lead to the fact that investors are increasingly beginning to look towards decentralized finance, which is experiencing rapid development even during the crypto winter. Strong growth is shown by DEX and liquid staking services. According to Messari at the beginning of 2023, the native token of the Injective Protocol (INJ) platform, the management token of the decentralized exchange dYdX (DYDX) and the liquid staking service Lido showed the best dynamics.
Looking back, we recall that DeFi was created, in particular, to eliminate the inability of banks and centralized crypto-financial institutions to provide a transparent and independent financial system.
Today, DeFi continues to develop, despite the problems and collapses of the bear market. Developers continue to create new services, and investors invest in startups. It is worth noting that decentralized finance is growing not only in the purely commercial sphere.
We have already written about interesting DeFi projects in 2021, such as Decentralized science (DeSci), a movement dedicated to using blockchain technologies and Web 3.0 capabilities to promote research and development, as well as to increase transparency and decentralization of research and development.
A new trend this year may be regenerative financing (ReFi), a new approach to financing that also uses blockchain and Web 3.0 technologies to solve climate change problems, support conservation and biodiversity, and create a fairer and more sustainable financial system.
Just as DeFi develops an open, accessible financial market and removes the limitations of the traditional financial system, ReFi projects are aimed at attracting investments in SDG projects (Sustainable Development Goals) developed by the UN. Within the framework of ReFi, it is planned to create integrated solutions, for example, to accelerate the path to a low-carbon economy, using ReFi-based venture capital, which will contribute not only to material rewards, but also help improve the environment or contribute to solving important social problems.
ReFi uses many social and organizational approaches from DeFi, based on the token economy and DAO (Decentralized Autonomous Organization). A DAO is a form of organization where its members can use DAO tokens to determine the further movement of the project. For example, by investing in development, documentation, marketing, or community management. Members are co-owners of the DAO through their tokens and are interested in increasing their value.
Another important feature of ReFi is the spirit of inclusivity — ReFi projects are designed so that everyone can contribute and use their opportunities.
Today, there are quite a large number of different blockchains focused on supporting and creating ecosystem financing.
The list of projects includes Cosmos (ATOM), Hedera (HBAR), Polygon (MATIC), Celo (CELO), Near Protocol (NEAR) and Algorand (ALGO) and many others.
The most dominant ReFi sector for climate was related to the increased transparency of the global carbon offsetting market. This is due to the fact that despite the introduction of reporting standards for this sector, healthy skepticism about the fairness of the distribution of funds remains in society.
The Cosmos-based Regen network focuses on helping landowner communities create digital carbon offsets on the blockchain.
Meanwhile, Klima DAO (KLIMA) has created a tokenized carbon compensation scheme. The project token is provided with compensatory units of CO2 reduction. The cost of an “eco-friendly” swap will cost less than $0.01 more than a normal transaction.
Several projects have already been launched on the Celo blockchain. For example, Flow Carbon tokenizes carbon credits in order to keep their records in the blockchain, which makes it easier to return funds to funded projects.
Moss (MCO2) is engaged in the protection of the Amazon rainforest; the project token allows users to purchase carbon credits from certified companies operating in the region. The use of blockchain makes the process accessible to ordinary users.
In addition, several venture funds and decentralized autonomous organizations focused on the ReFi space have recently been launched, among them: Cerulean Ventures, AeraForce DAO, ReFi Venture Studio, Allegory, a100x, Vanagon Ventures, Possible Ventures and Draft Ventures.
Unfortunately, with all the attractiveness of ReFi concepts, it is too early to talk about the significant spread or benefit of projects adhering to the idea of regenerative finance. The main reason is a little interest and attracting a wide audience. So far, few people know and are ready to participate in such endeavors.
In the modern development of society, many things are happening now that contribute to the use of new technologies for positive, socially significant and sustainable purposes.
Despite all the geopolitical and economic shocks possible in the near future, 2023 could be the year of ReFi if this initiative can attract more attention and prove that blockchain and cryptocurrency technologies can have a positive impact on the world around us.
