What Is ReFi?

Introduction
ReFi is rooted in the theory of regenerative economics, which explores how to create a system to restore and maintain the material resources necessary for human well-being, and hopes to encourage people to do things that are beneficial to the ecosystem through financial interests, so as to regenerate natural resources.

TL;DR
- ReFi (Regenerative Finance) aims to reverse climate change through Web3 technology, that is, using the transparent mechanism of blockchain technology to introduce real natural assets into the chain, and at the same time, introduce incentive mechanisms to reward behaviors that contribute to green development, so as to promote sustainable development.
- As a new narrative paradigm for exploring the Web3 world, ReFi is different from the previous Web3 narrative paradigms L1, L2, DeFi, NFT, P2E, etc.
- Presently, the relatively successful ReFi project is Celo.
- By combining Web3 technology with decentralized architecture, ReFi creates a programmable economic cycle for the earth's regenerative economy, which can sustainably promote the earth's regeneration and generate sustainable positive externalities.

What is ReFi?

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ReFi (Regenerative Finance) now refers to the Web3 regenerative finance movement. The abbreviation indicates that it originated from DeFi.

The innovative concept of ReFi aims to reverse climate change through Web3 technology, that is, using the transparent mechanism of blockchain technology to introduce real natural assets into the chain, and at the same time introduce an incentive mechanism to reward behaviors that contribute to green development, so as to promote sustainable development.

ReFi is rooted in the theory of regenerative economics, which explores how to create a system to restore and maintain the material resources necessary for human well-being, and hopes to encourage people to do things that are beneficial to the ecosystem through financial interests, so as to regenerate natural resources.

ReFi is not limited to the crypto space. The carbon emission market is also a ReFi market, which is in line with using financial interests to stimulate enterprises to reduce carbon emissions. By pricing carbon emissions, more enterprises will be encouraged to reduce carbon emissions and do something more beneficial to the ecosystem.

Development Mode of ReFi

Presently, the number of projects in the ReFi field is increasing day by day, and there are mainly three development modes:

1. Stabilize our climate by reducing and eliminating greenhouse gas emissions, mainly through the carbon emission market;

2. Based on cultivating and developing biodiversity, we can restore our ecosystem and exchange its value with carbon market infrastructure;

3. Building social justice - by rebuilding the local economy rooted in the nursing community

These three pillars provide a framework that can guide the ReFi movement to its full potential. Although there are many risks in pursuing these ambitions – our aim is not to outline the full range of possible mistakes, but to highlight the potential of the Web3 community to redesign money and heal the planet.

Features of ReFi

As a new narrative paradigm for exploring the Web3 world, ReFi is different from the previous Web3 narrative paradigms L1, L2, DeFi, NFT, P2E in the following features:

Multiple Benefits

ReFi supports other groups to benefit from the development of Web3 without paying any additional costs. This new narrative of Web3 shining with the glory of humanity (perfect humanity is Divinity) will add new fresh water into the Web3 industry facing the crisis of narrative exhaustion.

Transparent Traceability

Whether Web3, Web2 or more traditional organizations, they all promise transparency. But only Web3 projects can realize the transparency of trustlessness technically and logically.

ReFi inherits the feature mentioned above of Web3. If a user purchases carbon credits to offset his carbon emissions through the traditional carbon credits market, he/she will eventually get only a PDF certificate, and other information is a black box for him/her. The ReFi project will link the registration institution, credit type and batch year of the carbon credit token. Users can view this information through the blockchain browser at any time.

Tokenization

After the ReFi project tokenized natural assets, with the help of Web3 infrastructure, wallet and DeFi application, users around the world can freely invest, purchase, use and trade tokens of these natural assets without permission.

Programmability

Programmability is a prerequisite for the implementation of transparency and tokenization in the ReFi project. The programmable smart contract gives the ReFi project the ability to unlock the tokenization, pooling (standardization) of natural assets and the use of decentralized lending and AMM Swap, making the ReFi project able to improve the capital efficiency and transparency of natural assets.

Sustainability

ReFi is an integrated innovation like Apple mobiles. ReFi is not a technological innovation. In fact, the Web3 technology used by ReFi is only some basic technologies, such as token issuance, DeFi lending, AMM Swap and DAO tools. Its innovation is to combine these Web3 technologies to provide a new solution for coping with climate change and supporting the diversity of sustainable development projects such as environmental protection and biology.

Positive Externalities

ReFi is an economic cycle system with positive externalities. ReFi is a relatively independent economic cycle system with complete production (production of natural assets) - exchange (tokenization of natural assets and DeFi facilities) - consumption (use and consumption of natural assets), and the system has positive externalities. The externalities here refer to that the economic activities of one economic subject cause other economic subjects to obtain additional economic benefits, and the beneficiaries do not have to pay relevant costs.

Can Celo bring prosperity to ReFi

In the economic sense, it is conducive to ensuring the emergence of a vibrant community economy. These life systems connecting human beings and the earth will produce a flexible monetary ecosystem, which can not only stabilize our climate and restore the natural ecosystem, but also activate the vitality of social capital through decentralization and trustlessness.

Presently, Celo is a relatively successful ReFi project in this field. The birth of Celo was partly influenced by Charles Eisenstein's Regenerative Economics. Its mission is to establish a financial system and create better conditions for the prosperity of everyone, including our planet.

Celo, as one of the few successful projects in the ReFi field, is a decentralized stablecoin and financial application platform based on blockchain. Celo is EVM compatible and adopts the L1 blockchain network in PoS mode. Its innovative feature is to use the phone identity system (PIS) and Plumo ultra-light client technology to realize some scenarios of ReFi.

PIs, the phone identity system, is a service that uses validators to prove that new users can connect their wallet address with their phone number, which enables users to send crypto assets to each other through their phone number. From the perspective of user experience, this is more conducive to the expansion of the user group.

Differences

Unlike many Layer1 public chains facing all markets, Celo is positioned as a blockchain network focusing on decentralized mobile payment. Its mainnet was officially launched in April 2020, aiming to enable users without bank accounts in the world to enjoy the convenience brought by DeFi products through mobile phones and other mobile devices. Therefore, Africa and many less developed countries are its target markets.

Celo not only adopts the PoS consensus mechanism, is EVM compatible, and has cross-chain interoperability, but also has the features of using stablecoin as the transaction medium for remittance, cross-border payment, etc., supporting multiple tokens to pay gas fees, mapping phone numbers to wallet addresses to simplify transfer operations, etc.

Celo is also committed to contributing to environmental protection and promoting the development of ReFi.

For example, we will conduct in-depth cooperation with the carbon credit token type of ReFi projects such as Toucan, Flow Carbon and Moss, and establish a cooperative relationship with Uniswap to better improve the liquidity of carbon credit tokens, so as to improve the capital efficiency of the current ReFi market.

The Current Status of CELO

Currently, Celo ecosystem products have begun to take shape. So far, there are more than 120 Dapps and protocols, including DeFi, GameFi, NFT, Web3, data and development platform, social impact projects, ecosystem native projects, staking, analysis tools, cross-chain bridges, wallets, financial products, etc. As of the writing time, the total TVL of the Celo ecosystem is approximately $139 million.

Among them, the weight of projects in the categories of DeFi, wallet and social impact is relatively high, accounting for approximately 26%, 24% and 10% respectively. Taking DeFi as an example, the proportion of nativel projects of the ecosystem is nearly half. However, the scale of the native projects is still small at present. Among the social impact projects, there are many financial services and poverty alleviation protocols for the poor, which clearly reflect the features of the CELO ecosystem.

Celo's vision is to establish an open financial system so that people in the world who do not have bank accounts but have smartphones can easily access financial services. Presently, 1.7 billion people in the world lack access to financial services, which makes the road to prosperity more difficult. Therefore, Celo is constantly committed to making financial instruments available to anyone who has a mobile phone.

Conclusion

Nowadays, it is time to redesign the traditional rules of the money game and solve the global environmental crisis such as the climate problem.

If it can provide people with basic needs and cultivate more dynamic local economies that can develop healthily, and if it can establish a fair, just, diversified and inclusive healthy ecosystem, ReFi is a new development direction worth exploring in the process of the world moving from Web2 to Web3.

Author: Gate.io Observer: Byron B. Translator: Joy Z.

Disclaimer:

* This article represents only the views of the observers and does not constitute any investment suggestions.

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