What Is Refi?
[TL;DR]
• ReFi is one of the new financing structures that arose from the DeFi revolution.
• ReFi stands for regenerative finance, which uses various forms of capital to promote sustainable, systematic, and positive change for all stakeholders.
• The regenerative finance (ReFi) space is one of the sturdiest examples of innovation now being unlocked using decentralized ledger technologies, such as using natural capital to back up a currency.
Keywords: ReFi, regenerative, finance, economy, climate change, carbon.
Introduction
ReFi, the short for regenerative finance, is a new financing approach fast gaining popularity. It rode on the back of the fame of decentralized finance (DeFi), which was Ethereum's trend, since about two years ago. The success of DeFi in disrupting the traditional finance system assured the possibility of building real high-volume Dapps on the still-novel network. It wasn't long before the earlier successes began to attract degens (degenerate gamblers) and holders seeking yields in questionable assets. Consequently, the drive towards total value locked (TVL) in many financial protocols became high. This drive and the perception that web 3.0 is deviating from its promises of utopian values of decentralization and democracy led to the new concept of regenerative finance (ReFi).
What is ReFI?
The concept of ReFi can be traced to the regenerative economy, which aims to enhance life and wellbeing without diminishing capital resources. It is a cultural inclination towards funding community and public goods rather than projects meant to generate a return for the founder. ReFi has been described as a Web 3.0 version of Silicon Valley's GiveFirst, which implies supporting others with no expectation of quid pro quo or getting anything back.
ReFi uses various forms of capital to promote sustainable, systematic, and positive change for all stakeholders. It aims to channel investment towards regenerative enterprises to accelerate their growth and enable them to scale up their impact. ReFi also incentivizes good social and environmental outcomes by prioritizing the system's long-term health over short-term financial returns.
ReFi, Blockchain, and Ecosystem Services
Blockchain technology has advanced where real-world use cases are possible and embodies improvements over previous systems. The regenerative finance (ReFi) space is one of the sturdiest examples of innovation now being unlocked and is currently being played out in a few different ways. Projects like the Toucan protocol connect carbon offsets directly from registries such as Verra.
Through this process of bridging the credits from a database on-chain, the credit is tracked to avoid double-spending. Also, Toucan can retool the existing DeFi infrastructure to enable the creation of new financial products around carbon credits.
Pricing actions related to the effects of climate change on biodiversity had traditionally been complex. However, re-working the existing blockchain infrastructure allows the same techniques of pricing tokenized assets to be applied to regenerative actions.
ReFi crypto projects such as BasinDAO, Regen network, and Avano are among the pioneers creating assets for broader regenerative actions. This trend is bound to accelerate as the financial opportunities around these businesses increase. Following these innovative new financing opportunities and unlocking assets, the pieces come together for something powerful.
One good example is using natural capital to back up a currency. For instance, "Sacred Capital," the Celo blockchain pledged to back up 40% of their US dollar equivalent stablecoin with natural capital assets. These assets include rainforests and eventually broader assets like those backed against aquifer recharge and minerals. The approach would serve as an incentive to protect these natural assets since their stewards would effectively create fungible currency out of thin air.
Examples of Regenerative Finance (ReFi) Crypto Projects:
1. Regen Network:
Regen Network is a ReFi project concerned with ecological data in the climate-carbon control space and regenerative agriculture. Regen network strives to reinvent the economics of agriculture such that farmers do not only produce foods but also serve as land stewards. The network rewards regenerative land practices, reverses climate change with digital carbon, and regenerates the ecosystem to achieve this goal. It built an on-chain registry system for carbon claims and integrated data into the marketplace with the network's registry.
2. ReFiDAO:
It is a startup community of founders who strive to accelerate impact on people and the planet. ReFiDAO tries to nurture regenerative culture through education, awareness, and events. It also builds coordination tools for identity, accountability, and incentives while working to address the challenges of climate change, ecosystem collapse, and social injustice.
3. Gitcoin Grant:
The Bitcoin community is a ReFI project that uses blockchain technology to build and fund digital public goods projects to serve everyone and solve immediate problems. The community provides crowdfunding for talents who need financing for their projects. Last year, over $4.5 million in funding was distributed to public goods on Gitcoin Grants, with $1 million given in the first two weeks of December.
4. WhalerDAO:
It is a community of developers, legal experts, researchers, and community influencers dedicated to solving the world's many problems using the power of web3 technology and decentralized finance (DeFi). The community calls itself whalers to symbolize their intention to take control of DeFi protocols away from the few privileged ones and mighty "whales" and give it into the hands of the people. The motivation is to prevent DeFi from becoming just another tool for the 1 percent rich to get even richer at the detriment of the remaining 99 percent.
5. BasinDAO:
It is another ReFi crypto project that uses the power of web3 technology to unlock natural and carbon capital for the restoration, regeneration, and conservation of land at scale. The platform simplifies the acquisition of undervalued or degraded properties and regenerates them for economic and environmental benefits.
Merits of ReFi
Regenerative finance is meant to keep Web3 on track with democratic value and decentralization, not technocratic. It is based on the community using peer-to-peer (P2P) tokens to fund what it needs to be funded. Contrary to the legacy world and traditional system where the bourgeoisie gets to decide what is worthy of funding, open sources and systems are to be funded by the crowd in ReFi. For example, more than 5,000 crypto users contributed to the latest Gitcoin Grants Round. The true wealth in ReFi is in the culture it fosters. A culture that flourishes on overcoming pessimism, embracing longer-term initiative, and mutual trust.
Conclusion
The disillusionment fueled by the recent crypto winter has made many express low faith in blockchain technologies' decentralized and trustless attributes. Some believe these attributes are mere techno-utopian fever dreams, and the future of web3 may be no different than that of the technologies before it. The existence of hegemons who call the shot and appropriate all the gains of the technologies may soon become the new norm. The ReFi movement is more of a reaction to this trend to build with a preference for funding of community and public goods rather than projects meant to generate a return for some founders.
Author: Gate.io Observer: M. Olatunji
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* This article represents only the views of the observers and does not constitute any investment suggestions.
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