If you are familiar with crypto, the term ‘Decentralised Finance (DeFi)‘ should be no stranger to you. It is essentially a financial system that evolves around blockchains. Recently, a new term has been rising in the space named ‘ReFi’, which is slowly gaining popularity among those passionate about social and environmental justice.
What is ReFi?
According to John Fullerton, an economist and philosopher who wrote in his paper Regenerative Capitalism, “regenerative economics” involves creating long-term financial prosperity for communities by regenerating what has been lost, conserving what remains, and maximising value.
Our current financial system is extractive and exploitative. In the case of environmental resources, one of the most prominent examples would be trees. We cut down trees to produce papers and furniture, yet we do nothing to replenish the trees lost. Hence, resources are depleted, and the system loses capacity over time; this is why we need a regenerative system to address social and environmental exploitation issues.
Connecting ReFi with Web3
Although the original term was not coined based on web3, a decentralised democratic place is where ReFi can fully reach its potential and bring about positive changes.
Therefore, leveraging DeFi is necessary to facilitate the automation of many financial decisions, such as earning interest, borrowing money, and purchasing insurance without requiring intermediaries or patchwork regulations.
Extending ReFi to Web3 allows the modification of existing financial models using smart contracts. Smart contracts are on-chain agreements written in codes, and they will be activated once pre-determined conditions are met. This means that transactions can be quickly executed without any human involvement needed! At the same time, faster processing times for payments and transfers while cutting down intermediaries’ services make it more accessible for everyone.
Carbon Trading and ReFi
We are all well aware of and have experienced firsthand the devastating effects of excess carbon emissions. It’s no secret that industrialisation is the major reason for climate change. Although we can’t undo the damage, there are ways to mitigate its effects. Many have developed various creative ways to neutralise corporates’ carbon emissions; one of the prime examples is carbon trading.
As mentioned in our Climate Change And Blockchain In Creating A Sustainable Future blog, carbon trading allows companies to offset their emissions by investing in projects that remove carbon from the atmosphere. However, a lot of these schemes are corrupt. There is concern about how this money is actually spent and if they were used in the right places. This is where Web3 technology can help! As tokens and NFTs are on-chain, everything is traceable and transparent, making it less prone to carbon trading system abuse. At the same time, these on-chain solutions make it possible for everyday individuals to participate. We’ve talked a bit about some of the most famous carbon credits, such as KlimaDAO in our previous blog; check out here if you have not read it yet!
Besides carbon projects, ReFi also focuses on other conservation areas, including ocean conservation, regenerative community development, reforestation and conservation, and soil and water quality preservation. We will talk more about each of these aspects in the future. Subscribe to our newsletter and stay tuned to learn more about them!
The potential of ReFi to revolutionise how we create and share value is fascinating. As we have seen, cryptocurrency projects have allowed communities to unite and use a new currency to denominate their collective efforts. However, new ReFi tools could take this to new heights.
ReFi has the power to enable communities working towards positive goals to become regenerative – as long as other members of society value those goals, this could lead us into an entirely new era where online communities can thrive through trading non-financial contributions that result in human flourishing. It’s no wonder why so many people are excited about what lies ahead for ReFi!
At its core, it’s all about creating economic or social paradigms that will benefit everyone involved – from individuals who want more control over their finances to larger groups looking for ways to contribute positively toward shared objectives. With these possibilities on our horizon, there’s plenty of promise for a brighter future! So if you’ve been considering getting into crypto but are unsure where to start – give ReFi a look today – you won’t be disappointed.