Regenerative Finance can be defined as a system that regenerates its resource capacity over time.
Regenerative systems leverage regenerative finance to achieve robust properties of growth. In extractive systems, resources are depleted and the system loses capacity over time. Resilient systems are able to recover from periods of shock. In sustainable systems, resource availability is not depleted over time and the system is steady. Regenerative systems must grow over the long term and must, therefore, be resilient and cannot be extractive.
Resource capacity here could be any or multiple of the 8 forms of capital (social, material, financial, living, intellectual, experiential, spiritual, and cultural). ReFi regenerates the resource capacity of many types of capital simultaneously.
In a ReFi system, financial capital is not an end in itself but is employed in service of each of the other forms of capital.
Because regenerative systems build capacity sustainably, regenerate resources, and are resilient to shocks, ReFi can be employed to prevent systemic risks to humanity and address coordination failures (e.g. inequality issues or social and environmental issues such as climate change).
In 2015, the economist John Fullerton coined “Regenerative Capitalism” stating eight principles that are the foundation of any economic system in order to build a stable and healthy foundation. The principles for a regenerative economy include balance seeking, in right relationship, holistic wealth views, adaptability, strong participation, emphasis on community, solid circulation, and edge effect abundance (meaning population abundance varies in a given ecosystem).
Another economic model that shaped ReFi is the “factors of production”, referring to the inputs needed to produce goods and services, which combines land (also known as natural resources), labor, capital and entrepreneurship. More efficient production advances economies and improves productivity and quality of life.
Equally, ReFi is having an impact in the field of conservation as companies that need to offset their carbon emissions can fund the preservation of a species or area via the use of smart contracts. This creates a win-win scenario in which species are preserved, companies can offset their emissions and communities will be paid for their efforts to preserve vulnerable species.
There are numerous notable projects within web3 that are paving the way for the ReFi movement. There are also organizations that help to build the infrastructure needed for ReFi projects to flourish.
Although ReFi is mainly associated with carbon projects, it is having a major impact in other areas:
Certain projects are issuing blue carbon credits which help marine protected areas track the health of their ecosystems and generate revenue to fund their conservation projects.
The Voluntary Carbon Market indirectly tries to incentivize the funding of carbon reduction projects. ReFi is taking this a step further by leveraging the power of web3 to fund reforestation, regeneration and conservation more directly.
Certain ReFi projects aim to solve the problems surrounding soil depletion and freshwater drying up by using web3 to fund the research, development and implementation of sustainable and restorative water practices.
Beyond the current projects, there's also promise for ReFi to prompt new economic or social paradigms. People have always come together to create value in the form of progress toward a shared goal, be it the creation of art or the development of infrastructure, but cryptocurrency projects have clearly illustrated that such a group can denominate that value in a novel currency. As long as the product of a community’s goal is valued by the greater population, we should expect that the world at large should support the community due to the gains from trade that result. This should, in turn, allow any community working toward positive and valuable impact to be regenerative, provided that their impact is valued by any other community that also produces goods or services. We should expect to see a renaissance of online communities as ReFi tooling becomes easier to use, resulting in not just gains from trade, but new forms of trade, as non-financial contributions to human flourishing are recognized and valued between communities.
Authors: Kevin Owocki, CEO and Founder of SuperModular, a web3 venture studio building modular apps for regenerative projects and Evan Miyazono, Head of Network Goods, a team building revolutionary coordination systems within Protocol Labs.
Kevin Owocki is a blockchain expert, CEO/founder of SuperModular and co-founder of Gitcoin, a venture studio that builds regen web3 projects and has helped to raise and distribute over $72 million for open-source projects. His new business venture SuperModular, aims to build a modular stack of products used specifically for public goods and funding tools. Prior to his career in web3, Kevin spent 15 years in the world of web2, working as a CTO and founder of open-source software and web startups.
Evan Miyazono supports technological development in support of human flourishing with new coordination tooling and incentive mechanisms. Prior to leading Network Goods, Evan completed a BS and MS in Materials Science and Engineering from Stanford University and completed a Ph.D. in Applied Physics at the California Institute of Technology before leading PL Research.
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