As 2022 approaches, few will look back on our nascent industry and say it lived up to its potential. Crypto began as a revolution in every sense of the word: a way to democratize access to finance and a revolution against the current financial system and its attendant exploits and complications. Fast forward to today, but what we see is an ecosystem that has failed to focus on its core promises, instead remaining largely detached from the real world and relearning many of the lessons traditional finance learned years ago.
In recent years we have lost sight of the true innovation of blockchain and smart contracts, and have gotten caught up in it. Ponzi-economics and celebrity hype trains. Businesses and individuals in the space have fallen prey to the “numbers up” mentality, which has only one goal. Nothing proves more than this FTX’s catastrophic collapse.
It is clear now more than ever that businesses built on decentralized finance (DeFi) dominants must focus on adding tangible and sustainable value. As we reset and realign our focus, Web3 will take on the challenge of tackling tough real-world problems by creating incentives that are economically viable. That’s where ReFi comes in.
Phil Fogel is the Chief Blockchain Officer FluocarbonAn ecosystem focuses on making carbon markets accessible and transparent, as well as mobilizing new technologies and communities to combat climate change. This piece is part of CoinDesk Crypto 2023 Overview.
Any DeFi product that wants to succeed in this new world must address two fundamental principles: creating new value and creating new enterprise use cases. The Regeneration Fund is uniquely positioned to address both of these concerns. By understanding where ReFi comes from, it’s easy to understand how. ReFi is a combination of two distinct fields: regenerative economics, which focuses on consistent, circular flows of capital, integrating positive and negative externalities while looking after people and the commons; and decentralized finance, which aims to eliminate opaque, centralized intermediaries and democratize both access to financial services and the management of the financial system.
The current dynamics of trying to create a regenerative economy are not working. Environmental, social and governance (ESG) measures are fragmented and not aligned with financial incentives. ESG investments are statistically underperforming and lack transparency as shown in the market HBS course And a Goldman Sachs Investigates ESG Funds. To harness the growing demand for a new regenerative economy, we must turn to emerging technologies such as DeFi. Vinay Gupta said it best: “Crypto wins by profitably solving problems that no one else can solve.” This leads to ReFi’s main thesis: We can create mechanisms that are palatable to ordinary people and corporations to governments and more advanced than existing non-crypto solutions to promote the regeneration of ecosystems and communities.
The ReFi space is poised to explode in 2023.
read more: ReFi goes mainstream
It all starts with carbon
No place is more relevant and unprepared for its consequences than the voluntary carbon market. VCM has long been plagued by issues of access and quality. It is almost impossible for an individual to obtain an account in one of the main carbon registry systems, preventing them from participating in the market. The market is also illiquid and opaque. Spot prices are not readily available and carbon offset units (COU) transactions typically take place over the counter through a web of brokers and intermediaries.
Overall, the quality of carbon projects remains a hot topic. There are many instances of projects overestimating emissions reductions; Additionally, permanence and leakage are more difficult to measure.
To date, various ReFi projects have emerged to address these issues, from infrastructure for tokenized credits, protocols for verifying carbon project data, and more. By operating on Web3Different actors can solve different parts of all kinds of problems in an interoperable and non-permissive way, without having to struggle with multiple gateways and roadblocks that are historically relevant.
All the existing ReFi projects are starting to communicate with each other and this ecosystem is poised to explode thanks to Web3, which is happening very fast. With more emphasis than ever on sustainable practices in every sector in the world, ReFi-centric growth will be exponential, and 2023 will be the year we look back on.
The views and opinions expressed herein are those of the author and those of Nasdaq, Inc.