The Next Step in the Evolution of Web3: Regenerative Finance

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The word “degen”, short for degenerate, has become a term of endearment in the crypto community. Its use stems from the high-risk, high-reward nature of digital asset trading — and people’s propensity to bet the house. If Wall Street has ever looked down on crypto’s volatility and Ponzi-nomics, Web3 has embraced it as a badge of honor.

But it would be a mistake to let this hedonistic mindset become the default for how crypto is understood. Web3 seems ironic when cryptocurrency Dogecoin, apparently created as a meme, sits in the top 10 digital assets by market cap. Yes, it’s (significantly still) funny. Yes, it’s important that crypto knows how to laugh at itself.

Linda Adami is the founder and CEO of Quantum Temple. This article is part of CoinDesk Crypto 2023.

But we’re in danger of letting blockchain’s revolutionary potential become a punchline. What many don’t know is that beneath the volatile prices and meme-worthy façade, Web3 is a transformative force that has the potential to bank the unbanked, unlock new economic value, and create a more equitable future.

Regeneration Fund (ReFi)

In a 2015 paper titled Regenerative capitalismEconomist and philosopher John Fullerton described a “regenerative economy” as a type of economic design that adds value to communities by rebuilding what is lost, preserving what remains, and ensuring long-term financial prosperity.

In other words, it is a way of thinking about economics that takes into account the negative externalities often neglected by traditional capitalism. These include environmental destruction, social inequality and financial instability.

While Fullerton doesn’t specifically discuss cryptocurrencies, the same principles can be applied to the way we think about decentralized finance (DeFi). In its simplest form, DeFi is about democratizing access to financial services and removing middlemen who take advantage of their position.

The concept of a regenerative economy is still in its infancy, but there are already some examples of Web3 projects using ReFi principles to create positive change.

In the past few decades, we have seen firsthand the devastating effects of carbon emissions and plastic pollution. There is little doubt that contemporary human activity and climate change are linked. But what men make, men can undo.

In an attempt to mitigate some of the damage of industrialization, various carbon trading programs have been developed. These programs allow companies to offset their emissions by investing in projects that remove carbon from the atmosphere.

read more: Ukraine is using NFTs to save its cultural ‘DNA’ amid Russian invasion

The problem with most carbon trading schemes is that they are often riddled with corruption and lack transparency. This is where Web3 comes in.

By using tokens and non-fungible tokens (NFT), a decentralized carbon trading system can be created that is more transparent and less vulnerable to abuse. Web3-native companies use blockchain technology to tokenize carbon credits and make them available on a public ledger to encourage responsible corporate offsetting.

This not only makes it easier to track and verify carbon credits, but also opens up the market to a wider group of participants. As more companies are forced to offset their emissions, demand for these tokens is likely to increase, leading to greater investment in carbon-reducing projects.

The world’s cultural heritage is threatened by climate change, war and economic inequality. The economics of cultural exchange, driven mainly by tourism, is often disadvantageous to the communities involved and middlemen end up capturing most of the value created. To preserve global cultural treasures for future generations, we need digital versions.

NFTs can be used to create verifiable and immutable records of tangible and intangible cultural artifacts. It may seem odd to “tokenize” a ceremony, language, or any aspect of local culture—but I mean that in a non-literal sense.

read more: How Traditional Artists Use Web3 to Meet New Audiences

Blockchains not only make it easier to track these units of culture, but also help people share their art and intelligence with the world. NFTs are a powerful funding tool for charities and local communities, and unauditable secondary markets (often with better, pre-planned royalty distributions) mean communities can continue to benefit from cultural exchange in the crypto age.

As mentioned, markets are destroying many of the world’s most interesting and unique cultures. But highly efficient markets backed by crypto will help reverse the trend. Peer-to-peer funding ensures that the proceeds of trade go directly to the community.

ReFi is a new funding vehicle for heritage that generates income and employment that directly benefits the communities and artists who work to create and preserve this heritage and ultimately preserve this heritage for generations to come.

As awareness of ReFi grows and more projects begin to adopt its principles, we are likely to see a wider range of applications for this transformative technology.

One area of ​​disruption is impact investing. Impact investing is a type of investment that aims to generate both financial returns and social or environmental impact.

With ReFi, we can create “Impact DAOs” that invest in projects that have a positive impact on the world. These decentralized autonomous organizations (DAO) can be used to finance everything from renewable energy projects to affordable housing initiatives. Web3 offers a new level of transparency and accountability, ensuring that funds are distributed fairly to all parties involved.

Another area where ReFi could have a huge impact is social governance. In many societies, decisions are made by a small group of people, often without input from the wider community.

With ReFi, everyone can have a say in how their community is doing. This will lead to more democratic and effective decision-making and improved social outcomes.

The world of cryptocurrency is often seen as the Wild West, full of scams and get-rich-quick schemes. As Web3 enters many key channels, we have an opportunity to use our skills and available technology to change that status quo and create a better, more equitable world. And these are the distortions we expect to succeed.

The views and opinions expressed herein are those of the author and those of Nasdaq, Inc.


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