Regenerative finance or ReFi is a type of finance that considers economy to be a tool working for the benefit of people and the environment. This is exactly what the blockchain and crypto market has been missing — some tangible value.
Crypto still has considerable untapped potential, and we are aware of only some of the capabilities of decentralized finance (DeFi). Crypto has always been a truly revolutionary technology. It intends to democratize finance and supersede the current financial system with its problems and exploitations.
However, so far, the crypto ecosystem is still mostly used for speculative gains, thus facing the same problems that traditional finance faced centuries ago, and learning the same lessons.
Financial exploitations
With all the hype going on, with pyramid schemes and celebrity endorsements, we have neglected the true innovations of blockchain and smart contracts. The FTX downfall has shown that the current situation is wrong. “The number go up” approach does not exactly bring the intended results. To promote balanced development of the crypto industry, it is sometimes necessary to give up here-and-now profit and focus on universal human values.
It seems more obvious now than ever that DeFi-based enterprises need to focus on creating tangible and sustainable value. Web3 is able to solve the world’s most crucial issues by creating incentives that make it financially rewarding. This approach can be based on ReFi.
This idea has been suggested by Phil Fogel, the blockchain officer at Flowcarbon, an ecosystem that aims to make carbon markets accessible and transparent, and to involve new technology and communities to fight climate change. This approach is considered in CoinDesk’s Crypto 2023 prediction.
Why ReFi?
In the conventional sense, Regenerative Finance is a type of finance that seeks to use money as a tool to solve some of the world’s most challenging issues. Most often, these are issues related to the environment and careful attitude to nature. ReFi’s main principle, however, is fair access and distribution, including in relation to crypto.
The success of any DeFi product depends on two important principles: it should create new value and new institutional use scenarios. ReFi has unique capabilities for complying with both these principles. It combines two distinct disciplines: regenerative economics, which focuses on the balanced circulation of capital, and decentralized finance, which strives to get rid of non-transparent, centralized intermediaries in order to democratize financial services and their management.
Nowadays, attempts are made to develop a regenerative economy based on environmental, social and governance measures (ESG). Often, however, the financial aspect is neglected, and people are not interested in following the rules and conditions of ReFi. And although the demand is growing, with more and more people reflecting on fairness and environmental protection, there is still a long way to go until we have a regenerative economy.
The growing demand for such an economy can be met with the help of new DeFi technologies. This will help to implement ReFi’s main principle: to create mechanisms for both individuals and major companies that promote the regeneration of the environment and communities in a way that is acceptable to governments and superior to existing non-crypto solutions.
