ReFi Is Trying to Use Blockchain to Heal the Planet

In Brief

• Rightly or wrongly, crypto does not have the best eco bona fides.
• An emerging movement, known as "ReFi," is leveraging blockchain for social and environmental good.
• However, it is still a poorly defined term and unscrupulous projects can take advantage of it.

Crypto and blockchain don’t have a reputation for saving the planet. At least not yet. The emerging ReFi phenomenon is trying to change that.

“The greatest threat to our planet is the belief that someone else will save it,” said the British environmentalist and explorer Robert Swan. That quotation has probably never felt more relevant. Though it’s probably not one you’re likely to hear recited at your next crypto conference. But increasingly, the crypto industry is trying to do its part. Quietly, a mission is underway to enable all the benefits of blockchain without any social or environmental downsides.

Famously, Bitcoin and its proof-of-work model are energy intensive. The world’s most popular cryptocurrency reportedly consumes a similar amount of energy as the countries of Pakistan, Malaysia, and Ukraine. This is an inconvenient fact for a planet that has never cared more about climate change.

Last year, the crypto conversation was dominated by Ethereum’s change to proof-of-stake (PoS). Unlike the energy-intensive proof-of-work (PoW) consensus mechanism, validators are selected based on their stake in the network, reducing energy consumption and improving computation efficiency. For non-crypto observers, the main takeaway was that the world’s second-biggest blockchain would be using less energy.

The crypto markets, more broadly, are also controversial. Not everyone is convinced of the value of digital assets, which only compounds the controversy around their energy consumption. Observers who are unaware of the intricacies of crypto often see it as a supercharged and cruder version of traditional finance. Not a helpful comparison, considering that even traditional finance has struggled to get a good hearing recently.

ReFi: Finance For Good
Blockchain has helped reinvent finance with DeFi (decentralized finance). But now there is a new kid on the block. ReFi (or “regenerative finance”) aims to foster a more sustainable and equitable economic system with blockchain. In theory, ReFi projects prioritize environmental and social responsibility over profits. As a movement, its goal is to promote a more inclusive and just financial system.

The term is also incredibly broad—maybe too broad. It can include carbon-negative blockchains, carbon capture, and storage, or simply the tokenization of eco-friendly assets. Because it is such a new and amorphous term, it can be whatever you want it to be.

And there’s an audience for it, too. There is more than enough data to show that we—as a society—are trying to behave more ethically. According to a 2022 consumer survey by Deloitte, consumers are increasingly making conscious decisions with sustainability and the environment in mind. A recent study by NielsenIQ found that 78 percent of US consumers say that a sustainable lifestyle is important to them. According to a 2020 McKinsey US consumer sentiment survey, more than 60% of respondents said they would pay more for sustainable packaging.

But studies only tell us what is already obvious to most. The general public has perhaps never cared more about the social and environmental impact of their habits. (At least on paper.)

ReFi Is Still a Relatively New Idea
However, this change in habits which has taken place over the last decade or so presents an opportunity for a business with a savvy marketing department. “A ReFi label shouldn’t be enough to satisfy an ethical investment,” said Marius Grigoras, CEO at BHERO, in a discussion with BeInCrypto. “While we believe that the ReFi movement is a positive force for change, we recognize that some projects may use the ReFi label to appear more ethical than they are. Contrary to other investments where a gut feeling can be enough, investors truly need to be thorough when vetting [these] investments.”

The regenerative finance movement arguably began in the aftermath of the 2008 financial crisis. Although the term doesn’t make a regular appearance in the digital record until the mid-2010s. However, its abbreviation (ReFi) hints at its origins in DeFi (decentralized finance), which took off only in 2020. Since then, crypto has made a name for itself in the wider world. It’s not always a good one.

“ReFi can help to shake off some of the negative reputations that crypto has garnered over the years, and we can begin to see real-life examples of how powerful crypto can be,” continued Grigoras. “As crypto values are largely dependent on reputation and demand, that’s great news for the industry! Additionally, by providing investors with access to a wider range of projects, ReFi can help to build trust in the crypto space and bring in more mainstream investors.”

More Awareness and Education
If someone asks Masa Finance co-founder Calanthia Mei about the hurdles facing the ReFi sector, Mei gives a simple answer: awareness and education. “Many investors are still unfamiliar with crypto and the principles behind the ReFi movement,” said Mei. “Additionally, there is a lack of clarity around regulatory frameworks for ReFi projects, which has caused hesitation from some investors.”

Many argue that the so-called “ReFi” movement has been in blockchain and crypto since the very beginning. After all, some of the biggest beneficiaries of cryptocurrencies are the unbanked and those in volatile economies. If that doesn’t count as ReFi, what does?

“Awareness brings users, traffic, and funding to ReFi projects,” added Mei. “In a crypto bear market, some ReFi projects are struggling without sufficient funding. [This] can also slow innovation required in getting these technologies into the hands of those who need them most.”

“The crypto persona, unfortunately, has become a caricature, but it does not accurately reflect the dynamic set of builders and projects working in the web3 community.”

Disclaimer
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