What is regenerative finance? what I learned from "Green Pill: Regenerative Cryptoeconomics"

This is 1 of 6 essays for 1729 Writers Cohort. Apply to 1729 today at 1729.com and join us learning decentralization from Balaji Srinivasan.

I first read the term regenerative finance or ReFi from reading about Toucan protocol when writing an article on carbon tokens. So what is ReFi?

ReFi means regenerative finance, leveraging DeFi (Decentralized finance) to fund projects that is regenerative in nature.

Unlike the legacy financial system, where capital transfers and funding allocation controlled by large institutions, cryptoeconomics open up the door to provide funding for anyone that deserves it.

Like jellyfish that can heal itself, ReFi enable decentralize funding mechanism to solve various problems while creating wealth for the project contributors.

Regenerative finance is positive sum wealth creation. It makes crypto sustainable, as its not zero sum gambling or negative sum hacking. Balaji Srinivasan

ReFi is popularized by Kevin Owocki, the founder of Gitcoin, a platform designed to fund and coordinate open source software development (allocated $21 million in grants as of June 2021).

He recently launched a new book called the “Green Pilled, how crypto can regenerate the world”. I immediately bought the book and never regret spending a cold weekend indoor to finish reading it.

While I am swallowing the “Green Pill” slowly, I would like to share 2 takeaways from the book:

1. Public goods: From the community to the people

The main use case for ReFi is to fund public goods. Public goods are free to use and can be used by everyone. It is non rivalrous and non excludable, unlike the chocolate bar (private goods) that I used to fight for with my siblings.

From the air we breathe, road we drive, to the online world we surf (outside the Web2 paywall). The problem with public goods are the free rider problem, where users (including most of us) exploited the resources without contributing back to the system. If we cut too many trees and no one is doing the replanting, pollution will be bad and the system will collapse.

Currently, most public goods are funded with taxes. In ReFi, new concept such as quadratic funding can be used. In quadratic funding, a pool of funds are collected from various institution, individuals, or protocol, and distributed “Fairly” by matching the initial funding received in a project with the number of individuals who has contributed (formula: square root of each contributor's contribution, add these values together, and take the square of the result).

With quadratic funding, the voice of the little guys can match the influence of the big whales. Gitcoin DAO has applied quadratic funding to support various projects from climate change, privacy tools, life extensions, and many more.

Honestly, it also took some time for me to understand the concept, but the video below will explain well how quadratic funding works. For more advanced explanation, read the article from Vitalik Buterin.

We should move from the mindset of “Now Me” (private goods) to “Future us” (public goods). The Bentoism concept from Yancey Strickler, Co-founder of Kickstarter.

2. Impact DAO: collaboration create abundance

Thanks to cryptoeconomics, we can now built DAO (decentralized autonomous organization) to connect people from anywhere in the world and collaborate on a cause that they believe in.

It feels like we can now build the web3 version of a tribe. Permissionless in nature. Bounded not by blood, but by incentives. Gathering around discord, instead of the fireplace.

When I was small, I was taught not to take candy from strangers. But time has changed and there’s never been a better time to work with anonymous people (with a JPEG profile).

“Human is the only species that can cooperate across genetic boundaries” Naval Ravikant.

Various DAO has been popping up. From finance (Syndicate Dao for Investment) to hobby (Krause DAO for basketball or Links DAO for golf). However, not just because of economic incentives or sport interest, there are now various communities collaborating to create impact DAO.

Here are some example of DAOS with environmental and social impact:

🔥 Carbon removal

Eden DAO is creating carbon token to scale up carbon removal projects and creates wealth for generations to come. Eden DAO has received grants from Gitcoin to fund various project that aim to sequestrate carbon.

Projects includes helping plants photosyntesize in the ocean, filter that can chemically bind carbon, and other exciting stuff. They are also working with with Patch.io, an A16z backed startup that provide carbon marketplace at scale.

🌊 Ocean conservation

Moonjelly DAO is decentralizing ocean conservation. Ocean is very important for the earth, not only for the surfer dudes. It absorbs around 25% of carbon dioxide emissions produced by human and provides 50% of the oxygen we breathe.

Moonjelly provide grants that are accessible to projects that normally do not have access to conservation funding. Making ocean impact verifiable and profitable. They also want to bring more scientist and ocean conservationist to Web3 through the Moonjelly academy.

♀️ Diversity

According to the project drawdown top 50 solutions to tackle climate change, educating women is one of the most important solution. Educating women, especially young girls, has a ripple effect. Women with more years of education have fewer and healthier children, contributing to a healthy economy and community, which is more resilient towards climate change.

Zebpay, a female-led DAO, is building a permissionless platform that helps women to bypass unfair systems and compete on a level playing field for capital and influence. For example, they are building a renewable energy Bitcoin mining setup for rural women in India, as a new sources of sustainable income.

🎓 Education

Knowledge is power. Imagine if a teacher have ownership of a school and received interest when the school increase their tuition fee, they will be financially incentivized to provide the best education.

Bacon DAO is a community that open up and decentralize education about crypto and Web3. It provides the mean for people, experts and beginners alike, to contribute by sharing knowledge. Every community member has the incentive to contribute and provide the best education, because its directly impacted the valuation of the community.

Another interesting DAO is the Invisible college. They provide the skills, network, and opportunities to learn, explore, and build in Web3. Unlike traditional colleges where the course are designed and taught by an academic professor, the community co-create courses that will help learners to get the right skills to thrive on Web3.

The list goes on and on, and as long as we are still facing the coordination problem, we will always see new DAO popping up. If you want to learn more about DAO, head onto Aragon free DAO courses, where they even provide the tools to create your own DAO. Lets create more than we consume!

Source: The Eden DAO

Conclusion

In summary, Regenerative Finance is about leveraging cryptoeconomics to create abundance with positive impact. As an analogy, by doing sports, we are not only burning fats and becoming physically healthy, but our mental health also benefited from it.

By putting our time, efforts, and wealth to ReFi, we all can strive to become wealthy, keep the earth healthy, and make our community happy. To learn more, I highly reccomend to get the ebook version of Greenpilled and listen to the Bankless podcast green pill edition, starting with an interview with Vitalik himself.

“REFI is for anyone who is going to the West! who are going to the new frontiers of web3 and building settlements in the Metaverse.” Kevin Owocki

After taking the “green pill”, you can join the community in the telegram group and contribute to the many forms of ReFi projects to come.

💡 Thanks for reading this article. Although it has been a tough time for people in some places, let’s be optimistic and (hopefully you can still) enjoy the weather!