In recent years, it’s become increasingly clear that blockchain finance companies have the potential to seriously disrupt the global banking landscape. As the world rapidly changes, modern markets are beginning to question the necessity of a centralized financial intermediary in connecting buyers and sellers. In the last two years, digital assets assigned to decentralized finance collectives have grown from less than $1B in aggregate in Jan 2020 to over $250B today.
Among these new financial players, four groups have broken into separate ideological camps based on core values and tactics.
- TradFi is traditional finance with its hallmark components that it is centralized, state regulated, and has large compliance programs.
- BlockFi is similar to TradFi though it incorporates new digital, blockchain-based banks that are centralized and regulated.
- DeFi (decentralized finance) provides uncensored access to basic banking products like savings accounts or loans to anyone in the world. These blockchain-based financial projects tend to be decentralized, unregulated, and are accessible to anonymous users.
- ReFi is newer still and can be understood in a different context. As Eric Leijonmarck, a software engineer with Grafana Labs, explains:
[Refi] is an emerging movement at the intersection of climate action and web3 communities. It is rooted in the theory of regenerative economics, which is about creating systems that restore and maintain the physical resources essential for planetary well-being.
Against the backdrop of accelerating climate crisis and environmental degradation, Regenerative Finance appears as one of the most promising innovations in Crypto. Practitioners seek to shift away from the extractive capitalist economy by transferring control of capital to communities seeking to build commons.
Two weeks ago, about 45 participants gathered at the Crypto Commons Hub in the Austrian Alps for Crypto Commons Association’s 2022 Re-Fi Unconference, the second summit of its kind to be hosted by the group. CCA is a non-profit organization founded in early 2021 whose mission is to facilitate the use of distributed ledger technologies (DLTs) in the governance and (re)production of material and immaterial commons. They aim to consolidate the nascent movement of crypto commoners by providing a nurturing intellectual environment as well as a permanent physical location for vanguard of ‘Blockchain 4 Good’ initiatives.
During the week-long ReFi summit, practitioners and developers gathered to share information and experiences, strengthen alliances and networks, explore strategies, and uplift practical solutions to improving the financial system.
Our goal was to connect this movement with nonfatal elements of the regenerative spaces. [Connecting] people involved in regeneration, regenerative practice, farming and soil climate activists and local economies agents. — Giulio Quarta, CCA co-founder
Speakers at the ReFi Unconference talked about the movement to sequester carbon, reduce reliance on chemical fertilizers, become more resilient to climate impacts, increase biodiversity, improve the livelihoods of farmers, and bring us more sustainable and secure food chains.
Attendees also proposed that centralized control structures are no longer able to move quickly enough to adapt to our current information economy. Historic institutional structures, they say, are being outpaced by adaptive organizations with superior feedback loops and better body-to-body intelligence, referred to as “pushing the intelligence to the edges”. In other words, fiat currencies and hierarchical organizations like corporations and governments are starting to be replaced by efficient distributed currencies, scalable gift economies, and self organizing networks. An inspiration mentioned by attendees was Donella Meadows’s systems-thinking approach which aims to help people better understand how things work by identifying root problem causes, seeing new opportunities, and adapting to changing circumstances.
Session speakers prominently focused on how new technologies like distributed ledgers and tokenomics could be used globally to catalyze regenerative social and environmental projects. Holo is one such project that enables anyone to become an internet host by turning their computer into a source of revenue. Holo network maintainers get paid in HoloFuel for hosting peer-to-peer applications and through hosting P2P apps, participants are supporting a distributed data web that empowers communities.
Holochain founder, Arthur Brock, spoke about how our current economic models remain outdated because they are formulated for an industrial age. He believes we have moved onto an information processing age of peer-to-peer networks and open knowledge systems. Brock argues that the logics supporting traditional economic models are unraveling and we’re in an awkward transition window where, as he puts it “ their influence is waning and we have the opportunity to build a different kind of economy.”
Members of the ReFi community remain critical of earlier DeFi projects, which they believe are unimaginative at best, simply accelerating capitalist extractive business models by tokenizing everything. Hereward McGillivray works with the larger ReFi Spring campaign organizing a series of such conferences globally, “Our goal is to offer a series of local in-person events taking place across the globe to build communities and provide educational experiences at the intersection of web3, regenerative finance and climate action,” he says. Refi Spring organizers collectively recognize the immense challenge that humanity faces and believe that regenerative finance protocols could spark a broad phase shift in civilization over the next 20 years.
The main component of this shift is that wealth will shift from increasing accumulation, to healthy patterns of flow. In the new information processing economy, digital assets do not follow the same scarcity principles as traditional commodities. In fact, there is an inverse relationship with scarcity because digital assets grow in value the more they are shared.
It’s a system inspired by Metcalfe’s Law, maintaining that the total value of a network is determined by the number of other users connected to that network. The more users that an individual user can reach through a network, the more valuable the network becomes, even when the features and price of a service remain the same. In context, tokens increase in value when there are more wallets, and shared protocols for email, websites, fax machines increase their use value the more people adopt the protocol.
A common theme among discussions at the Unconference was the best techniques for using traditional capitalist financial tools to fund progressive social goods; a kind of “greed jjiu-jitsu”. Gustavo Segovia’s project, GoodDollar, wants to eliminate percarity through a Universal Basic Income, “The GoodDollar protocol uses free market forces and the principles of social investing to create a stream of free digital currency,” Segovia explained. “Anyone can receive real, free reserve-backed crypto straight to their phone”.
ReFi Unconference participants like Lio Monando, founder of JusticeDAO and member of the Economic Space Agency, take a more radical approach, “We are recruiting Economic Space Agents, a group of radical economists, distributed systems architects, game designers, activists, monetary theorists & content creators deeply passionate about doing what it takes to transition to the next economy”.
Monando argues our economy is on a programmable medium: “We want to create a more expressive language, and economic grammar, to describe our economic networks, their participants, the nature of their value flows, that gives everyone equal capacities of economic expression and does not collapse into single universal value definition of a fiat money or a “master token” (like BTC, ETH etc.)”.
JusticeDAO’s overall mission is to use the tools of Wall Street to create revenue streams for social movements, creating financial instruments to create volatility in derivatives markets and then speculating on the volatility of these indexes to grow the size of the JusticeDAO Fund. Their members use JST governance tokens to vote on grants to give to projects in order to create a justice feedback loop.
Several projects are using natural resources to form the basis for a new world reserve asset that can be used as a source of stable and increasing value to back the minting of new money. EdenDAO is one such project. Their current aim is to create a carbon coin that hyperscales carbon removal and creates wealth for generations to come. As their founder, Kash Nouroozi says: “We are done relying only on corporations and consumers to get the necessary funding to halt climate change. As the carbon actually gets captured out of the air, an official “offset” is minted in the real world, this is property of the DAO and can be sold to corporations and institutions for immediate retirement.”
Many of the week’s discussions centered on the design challenges and benefits of governance within Decentralized Autonomous Organizations (DAOs), with many ReFi members approaching governance as an optimization problem. Most are in favor of polycentric governance, a complex form of governance with multiple centers of semi-autonomous decision making.
During the summit, Jessica Zartler led a session exploring such governance in Web3 Ecosystems. Zartler began by defining governance as the metagame in decentralized systems, where actors are subject to the field of action, as well as responsible for shaping that field, “We have urgency here, we can draw from existing fields, but we can’t recreate the wheel,” she explained, noting that the time costs and risks associated with decentralizing the decision-making process are worth taking on, given the ineffectiveness of antiquated governance models. “We have legacy voting systems that are top-down. In global communities we need emergent decision making tools.”
As blockchain-based finance grows in importance, challenges will likely arise from interlinkages between cryptoassets in complex financial sectors outside of existing regulatory perimeters, however the goal of ReFi is continuous funding of social movement causes, not the token price.
The Commons Stack is building a commons for every public goods using governance, funding, proposal, analytics, and initialization tools. One such tool is the ‘Commons Market Maker’ which can be used to regulate and stabilize the in and out value flows of an organization; an engine for public goods funding. The Maker’s bonding curve acts like a semi-permeable membrane, permitting value flow into and out of a token economy.
In one of the summit’s closing sessions, Jeff Emmett who works as a token engineering researcher at The Commons Stack, focused on framing ReFi in terms of a permaculture analogy: “Economic monocultures are really dangerous. They have created lots of pumps and dumps, just like you would have in any agricultural monoculture,” he explained.
In Wall Street finance, you have top down colonial decision making; it’s brittle and susceptible to shocks. And the opposite theory is permaculture economics where we have local purpose driven economic networks that are created from the bottom up. They’re generative and they’re resilient. This is biodiversity in an economic form. — Jeff Emmet, Commons Stack engineering researcher
Members of the Crypto Commons movement argue for a rejection of economic ‘sacred cows’ like the belief that markets are the most efficient means for distributing resources and instead look to building cooperative, democratic ownership within communities. They seek to maximize community benefit of shared resources through the principles of radical inclusion, non-extraction, and unlimited abundance economies.
I believe ReFi is the future of collective empowerment; using the power of technology to create shared value and build commonly owned and governed democratic economies. At the ReFi Unconference, projects and thought leaders came together as a community and began the process of sowing the seeds for a global movement that may finally turn the tide towards a loving regenerative future for all.