ReFi Is Going Mainstream

Decentralized finance (DeFi) took off in the summer of 2020 and has become synonymous with the last bull market as well as a lot of speculative activity since then. DeFi was born, in part, to address the failures of banking institutions to provide for a transparent and inclusive financial system. ReFi, or regenerative finance, is about leveraging crypto rails to rebuild our economies in ways that are more inclusive and sustainable. My prediction in 2023 is that ReFi will be hotter than DeFi, especially at the intersection of crypto and climate change.

Outside of the bear market and scandals, the Ethereum Merge dominated much of the narrative in 2022. One of the most discussed, debated and analyzed outcomes from the Merge was the resulting drastic reduction in carbon emissions from the new proof-of-stake consensus mechanism for Ethereum, particularly juxtaposed with Bitcoin’s energy intensive proof-of-work mechanism.

Yet, this is just the tip of the iceberg regarding the relationship between crypto and climate. As we head into 2023 we are starting to see dozens of exciting Web3 projects focused on leveraging crypto rails for accelerating the path to the low-carbon economy, while new venture funds focused on ReFi are being launched to accelerate these projects.

Boyd Cohen is CEO and co-founder of Iomob, the developers of WheelCoin, a Move2Earn game that rewards users for moving green. This piece is part of CoinDesk's Crypto 2023 outlook.

There is a surprising number of layer one and layer two blockchains that are explicitly focused on promoting and supporting the low-carbon economy and even creating ecosystem funding to encourage ReFi projects to deploy on their blockchain. The list includes Cosmos, Hedera, Topl, Polygon, Celo, Near and Algorand among many others.

Yet, what is more interesting, to me at least, are the projects being deployed on these blockchains that have a more direct impact on industries, people and the planet as we move up the stack towards the app layer.

The most dominant ReFi sector for climate has been tied to bringing more transparency to the $270 billion global carbon offset market. Carbon offsets have long been questioned regarding the credibility of the actual claims made by carbon originators and the offset buyers. While standards have been introduced to help create more accountability in the sector, there remains healthy skepticism in the public domain.

The Cosmos-based Regen Network focuses on helping communities of land owners generate on-chain digital carbon offsets. Meanwhile, Klima DAO has created a tokenized carbon offset scheme which, at the time of writing, has supported the transparent removal of more than 17 million tons of carbon from the global atmosphere.

What is even more exciting to me is that we are starting to see greenshoots of ReFi that go way beyond base-layer blockchains and carbon offsets. Every industry and consumer activity has some kind of climate impact and ReFi projects are emerging to tackle these challenges on crypto rails.

Similar to bringing carbon offsets on-chain, Reneum is leveraging blockchain tech to create more transparency in the renewable energy credits (REC) space. Meanwhile, Powerledger has been an early player in facilitating peer-to-peer (P2P) decentralized renewable energy trading since its inception in 2016.

On the end-user level, I am optimistic we will start to see ways to gamify the adoption of low carbon lifestyles such as through move2earn (M2E) projects. Tying M2E with carbon reduction and perhaps the creation of personalized, transparent and tokenized carbon offsets could become a thing in 2023.

Recently the World Economic Forum launched the Crypto Sustainability Coalition to focus on accelerating the adoption of ReFi use cases. The famous X Prize, created originally by Elon Musk to reward disruptive climate innovation, is now moving into the ReFi space.

In the past few months several new venture funds and decentralized autonomous organizations (DAO) have been launched focused on the ReFi space such as Cerulean Ventures, AeraForce DAO, ReFi Venture Studio, Allegory, a100x, Vanagon Ventures, Possible Ventures and Draft Ventures. Just as mainstream venture capitalists have increasingly embraced environment and social governance (ESG) metrics and launched sustainability-focused funds, I believe in 2023 we will also start to see mainstream-impact funds and crypto funds, deploying ReFi-themed funds.

Yes, as we head into 2023 we remain in a bear market with little hope for a near-term return towards more bullish conditions. I am convinced 2023 will be the year that ReFi gains more mainstream attention and adoption and helps to prove how crypto has tangible impacts on the real world and helps to change the narrative from the scams of 2022 to a force for positive change and an accelerant towards a more sustainable, low-carbon economy.