#36 — Solana ReFi Ecosystem Deep Dive

10 min readApr 9, 2023

Regenerative Finance (ReFi) has fast caught on as a narrative in Web3 with mission-driven communities harnessing the power of the blockchain to bring about change on the ground.

This essay explores the state of the ReFi ecosystem on Solana including a background of how we got here, why ReFi, why Solana, modeling the current ecosystem map, state of capital flows, gaps & celebrating wins.

How Did We Get Here?

Human development in the fields of economy, science & technology has continued at an exponential pace ever since the industrial revolution. While this has ushered in an era of prosperity, affluence & accessibility unmatched in the history of mankind, there has been a significant negative impact on the Earth from the perspective of environmental degradation.

The 20th century ushered in a greater focus on the plight of the planet with calls for a model that prioritizes sustainability. This was the catalyst for the United Nations General Assembly formulating the global sustainable development objectives in 2015. While this set of 17 interlinked objectives focused on sovereign actions, climate action picked up as a narrative for the industry at large with the growth of Environmental, Social & Governance (ESG) investing in traditional finance (TradFi).

Unfortunately, such impact investing themes have yielded little in the form of directing capital flows away from polluters and towards green initiatives. So much so that there has been gaming of the ESG brand by financial intermediaries for their own profit, a subject that has recently brought on regulatory scrutiny in Europe & beyond.

The reason for this apathy is probably found in the political consensus that is centralized in the non-Web3 world. This is characterized by factors of production concentrated in the hands of a few (elite capture) with mission-driven communities reduced to making noise outside fancy conferences called by this kleptocracy to plan their next assault on the environment.

The Power of The Blockchain

The advent of blockchain technology, however, allows mission-driven communities to significantly balance the scales in their favor. This has been made possible through the development of high-speed & low-cost blockchains & smart contracts sitting on top of them.

Already, Decentralized Finance (DeFi) has attracted billions of dollars worth of capital flow thus affording mission-driven communities to improvise & experiment with what responsible finance could look like. These initiatives within Web3 are dubbed Regenerative Finance (ReFi) which has caught on as a narrative encompassing impact investing, climate action & other green initiatives.

Why Solana?

Before we jump into the ReFi ecosystem on Solana, it is important to understand the complementary nature of its blockchain architecture to the ReFi movement.

Specifically, proof-of-work systems have been criticized for the alleged mass amount of energy that they consume for transaction validation & the high transaction costs that emanate from their inability to scale. Building a ReFi project on such a system infrastructure is a losing proposition with a high carbon footprint & capital that could have been erstwhile spent on regeneration lost to miners.

Solana, on the other hand, boasts a system architecture that enables low transaction costs & lightning speed without compromising on scalability. By their own assessment, the environmental impact of one transaction on the network is roughly 1/10th of using an LED light bulb per hour.

Thus, one can see that Solana is the natural habitat for the ReFi movement.

Solana ReFi Ecosystem Map

You would conjecture that with Solana’s powerful complementary nature to the ReFi movement, the number of ReFi projects on the blockchain would be blowing off. Unfortunately, there is a lack of readily available data in the form of a directory or a tag that tells you which project is on the ReFi map.

Despite this handicap, a few hours spent treasure hunting through the ecosystem led to the development of the following ecosystem tree. All of these projects are ReFi in nature or aspire to have a positive impact on the planet.

That said, this tree doesn’t really tell you much in terms of categorizing what these projects do, that is, what elements of ReFi they touch. To achieve this, I have relied on the three pillars of ReFi as a model to categorize the ReFi movement on Solana:

Stabilizing The Climate

By far the largest category, the focus here is primarily carbon off-setting which has been generally accepted as an effective practice outside of Web3. However, the friction, red tape & countless hoops of TradFi are prevalent here too with limited access to the product for small businesses & individuals plus a web of financial intermediaries (aka brokers) to navigate through. This is where the advantage of Web3-based systems is unmatched as they cut through all of this barbed wire.

Effectively, this requires a classic demand & supply equation with marketplaces bringing together buyers & sellers to trade carbon that is tokenized. On Solana, Toucan (bridged from Polygon), leads the way in terms of the tokenization of carbon credits called TCO2 as the preferred technology partner. Regen Network on the other hand is the most prominent marketplace connecting carbon buyers & sellers.

Lately, the focus has also started shifting towards a broader handshake between DeFi & ReFi on Solana that is focused on passive yield generation to offset carbon. Sunrise Stake (winners of the Climate award at the recently concluded Solana Grizzlython) is the epitome of these new solutions with their ingenious offering to offset carbon via staking yield.

Restore Our Ecosystem

The focus here is primarily on reversing biodiversity loss in the hope that such regeneration will contribute to carbon offsetting in the future and help exponentially stabilize the climate in addition to the positive impact on local societies. This is another widely accepted measure outside of Web3 & is fast picking up the pace here too.

On Solana, Regen Network is again an example of a project working with local communities to equip them & bring them on board their marketplace to sell the carbon credits they generate. The key here is the development of digital measurement, reporting & verification tools (dMRV) so as to ensure ongoing support to these communities and vetted data to generate carbon credits. A decentralized blockchain alternative to a traditional Web2 model of course adds greater trust and prevents possible gaming.

This model of dMRV has been successfully replicated by non-marketplace projects as well. Take for example Gain Forest which monitors 9,486,910 hectares of land and is targeting to use the carbon credits for offsetting. Their main call to action is for their projects to be funded with the dMRV giving real-time impact reports to investors. Blockchain technology makes data incorruptible while opening up access to liquidity which won’t be barred or slowed down by TradFi’s compliance checks for example.

The Aborn project for example is a new entrant in this space and was recently recognized under the DeFi track at the Solana Grizzlython. They are taking a novel approach to improve the global carbon market by developing a dMRV based on a “vision-assisted oracle network” & “a last-mile network of stewards to coordinate local forest protection”. The whole system is to be incentivized through “land parcel NFTs in the Amazon.”

Yet another example is Orca & their Climate Fund which is being funded by a portion of every fee that is collected by the platform. The first grant was made out to Ocean Conservancy & suggests how DeFi is well positioned to take advantage of the underlying flow for ReFi activism to support biodiversity.

Institute Social Justice

The focus here is to bring about a positive societal impact for communities that have been exploited and/or ignored in the quest for prosperity. It is envisaged that it is not just the planet that needs healing but also its inhabitants who have been deprived of opportunity.

This aspect of the ReFi movement is very limited in terms of visibility and action on Solana. An excellent example though is Bancambios DeFi who see it as their mission to bank for the unbanked population of the world by bringing technologically driven solutions to equip communities with limited access to banking networks.

The State of Capital Flows

Unfortunately, not a lot of information is available in terms of quantitative data on investment going into the ReFi segment on Solana. This is not due to the want of opportunity but rather it seems the lack of financial orientation that projects have been able to depict to investors.

This is surprising given the fact that the blockchain itself depicts all the ingredients to become the platform of choice for the ReFi movement. This point is not just limited to the blockchain architecture that we covered earlier but also extends to the generally high user metrics. These include a high number of active wallets, capital flows especially on the NFT side, a high active developer count & the excellent level of DAO tooling already in place. You would think that this ecosystem would appeal to mission-driven communities & investors alike.

That said, notable initiatives/deals include:

A special climate award by the Solana Foundation as part of their annual hackathon for climate-focused projects. This is an annual feature and probably the best recognition of the ReFi question by the Foundation itself. The most recent award for $5,000 went to Sunrise Stake.
Persistent Requests for Proposals (RFPs) by the Solana Foundation are made to help fund grants on ReFi themes. These grants are generally for more than the hackathon award and vary on a case-to-case basis.
ReFi DAO, whilst multi-chain, has been conducting cohorts on a regular basis supporting 300 founders and aligning 30 investors (across all chains). They feature Solana as well.
The ORCA Climate Fund which is pivoting to an impact investing model as well could potentially be interested in supporting early seed funding to ReFi projects.

While this is not a great list in terms of portraying the monetary value proposition from a capital flows angle, it is important to understand that this segment is still very much in its infancy. A number of venture capital firms and ecosystem partners have funded existing protocols so it is not as if they are completely non-receptive to the idea. In simpler terms, funding ReFi on Solana is yet to make the headlines.

Identifying Current Gaps

With the bulk of the ecosystem map focused on carbon offsets, there is a dire need to focus on the other two pillars while at the same time developing the infrastructure that helps direct capital to these initiatives. As part of my research, the following key gaps have come forth that need addressing:

Developing a dedicated directory of ReFi projects on Solana. At the moment there is none on the Solana ecosystem directory or any other directory that is run by ecosystem partners. Worse, there is no tagging of projects within existing categories to tell which projects have a ReFi focus.
Developing on-chain communities that would be interested in funding ReFi projects under a crowd-funded model. DAO tooling and NFTs could play a major role here as well as the DeFi infrastructure. One only has to look at the example of the Orca & Sunrise Stake to think of the endless possibilities.
Increased focus on projects that are focused on biodiversity & instituting social justice. Extensions to existing models could come from pivoting to activism on wildlife protection, decentralized air quality monitoring, and conserving local communities whilst providing them with opportunities & helping alleviate poverty through greater access to education, health, and sports.

Some hypothetical examples to formulate the aforesaid points into actionable ideas are:

A ReFi directory of projects and ecosystem partners charging a listing fee for inclusion post thorough due diligence.
A ReFi-focused investment fund under a DAO model with crowd-sourced funding raised through NFTs with the profitability of underlying operations for the benefit of DAO members.
A ReFi project focused on protecting wildlife by crowdfunding acquisition of land infused with grants from ecosystem partners for operating needs allowing species facing extinction to be provided a second chance
A decentralized air quality monitoring network that allows the collection of air quality data that may be sold to environmental agencies and thus yield a return for those participating
Enabling remittances through the blockchain to help communities without access to banking networks easily access funds without having to pay exorbitant fees.
A DAO-led fund that invests in run-of-the-river small hydroelectric projects that then sell the electricity to local communities. This is yield generation for the DAO members.
A DAO-inspired strategy to develop a network state of football academies to help nurture talent as well as encourage education in impoverished societies.

The ReFi Ecosystem Continues To Win

While not a recent win, the initiative by members of the Grape DAO to fund the Decentralized Football Academy in Lagos, Nigeria is by far the most inspiring story on Solana as far as ReFi is concerned. The academy turned 4 years old on December 23rd, 2022, and continues to make an impact on the local community. This is despite Grape DAO not being a ReFi project in its own stead and thus highlighting the power that mission-driven communities could create in real life by utilizing the power of the blockchain.

The decision of the ORCA DAO to enhance the spectrum of their impact fund into a climate fund, while again a not-so-recent development, is again a positive step that pits an alpha-level player firmly in the ReFi space.

Apart from the above, it was inspiring to see Arbon winning under the DeFi track at the recently concluded Solana hackathon which gives you a fair amount of inspiration in terms of ReFi extending as an idea into the realms of DeFi. Sunrise Stake with a similar DeFi-based solution is another win.

The biggest win, however, has to be the ReFi movement on Solana continuing to persevere despite the existential-level threat to the ecosystem from the FTX fallout. The ReFi movement has continued to find a home in Solana & seen the worse through.

Conclusion

Solana is primed from a design aspect & a community aspect to become a major breeding ground for the ReFi movement. However, it is important that the ecosystem champions this by creating the necessary incentives and infrastructure to direct capital and ideation to these ventures. It is hoped that we as a community will continue to move in that direction.

Disclaimer: The views presented in the post are the personal opinion of the author & do not represent that of his employer nor are financial advice. Please do your own research before investing in or using any product mentioned in the post. The author may or may not be invested in any particular product.

References:

Acknowledgments

Members of the Dean’s List Network State for their feedback and support namely:

Alexperts.sol#4620
DeanMachine#9058
BilalAhsanElahi#3407
E$E#9586
Takisoul#5096