Regenerative Finance and the Case for Blockchain

Global Warming, Social Inequality, Biodiversity Loss — and how to create incentives to solve them.

Ram Potham
Carnegie Mellon Blockchain
4 min readMar 7, 2023

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Some ReFi projects of 2022. Image from refidao

The modern manufacturing industry tells a story of extraction: how we can best extract value from land and natural resources to create value for investors and businesses. However, this generally leads to the tragedy of the commons; people don’t have an incentive to actually use public resources sustainably.

Moreover, systemic inequalities exist in many communities, including racial and economic discrimination. While there are efforts to address these issues, such as policy reforms and community initiatives, systemic inequalities can take time to unravel, requiring sustained and collective action.

Although it doesn’t provide all the answers, Regenerative finance (ReFi) attempts to solve many of these issues. ReFi responds to the shortcomings of traditional finance and industrial economics (the branch of economics that studies how businesses and markets behave and perform in the real world) by offering a new approach to creating sustainable and equitable economic systems.

Unlike industrial economics, which prioritizes short-term profits and resource extraction, regenerative finance aims to create a financial system that is restorative, regenerating natural resources, social systems, and economic opportunities by prioritizing sustainability, transparency, and accountability.

ReFi has a wide range of applications in various sectors, including Regenerative Agriculture, renewable energy, and sustainable infrastructure. In Regenerative Agriculture, ReFi provides financial support for farmers to adopt regenerative practices prioritizing soil health, biodiversity, and ecosystem services. By investing in these practices, Regenerative Agriculture can restore the health and productivity of farmland, sequester carbon, and support local food systems.

In addition to agriculture, ReFi can also play a crucial role in promoting renewable energy and sustainable infrastructure. By investing in renewable energy projects and sustainable infrastructure, individuals, businesses, and organizations can accelerate the transition to a low-carbon economy and reduce our dependence on fossil fuels. This can include investments in projects like solar and wind energy, sustainable transportation, and green buildings. By supporting these initiatives, we can create a more sustainable future for ourselves and future generations.

Moreover, regenerative finance helps promote impact investing, which generates positive social and environmental outcomes alongside financial returns. Impact investing can support underserved communities, such as low-income neighborhoods or rural areas, by investing in projects that create jobs, and increase access to healthcare, education, and other essential services.

So, Why Blockchain?

Blockchain creates a verifiable public ledger so we can quantify positive actions that create change and further incentivize them. Most ReFi (Regenerative Finance) Blockchain initiatives help solve climate change and biodiversity loss by creating incentives for investing. This is done in 4 simple steps.

  1. Identify sustainable projects or initiatives
  2. Tokenize the assets or their impact
  3. Raise capital by deploying these assets as NFTs to the blockchain
  4. Monitor these investments on the blockchain

One large use case is enabling access to more equitable carbon markets, as I’ll explain below.

After the Kyoto Protocol of 1997 and the Paris Agreement of 2015, international accords were laid out for CO2 emission goals. To achieve these goals, governments regulate the emissions of companies using incentives in the form of limits and fines.

They do this through a cap and trade system — the government sets a limit, or “cap,” on the total amount of greenhouse gases that can be emitted over a certain period of time. They then issue a corresponding number of permits, each representing the right to emit a specific amount of greenhouse gases. Companies are fined when they emit more emissions than the amount of permits they hold, so they can buy permits from other companies that have more permits than emissions.

Carbon credits are a specific type of permit businesses create, using regenerative initiatives to remove carbon from the atmosphere. Each carbon credit represents the removal of one ton of CO2 from entering the atmosphere, and the price varies greatly depending on the project.

Some issues with current carbon markets include

  • Lack of transparency: difficult to verify whether emission reductions are genuine
  • Double Counting: multiple entities claim credit for the same reductions
  • High transaction costs: this limits participation to large businesses and organizations

This creates a perfect use for blockchain. Carbon credits can be tokenized on the blockchain, so carbon projects that remove carbon from the atmosphere don’t have to go through significant regulation and it’s much easier to find a buyer for those credits.

With blockchain’s low transaction fees and decentralized nature, individuals and blockchain organizations can access these carbon markets, create investments that generate significant returns, and even offset their own emissions.

How do I Get Involved?

Here are some projects that you can get involved with:

  • KlimaDAO: Participate in carbon markets with a digital currency backed by real carbon assets through buying bonds.
  • Ethic Hub: Connects lenders to invest in high social impact investments.
  • Regen Network: Connects investors and buyers to premier-quality ecological impact projects.
  • Giveth: A decentralized charity protocol that rewards donors and gamifies fundraising.
  • Plastiks: Connects companies and individuals to plastic recovery projects worldwide, especially in regions that lack infrastructure.
  • Open Forest Protocol: Fund forestation projects with digital transparency.
  • Toucan Protocol: Instantly buy and retire carbon credits, and share your impact on a public verifiable ledger.
  • Celo Climate Collective: A coalition of stakeholders — from investors and nonprofit organizations to entrepreneurs and scientists — aiming to do verifiable climate action at scale.

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Ram Potham
Carnegie Mellon Blockchain

Founder. AWS certified expert. Web3 enthusiast. Yoga Teacher. Artificial Intelligence student at Carnegie Mellon University.