Takeaways from Distroid Issue 19 — Startup Series: Toucan
Theme: Regenerative Finance (ReFi)
For Distroid Issue 19, my takeaways focus on three themes:
- Digital Organizing,
- Regenerative Finance, and
- Foresighting.
This post covers the Regenerative Finance theme.
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Regenerative Finance (ReFi)
Regenerative Finance (ReFi) is a sub-category of Decentralized Finance (DeFI) that focuses on using blockchain and smart contracts (or Web3 tools in general) to develop environment-related markets (primarily natural capital assets) that enable positive behavioral change and regenerate natural systems.
For ReFi, I focused on Startup Series: Toucan by My Climate Journey (Jason Jacobs is the host).
Startup Series: Toucan
Notes
I really liked how the founders of Toucan Protocol, Raphaël Haupt and James Farrell, discussed the need for constantly questioning whether blockchain had the necessary characteristics for solving problems related to voluntary carbon markets.
I also really felt James’s pain point of digging into the Web3 rabbit holes and the difficulty of finding other people to talk to who understand the problem you are trying to solve and just Web3 in general.
Lastly, I really liked how James pointed out how measuring based on tonnes of carbon can actually cause unexpected problems, such as reducing biodiversity because people wan to produce carbon assets with “the fastest growing monoculture trees” rather than growing a polyculture.
Additional Readings
- Voluntary carbon market rally set to stretch into 2022 on demand optimism
- Regenerative Finance in Crypto
- Crypto, climate, and the foundations of a regenerative economy
- Pete Howson on Cryptocarbon
- What is ReFi? Part I — A tour through the climate crypto rabbit hole
- 🌍 Giving (carbon) credit where it’s due
- Launch of Toucan Protocol
Highlights
And just to give you an idea, like if we, if we use money as, you know, our medium of exchange every day, today money is, you know, backed by the power of the US military or by oil, or essentially just the social contract that we all believe that money is real and worth something. But, you know, we can back money by things that we care about like by diversity carbon and like natural resources. So this is an example. Like if we did that, if we had money that is backed by, by the things that we actually care about, without even noticing people just transacting in this clean currency or whatever you wanna call it, it would create like regeneration without people even noticing. So I think we have a, essentially we have the power to create systems that align incentives in a way that, you know, planet earth as like the stakeholder that has always been forgotten is part of the equation essentially.
Yeah. I mean, there’s several, like that’s definitely a big part of it, right? I mean, there’s several characteristics that, you know, are quite specific to blockchains, right? And like one of the biggest questions Raphael and I continued to ask ourselves, especially in the earlier days was why blockchain? Right? Like why are we doing this? Like why is it gonna be better? And there’s certain core principles or fundamentals of blockchains, like characteristics that they have that are really in our opinion, what make them the perfect home for what needs to happen. Right?
But quite frankly, the biggest problem as far as I see it is that we are measuring things in terms of tons of carbon, right? Like we’re really looking at it as if like this is a sensible thing to do at all. And if that was a sensible thing to do, and you wanted to just, you know, produce carbon assets, then you should get like the fastest growing monoculture trees, plant them and as quickly as possible, you know, certify them or whatever. Right? But this doesn’t help biodiversity, this doesn’t help community, this doesn’t help anything around permanence or any of the other business. Right?
Yeah, I’d start with the last question. So the legal entity is a nonprofit, a Swiss nonprofit that is kind of steered into protocol. And like, this is the first kind of like key difference between Web3 companies, I guess, and traditional companies is that Web3 has found ways for nonprofits to have a business model, which can be as simply a token, right. So we can have… We don’t have a platform token, but we can have a platform token in the future and essentially gives gradually decentralize the protocol through this serious token and giving people like that use it, there are users of the protocol that are investors and the possibility to govern it in the future. So this is the first, you know, about how to monetize it. There’s this, you know, concept of governance tokens, which allow protocols essentially to, uh, it’s often called exit to community if you want, where, you know, you allow the community now to govern your project.
And, and so I think this is one that, this is a very obvious way. We haven’t introduced any fees yet. I think at some point we were gonna think about, you know, where can we, where does it make sense to introduce fees that are, you know, enough to sustain a protocol ’cause you know, it doesn’t make sense to… Like it’s important to also, you know, sustain yourself to keep growing this ecosystem. So we are kind of like, we’re doing a lot of sessions right now on whiteboards again. Like, you know, the different parts in the system where we could have a fee that, that incentivizes maybe also the behavior that we wanna see. Right?
So the first of which is called the Base Carbon Tonne, which is what is used as the underlying value in KlimaDAO. And this is because, you know, carbon projects are what we call semi-fungible. So it’s like there’s fungibility, which is a term that’s simply means that things are the same as each other, like dollars. You can exchange $10 for 10 single dollar coins. Right? And it doesn’t matter ’cause they’re all the same thing. And then you have non fungibility, which is essentially unique items that generally have some unique identifying characteristics. So that’s a non fungible item.
And carbon projects, like there is fungibility, right? Like at the level of project and at the level of vintage, there is fungibility, but in terms of building markets and in terms of building, you know, really deep systems that can allow value to flow, like we really need deeper liquidity. So the purpose of these pools, well, in this case, the Base Carbon Tonne pool, really is to create deep liquidity and fungibility. So, so this is kind of the two pieces of infrastructure that we’ve, we’ve started with, I would say.
I think for both of us, it was really the first time we had met someone else who really, that we could talk to. Right? Because like, when you think about this stuff, like for so long, you go down so many of these rabbit holes, like there’s very few people who can really understand you. Right? So serendipity had it that we were very close by. And since then, yeah, as Raphael said, we locked ourselves in, in a room for six months with 13 whiteboards, you know, mapped out many different companies or like entities or organizations that would need to exist to make this new economy. And yeah, after a break, went back to the beginning and said, “Okay, well look, what is the lever that we can pull?” Like what can we do that would have the biggest impact?
