ReFi — the global wealth flywheel
Regenerative Finance is a positive-sum economic model where wealth generation is aligned with the greatest benefit for all beings.
What does it mean to be positive-sum?
A positive-sum game has a net positive value output.
Playing the game produces value, so everyone involved is able to come out ahead. Regenerative agriculture, for example, has the effects of improving regional biodiversity and soil vitality, which in turn enhances the food producing function and resilience of the whole region into the future.
Positive-sum games feed into their own future success and create a multiplier effect on wealth generation for the whole system over time.
A zero-sum game is net neutral.
The sum of wins and losses can only be null, so one player can only win if another player loses. If someone thinks that the only way to get what they want is to take it from someone else, or to out-compete the other for resources, they are playing a zero-sum game.
A negative-sum game depletes value from the system.
Even if one or more players come out ahead, the whole system loses value overall. If two players sabotage each other’s effort to acquire rivalrous goods, there is a net loss. Negative sum games are naturally self-terminating since they eventually deplete all opportunity in the system. This is what ‘unsustainable’ really means.
Ok, so why are we even having this conversation — isn’t the obvious move for all players to always choose to participate in positive-sum games?
Multipolar traps — the alignment issue
Unfortunately, the path that leads to the greatest long-term benefit is often misaligned with the path that leads to one’s immediate benefit. These scenarios are called multipolar traps. Even with the most altruistic intentions, it can be easy to get trapped in a local maximum, unable to see the bigger picture, including the second and third order effects of one’s actions.
Consider that folks may already be exerting the full extent of their effort toward sustaining a livelihood, and many are facing substantial adversity in this effort. The more that one’s focus is on surviving, the shorter that their time-preference is generally going to be. This forces us to forgo opportunities that may have produced even more value for everyone, long term, in favor of opportunities that serve our own short-term needs.
A few examples:
Building a home with cheaper materials may be the only option within one’s budget, even though higher quality materials would last longer and insulate better while producing less VOCs. Eventually, the savings on energy and maintenance cost would be much greater than the difference in initial investment for the quality build over the cheaper one, while also providing a healthier living environment and consuming fewer natural resources in the long run.
A solar array may be a prohibitively expensive investment, but it produces more value in power than it initially costs while also mitigating CO2 emissions from other means of producing electricity.
Many conventional farming practices may be more economically attractive than regenerative practices to a farmer with a shorter-time preference, but can deplete soil quality and fresh water supplies, threatening long-term food production capacity and the ecological vitality of the region.
An auto company may avoid the inevitable transition away from petroleum fuels because of the immense engineering challenge associated with inventing and building new propulsion systems and the investment in new infrastructure and manufacturing methods, but the continued CO2 emission by their cars is contributing to global climate catastrophe, which threatens unfathomably more value for the long term thriving of our entire planet than the initial cost to make the transition.
All of these situations have both local and global consequences — affecting those directly involved as well as the greater ecosystem. We haven’t even begun talking about the Malthusian Trap, the prisoner’s dilemma, race-to-the-bottom and the many other modes of coordination failure that can lead well meaning folks into negative-sum games.
Meet Moloch, supervillain to global thriving.
Pseudonymous writer, Scott Alexander, describes multipolar traps in Meditations on Moloch, where they lay out an extensive set of examples for different forms of coordination failure that lead to negative-sum games. Moloch, as ‘the god of coordination failure’, has since become a powerful meme in the ReFi space, propagated by the likes of David Hoffman, Kevin Owocki, and others building and envisioning the future of regenerative crypto-economics. Gitcoin has even published a series of exciting comic books that tell stories of the epic adventure and struggle of ‘slaying Moloch,’ a visualization of the beautiful future that comes when we work together to improve systems of coordination across all facets of society.
We want to build economic systems where the short-term economic interest of each entity aligns with the long-term benefit of the entire planet.
When we align the sense of deep wealth with global health and shift priorities from exclusively optimizing GDP to improving well-being— it’s easy to see that the long term benefit of all beings is the most profitable business model for the everyone, long-term. In regenerative finance, any departure of the short-term economic interest of an individual from the long-term benefit of the whole can be seen, ultimately, as a coordination failure, and resolved with the appropriate incentive alignment.
So how do we begin to resolve these coordination failures? How do we save each other from multipolar traps? How do we overcome the continuous onslaught of Moloch on our collective potential to build the best world we can dream of?
ReFi — toolkit for regen super-heros
Regenerative crypto-economics gives us the tools to coordinate as value aligned collectives to discover the most mutually beneficial opportunities and then design incentive architecture that serves the best outcome for everyone.
Regenerative solutions produce positive externalities, which contribute to improved health and productivity of the whole system over time and create a positive feedback loop, spinning the flywheel of global wealth generation. Deep wealth — the greatest benefit of all beings.
If we, as a community, account for all of the global value added through the positive externalities of one path over another with its negative externalities, we should be able to invest in the short-term incentives that would sway individuals toward the regenerative path and produce a great return on that investment over time. The whole planet stands to benefit the most from the long-term value produced by regenerative impact. It’s up to the global community to make those regenerative paths the most attractive paths so that individuals can meet their own short term needs while also serving the greatest global benefit. This is not always so straight forward, of course, and will require many of the most brilliant minds and skilled creators to build, but the deep value return on creating scalable, non-coercive, transparent solutions to systemic coordination problems is enormous.
Think of it this way:
Of two given opportunities for Sebastian to make a living,
Option A is cheaper to initially perform and produces a return on Sebastian’s effort within the time frame required to meet their own needs. But it also produces a certain negative externality by degrading the quality of a resource shared by the greater community.
Option B requires more initial effort and capital to initiate and would produce a grater return but over a longer time period. This option also produces a positive externality by contributing to the regeneration of that shared resource.
The regenerative externality of B improves the performance of the whole system, including the yield on Sebastian’s own effort over time and increases the long-term wealth generation for the whole community. Sebastian would naturally want this option but they do not have the capital to pay for the initial investment over Option A.
We have an arbitrage opportunity here. The community as a whole has a much longer time-preference than Sebastian, and also has access to a much greater pool of resources to invest into the most optimal solutions, including such ethereal resources as monetary energy. The greater community also represents a broader reaching set of perspectives and expertise to discover the most valuable opportunities for the whole.
As a collective, we can coordinate in order to optimize for the greatest long-term benefit by offering just enough of an initial incentive to Sebastian (and anyone else) to choose Option B instead of Option A. The future return of value in the form of positive externalities will then exceed the initial investment over time, and everyone comes out further ahead. This is a non-coercive model and a virtuous cycle that benefits from the free market to reward the discovery of good ideas for the optimization of collective well-being and ecological vitality.
The other option is to do nothing, let Sebastian and everyone else fend for ourselves within the narrow scope of our own individual models and allow the shared resource to degrade through the negative-sum game we’re bound to get trapped within until some dependencies break and we are forced to invest even more capital into engineering emergency solutions, or worse — pass away.
Society today is largely choosing the latter, and we are seeing the consequences of misaligned incentives play out in the forms of climate catastrophe, fresh water depletion, desertification, acidification of oceans, mass extinction, ecosystem collapse, social inequity, wide-spread poverty, systemic violence, war, the list goes on.
There’s hope!
A number of exciting projects in the ReFi space are already laying out successful models for incentive alignment toward global benefit. Nori, for example, has built a blockchain-native carbon marketplace where farmers can earn carbon assets for building vital soil through regenerative agricultural practices. Did you know that building soil also sequesters CO2 from the atmosphere? The farmers can then sell these NFT-based carbon assets to those who would like to offset their carbon footprint or generally contribute to the sequestration of carbon dioxide from the atmosphere while simultaneously increasing regional biodiversity and ecological vitality, improving nutritional content of the food produced, and ensuring food production security well into the future.
All of these positive externalities contribute immense value to the greater community and actually improve the food producing function of the entire region — thus feeding into a great virtuous cycle where everyone’s ability to cultivate value is improved and the global wealth flywheel gets spinning stronger and stronger.
Common Action is building a knowledge graph to help with global ecological restoration by developing a common ontology that can unite all scientific research and and invaluable environmental data in real time and make critical knowledge more accessible than ever to ecological regeneration efforts all over the world.
Solid World DAO is helping to make it easier for land stewards of all kinds to beginning earning money sooner for the carbon sequestered as a result of their land management practices — be it the cultivation of old-growth forests, or regenerative agriculture. By closing the loop in the verification process and employing better MRV solutions, they can begin delivering carbon credits to land stewards up-front, where they may have had to wait five years or more previously.
Regen Network has built a robust ecosystem of blockchain-native solutions to climate crisis and a global community of powerful regens passionate about improving the ecological vitality of the entire planet and armed with the right tools to do it. Listen to Regen Network co-founder, Gregory Landua, discuss paths toward the regenerative renaissance with fellow solarPunk regen lvl 9000+, Kevin Owocki, in the Greenpill Podcast.
Nourish DAO is seeking to scale a proven model for thriving community farms that can bring vibrant life and vitality to food-deserts everywhere. The model has been laid out by The Green Haven Project and offers even more than delicious, organic produce free of charge to the local community. These are spaces for deep community bonding, collaboration, opportunity to socialize and exercise in the most satisfying ways, and make contact with earth, literally.
We’re excited to dig deeper in future articles about the potential of regenerative crypto-economics as well as real world solutions in ReFi that are creating global benefit today, like those mentioned above among many others, like, Moss, Carbon Collectibles, Bounty Network, Klima, Nemus, Gitcoin, Proof of Humanity, Giveth, and DoinGud, just to name a few.
There are so many incredible creators, thinkers, and projects building the Regenerative Renaissance as we speak, and we commend every one of you for working with compassion and inspiration to help build the best future we can dream of.
