ReFi Industry Research Report: Programmable Economic Cycle

Preface – This article comprehensively introduces the definition, types, characteristics of ReFi, excellent projects in the ecology, and the design principles of ReFi token economics.

As well as issues that need attention, ReFi investment methodology, etc., so the article is long, and readers can choose the parts of interest to read.

A luxury NFT project developed by an Italian team chose to issue their NFT on Polygon, but did not choose the “noble chain” ETH that matches the luxury positioning.

Is it because they are “Muggles” living in the old classical world? No, they know web3 very well, ERC721, and Ethereum’s market position in the web3 world and in the NFT field, but they insist that the properties of Polygon’s carbon-neutral public chain are more in line with their luxury NFT brand positioning.

Of course, we can laugh at them from the point of view of market strategy as selling diamond rings in a charity second-hand store, but it is undeniable that their choices reflect the trend of environmental protection, inclusiveness, and diversity values ​​that are quietly infiltrating the Web3 world.

We know that due to various historical and practical reasons, the early Web3 industry was shrouded in an ideological atmosphere of social Darwinism and neoliberalism. Many web3 practitioners regard issues such as environmental protection, inclusiveness, and diversity as hippies’ utopian fantasy .

However, things are changing.

With the development of Web3 today, the internal and external environment of the industry has been turned upside down compared with the past, and great changes have taken place. The values ​​of practitioners are more inclusive, open and diverse.

At the same time, the narrative power of neoliberal discourse systems such as censorship-resistant and permissionless is weakening, and Web3 capital (such as A16z) is struggling to find or invent new narrative paradigms.

Therefore, Web3 projects of environmental protection, inclusiveness and diversity are receiving more and more attention and attention from capital and industries. Examples are as follows:

Gitcoin’s donation activity, which has a reputation as an industry vane, has a dedicated environmental protection, inclusive and diverse web3 project section in both GR-13 and GR-14 phases.

ReFI projects such as Amazon rainforest protection and carbon credit project, carbon credit version OlympusDAO fork KlimaDAO, carbon credit asset tokenization protocol Toucan Protocol, and Regen Network have gained considerable brand awareness and market influence

People also borrowed the concepts of DeFi and GameFi to invent a new proper term ReFi to define the Web3 environmental protection project sector.

What is ReFi?

1. Definition of ReFi

ReFi is short for Regeneatve Finance. As a brand-new concept and capital narrative paradigm in the Web3 industry, ReFi does not yet have an authoritative and unified definition. GeekCartel believes that the ReFi concept will eventually be jointly defined by builders, developers, participants, etc., and will exist in the form of an open, self-evolving consensus.


Currently, there are two main definitions of ReFi in the Web3 community:

The definition of ReFi by the green public chain Celo:

ReFi = reimagining traditional finance (TradFi) to better integrate nature and humanity, making money more accessible and beautiful.

The definition of Celo emphasizes the reconstruction of traditional finance (TradFi) by ReFi. Celo believes that the philosophical cornerstone of the modern financial system is the abstraction of the world into a space with unlimited access to resources. However, to quote the economist Herman Daly, the real world we live in has planetary boundaries, carrying capacities and tipping points.

ReFi acknowledges that we live in a “whole world,” and ReFi aims to correct this exploitation and better intertwine our economies and ecosystems.

ReFi By using money as a tool to give value to assets backed by natural assets, ReFi prices externalities, charging those who create negative externalities and rewarding those who create positive externalities.

 Externalities: The actions of individual economic units have an impact on society or other individual sectors without corresponding obligations or rewards

The definition of ReFi by the Web3 non-profit organization Crypto Altruism:

ReFi is a movement focused on the power of blockchain and web3 to combat climate change, support environmental protection and biodiversity, and create a more equitable and sustainable financial system.

The definition of Crypto Altruism emphasizes the social movement attributes of ReFi. ReFi not only exists as a powerful tool for people to create a more equitable and sustainable financial system, but also a green social movement with positive externalities.

As a VC DAO who has been focusing on the field of Web3 innovation for a long time, GeekCartel tries to put forward an understanding of ReFi from its own perspective:

First, ReFi is a new Web3 narrative paradigm. One obvious difference between it and the previous Web3 narrative paradigms L1, L2, DeFi, NFT, Play to Earn, etc. is its positive externality. ReFi enables other groups to benefit from the development of Web3 at no additional cost. This new Web3 narrative that shines with the brilliance of humanity (perfect humanity is divinity) will inject new vitality into the Web3 industry facing the crisis of narrative exhaustion.

Second, ReFi is a combinatorial innovation like the iPhone. ReFi is not a technological innovation. In fact, the Web3 technology used in ReFi is only some basic technologies, such as token issuance, DeFi lending, AMM Swap and DAO tools. Its innovation is to combine these Web3 technologies to provide a new solution for the diversity of projects that combat climate change, support environmental protection and sustainable development such as biology.


Finally, ReFi is an economic cycle system with positive externalities. ReFi is a relatively independent economic cycle system with complete production (production of natural assets)-exchange (tokenization of natural assets and DeFi facilities)-consumption (use and consumption of natural assets), and this system has positive externalities. The positive externality here refers to the fact that the economic activities of one economic entity lead to additional economic benefits for other economic entities, and the beneficiaries do not have to pay the relevant costs.

2. Types of ReFi

ReFi does not belong to one of the main narrative lines of this bull market. As a new thing, it is still in the early stage of latent growth, or to borrow the terminology of MOBA games, it is in the Farming stage. However, even though the number of projects in the entire ReFi ecosystem is still relatively rare, its types are relatively rich.

According to the type of problem to be solved:

  • Climate Solutions

ReFi projects for climate solutions include: Toucan Protocol, KlimaDAO, FlowCarbon,, Regen Network, Nori, basinDAO, etc.

In response to global warming, a series of international institutional arrangements, such as the Paris Agreement and the Kyoto Protocol, reached by sovereign countries around the world regard the carbon credit market mechanism as an important climate solution. The carbon credit market is divided into a compliance carbon credit market and a voluntary carbon credit market.

Among them, the compliance carbon credit market is only allowed by institutions licensed by the regulatory agencies of various sovereign countries to participate. The voluntary carbon credit market is relatively open and everyone can participate. However, the voluntary carbon credit market has problems such as inconsistent carbon credit standards, opaque trading market, and poor market liquidity. And this happens to be the starting point and focus of ReFi projects for climate solutions.

From the perspective of financing amount, market share, social influence, etc., the climate solution ReFi project is currently the mainstream type in the ReFi field.

  • environmental protection

Environmental protection projects in a broad sense include climate solutions and biodiversity conservation. In a narrow sense, environmental protection projects include marine water pollution cleanup ReFi project Neptune Chain, decentralized environmental compensation project Avano, tropical rain forest monitoring project Rainforest Alert and so on.

  • biodiversity conservation

Biodiversity conservation ReFi is dominated by DAOs, such as The Endangered Tokens (ENTS) Foundation, which protects endangered forests.

Types by web3 technology stack:

Protocol class

The main ReFi projects in the protocol category are: Toucan Protocol, Regen Network.

Platform class

The main ReFi projects in the platform category are: FlowCarbon,

Application class

The main ReFi projects in the application category are: Kumo, Return Protocol, Meltek.

DAO class

The main ReFi projects in the DAO category are: KlimaDAO, CarbonDAO, basinDAO.

3. Features of ReFi

The characteristics of ReFi are: transparency, accessibility, programmability, and positive externalities.


transparency. Whether web3, web2 or more traditional organizations promise transparency. But there is only web3 project that can achieve trustless transparency technically and logically. And ReFi inherits this feature of web3. If a user purchases carbon credits through the traditional carbon credits market to offset his own carbon emissions, he will eventually get only one PDF certificate, and other information is a black box for him. The ReFi project will put the carbon credit token’s registration agency, credit type, and batch year on the chain, and users can view this information through the blockchain browser at any time.

accessibility. After the ReFi project tokenizes natural assets, with the help of web3’s infrastructure, wallets and DeFi applications, users around the world can invest, purchase, use, and trade these natural asset tokens without permission and freely.

Programmability. Programmability is a prerequisite for ReFi projects to achieve the two characteristics of transparency and accessibility. Smart contracts give ReFi projects the ability to unlock natural asset tokenization, pooling (standardization), and the use of decentralized lending and AMM Swap, enabling ReFi projects to improve the capital efficiency and transparency of natural assets.

positive externalities. ReFi is different from other types of Web3 projects such as L1, L2, DeFi, NFT, Play to Earn, etc. It emphasizes positive externalities. ReFi enables other groups to benefit from the development of Web3 at no additional cost. ReFi By using money as a tool to give value to assets backed by natural assets, ReFi prices externalities, charging those who create negative externalities and rewarding those who create positive externalities.

List of ReFi Ecological Projects

Carbon Market Public Market Infrastructure Toucan Protocol

Toucan Protocol’s mission is to build a planetary regeneration economy on the open web. Toucan Protocol chose to start with the public infrastructure needed to create the new currency Lego: programmable carbon.

Toucan Protocol’s product has an architecture consisting of two parts: a carbon asset bridge and a standardized carbon pool.

  • Carbon Asset Bridge. To put the carbon chain on the chain, Toucan Protocol builds carbon bridges. It allows anyone to tokenize their carbon credits and make them available in the DeFi world.

Toucan Protocol’s carbon asset bridge is the first general bridge of the ReFi ecosystem. In principle, it can be connected to any carbon reduction resource. But Verra, which Toucan Protocol currently supports, will only then be extended to Gold Standard and other institutions.

During the bridging process, carbon emission reductions are normalized and attributes are recorded. At the end of the process, users receive TCO2 tokens: fungible tokens representing tokenized carbon tons. By tokenizing existing carbon offsets, a well-established ecosystem of carbon standards and validators can be established and link these markets to DeFi.

  • Standardized carbon pools. Toucan Protocol converts tokenized carbon credits into more liquid carbon portfolio tokens, providing price discovery for different classes of carbon assets, and a new currency Lego for DeFi. 

Not all carbon offsets are equivalent — they come from a wide range of projects that use different technologies to reduce emissions or remove greenhouse gases from the atmosphere. Additionally, each project creates a different emissions reduction year or so each year, and just like wine, the quality of the year varies. This change spreads liquidity

For this purpose, Toucan Protocol has developed the Toucan Carbon Pool. Carbon pools are carbon composite pools with corresponding carbon tokens. When these pools are created, a set of attributes is whitelisted – in order for carbon credit tokens to be deposited into the pool, the TCO2 tokens must match the gated attribute list.

The Toucan Carbon Pool transparently addresses liquidity issues that hinder price discovery in off-chain carbon markets. Carbon Combination Tokens are ERC20 tokens that are composable with the entire DeFi world – they can be traded on AMMs like SushiSwap, used as collateral for KLIMADAO, and more.

Toucan Protocol is currently developed based on Polygon, and the next step is to expand it to the Celo public chain.

Toucan Protocol is one of the first teams to eat crabs in the ReFi field. Toucan Protocol’s carbon portfolio tokens have a market value of $36.69M in circulation, and they are in a dominant position in the carbon credit token market segment. The carbon asset bridge mechanism of the V1 version of Toucan Protocol relies too much on centralized institutions such as Verra, and it is hoped that this can be improved in its V2 version.

The Layer 0 infrastructure of the ReFi ecosystem Regen Network

The goal of Regen Network is to build a fundamental fintech infrastructure for the ReFi ecosystem, that is, to become the Layer 0 of the ReFi ecosystem. Other projects and protocols can build on and leverage this Regen Network to execute their own climate-focused business models. Regen Network creates new tools for the relationship between humans and the environment through the use of blockchain ledgers and modern remote sensing technology.

The architecture of Regen Network consists of Regen Ledger developed based on Cosmos SDK and Regen Registry, a decentralized carbon asset registry.

  • Regen Ledger. Regen Ledger powers the Regen Registry, enabling multiple registries to communicate and trade with each other, resulting in a public ecological accounting system.

Regen Ledger is a public chain developed based on the Cosmos SDK that adopts the PoS consensus mechanism. Regen Ledger has dual goals, one is to index ecological health-related assets and rights, and the other is to track ecological service points that quantify the degree of ecological health change. 

Focused on open source, Regen Ledger welcomes active participation from software developers working in the fields of blockchain, climate solutions or agritech to take part in a community-driven approach to open source protocol design.

Regen Ledger is a core player in the Cosmos ecosystem. Contracted directly with the Interchain Foundation as the main maintainer of the Cosmos SDK. With the advent of IBC, any Cosmos SDK blockchain connected to the Cosmos Hub will be able to interact with assets and ecological data on Regen Ledger.

  • Regen Registry. The Regen Registry allows Earth Stewards (owners/producers of natural assets in a regenerative economy) to register their ecosystem services and generate carbon credits token CarbonPlus Credits to sell directly to buyers around the world.

Unlike Toucan Protocol’s carbon asset bridge, Regen Registry does not rely on third-party carbon asset registries such as Verra, but uses blockchain and remote sensing monitoring technology to directly sign a carbon asset registration contract with the registrant to generate carbon credit tokens.

The carbon assets currently supported by the Regen Registry focus on soil organic carbon in grasslands and pastures. Among those being developed are forestry-based credits (afforestation, reforestation, deforestation avoidance, and agroforestry) and cropland-based soil organic carbon credits (no- and low-tillage, cover crops, and crop rotation).

Compared with the path of Toucan Protocol, Regen Network chose a path of heavy operation and more web3 native. This may be related to the long-term deep involvement of the team in the “Open Agriculture” project, and their rich environmental protection resources, experience and knowledge.

Amazon Rainforest Carbon Asset Agreement

Moss Earth is a climate technology company focused on environmental services, using blockchain technology to simplify the offsetting process and guarantee traceability and transparency. In 2020, it uses the 150,000 carbon credits generated by the Amazon rainforest every year as asset reserves. These carbon credits have passed the verification and registration of the standards agency Verra. By freezing the carbon credits of the Verra centralized trading center, the MCO2 chain assets are minted for trading. buy and sell. Users can purchase, store and offset MCO2 to protect the atmosphere.

Moss Earth uses funds from carbon credits on the platform in three main ways:

  • Protect native forests: Reduce greenhouse gas emissions by protecting woodlands and preventing forest degradation, and create monitoring, patrolling and other employment opportunities for local communities.
  • Reforestation: A project to sequester greenhouse gases from the atmosphere by reforestation with native species.
  • Carbon sequestration: Collaboration on projects that promote sustainable agriculture through agroforestry systems or reduce the use of chemical fertilizers, thereby reducing greenhouse gas emissions .

At present, Moss Earth has established cooperative relationships with many large companies. Amazon has purchased more than $15 million in MCO2, helping protect some 800 million trees. Brazil’s largest airline, Gol, offsets its in-flight carbon emissions with MCO2. The Celo community also approved a proposal to allocate 0.5% of cUSD’s reserves to MCO2.

FlowCarbon, an open-source protocol for carbon credits with double blessings from capital and celebrities

Flowcarbon is a Celo-based open-source protocol for carbon credits that drives institutional capital into climate change mitigation efforts by tokenizing traditional carbon credits. In addition, the agreement aims to be a transparent, threshold-free carbon trading market that continues to help companies reduce carbon emissions to net zero or net negative.

The Flowcarbon team believes that the most effective way to mitigate climate change is to tokenize carbon credits. Traditional voluntary carbon markets are inefficient, opaque, and have high barriers to entry. Various brokers and advisors take up to 20% commission, and there are frequent incidents of a single type of carbon credit being sold to different buyers at different prices. Currently, at every step of carbon credit trading (issuance, clearing, settlement and custody), the transaction process is expensive and slow.

a16z stated on the official website that in Flowcarbon’s protocol, on-chain carbon is an innovative tool that can be integrated into the existing DeFi ecosystem as an innovative portfolio finance, and is explained by the builders in web3 and a16z A new way to inspire climate-positive behavior. Flowcarbon’s GNT is fully backed by the real-time value of off-chain credits and can be used as collateral, protocol vault assets, stablecoin reserves, or to offset on-chain carbon credits. On-chain carbon credits will become a key part of the financial architecture, driving a zero-carbon future.

Flowcarbon, backed by WeWork founder Adam Neumann, closed a $70 million round led by a16z at the end of May. a16z believes that the carbon credit market may grow to $50 billion by 2030, and on-chain carbon credits can facilitate this expectation.

Effective carbon credit token market Nori

Nori is a blockchain-based carbon reduction platform founded in 2017 and headquartered in Seattle, Washington. Nori’s goal is to create a marketplace that addresses double counting and fraud in existing markets and builds strong economies around carbon reduction.

Suppliers first register their carbon reduction projects with the Nori platform, report the carbon reduction cases they have taken, and provide enough data to establish an accurate project baseline. Once project data is fully entered, the Nori platform commissions an independent third-party carbon quantification tool to estimate carbon emission reductions, and then uses that estimate to determine the amount of NRT tokens to create for suppliers. After that, buyers can purchase NRT directly from suppliers on the Nori market and receive a carbon emission reduction certificate. In Nori’s marketplace, the supplier receives the total price of NRT purchased, and Nori charges the buyer an additional 15% transaction fee. One NRT represents one ton of carbon dioxide removed.

Nori’s first carbon reduction product, soil sequestration, is aimed at farmers using regenerative farming methods that involve soil carbon sequestration, which sequesters carbon dioxide from the atmosphere and provides farmers with incentives.

Green version of MakerDAO Kumo

KUMO supports users to borrow the stable currency KUSD issued by the stable currency with no interest rate carbon credit token.

The KUMO protocol is an over-collateralized lending protocol. This means that the value of locked carbon tokens (collateral) always exceeds the value of minted KUSD. As an additional buffer, the KUMO protocol provides each asset with a stable pool of deep liquidity to further protect loans and repay debts in liquidation.

KUMO can be simply understood as the green version of MakerDAO.

KUMO’s philosophy is simple and straightforward: let money automatically recognize regenerative economic behavior to heal our biosphere.

The more KUSD in circulation, the more carbon emissions outside the market, and the more financing available for carbon projects. Through this cycle, KUMO makes money an ally of people in the fight against climate change.

The KUMO project is still in its early stages, and the team is focusing on developing KUSD usage scenarios, payment gateways, and carbon credits burning dashboards.

” Emission reduction is mining” on-chain automatic emission reduction tool Return Protocol

The goal of Return Protocol is to drive the mass adoption of ReFi in Web3 to make blockchain transactions environmentally sustainable.

Return Protocol is an environmental emission reduction protocol for on-chain wallets. By allowing on-chain wallets to achieve emissions reductions in a simple, automated, and economically beneficial way, driving funds to projects that are good for the planet, creating an environmentally friendly Web3 for all.

Return Protoco is a fully automated dApp hosted on Polygon that allows for accurate and automatic on-chain environmental mitigation with every cross-chain transaction. The process of automatic emission reduction is simple:

Store Return NFTs in wallets where you want to automatically reduce emissions. Return NFTs can act as a passport into the ReFi ecosystem, providing access to the ReFi dashboard. Also serves as social proof of commitment to environmental neutrality.

Customize emission reduction preferences. On the Return dashboard, the user is allowed to set the percentage of each transaction they want to offset, which carbon credit token to use (NCT, MCO2, PRC, etc.) and the type of underlying project the user wants to support. Users can also decide whether to initiate the burning of carbon credits and subsequently offset carbon emissions, or to bind and stake with the underlying protocol.

Normal transactions, after the user has set their preferences, Return will execute them for every activity the user participates in from the desired wallet. Users will see a carbon reduction fee on top of each transaction, and Return is automatically calculated using the gas fee and the blockchain’s average emissions. For each carbon reduction fee, Return Protocol rewards users with Return Protocol’s governance tokens.

ReFi version of Olympus DAO protocol Klima DAO

The Klima DAO is a protocol that attempts to drive climate action by accelerating the appreciation of carbon asset prices through its KLIMA token. To encourage emissions reductions by driving up the price of carbon assets, each KLIMA token is backed by real-world carbon assets.

The reserve asset of Klima DAO is Base Carbon Tonnes (BCT), a carbon offset index token that represents a basket of carbon emissions including TCO2. Each TCO2 unit represents an individual carbon offset that users can purchase on the Polygon blockchain through the Tucano carbon bridge. In addition, TCO2 carbon offsets include characteristics such as project name and type, serial number, and verification year.

Klima DAO, a fork of the popular Olympus DAO protocol, offers users two incentives:

Bonding: Encourage other carbon emission reduction agreements or application projects to participate in the Klima ecological construction. If they are willing to give up the on-chain asset share of other agreements or application projects, they can obtain Klima on-chain assets equivalent to the open market and corresponding discounted rewards as compensation.

Staking: Encourage participants to hold assets on the Klima chain for a long time, allowing holders to receive rewards and participate in governance. Participants who pledge Klima will get 1:1 sKlima, and holding sKlima will get corresponding benefits based on the length of time and the re-benchmarked floating interest rate.

Launched in August 2021, Klima DAO has accumulated over $110 million worth of treasury assets in one month. But as the crypto market has entered a cold winter this year, Klima DAO’s TVL and currency prices have entered a terrifying negative feedback loop known as the “death spiral”.

As of July 17, 2022, there are still 17.77M TCO2 (carbon credit token issued by Toucan Protocol) on-chain carbon credit assets registered in its ecology.

Issues needing attention in the design of ReFi token economics

The core issues dealt with in the design of L1, L2, GameFi, and DeFi token modes in the past are:

  1. Questions about the strength of economic incentives and the stability/sustainability of the economic system;
  2. The empowerment of token is the application scenario of token.

In some ponzi-biased internal circulation token economic system designs, such as some DeFi2.0 projects and Play to Earn game projects, the two indicators that people generally value are APR and ROI.

These design principles are obviously not very applicable to ReFi projects. Because ReFi projects do not need to create market demand for tokens through economic incentives like most other Web3 projects, nor do they need to rack their brains to find application scenarios for tokens. Of course they can do that too, but it’s not required. ReFi assets, especially carbon credit tokens, have real market demands and usage scenarios.

For example, Polygon will purchase $400,000 of carbon credits (about 90,000 tons of carbon dioxide emissions) through Klima Infinity, a carbon credits marketplace on KlimaDAO, and plans to invest $20 million to make Polygon carbon neutral. Celo purchased the carbon credits token issued by as a reserve asset for its stable currency cUSD.

Of course, we are soberly aware that the market size of ReFi projects is not very large now (it is predicted that the total size of the carbon credit market will reach 50 billion US dollars by 2030), and it is not just a rigid demand for ordinary users. Currently, Web3 enterprises are mainly based on ESG. The idea is to take the initiative to buy.

Therefore, the core issues to be addressed by the token economics design of the ReFi project are:

Standardization and homogenization of natural asset tokens. The natural asset attributes that are the underlying assets of ReFi are naturally non-homogeneous. A newly planted forest in the Amazon basin, a new hydroelectric power station in the Mekong River basin, a carbon-negative farmland on the Mexican plateau, standardizing and homogenizing these natural assets is a very specialized and complex task.

The current mainstream operation process of ReFi is:

The assessment of natural assets is operated by international third-party professional organizations such as Verra, GoldStandard, the US Carbon Registry, and the Climate Action Reserve;

The ReFi project uses the registration agency, point type, batch year, and verification data such as token name, token conformity, and UUID or Hash string in the evaluation results as metadata for token minting;

The minted tokens of different batches are packaged into a so-called bundle token according to a certain proportion, and the bundle token and tokens of different batches can be freely exchanged. This bundle token will be deployed in decentralized lending protocols and DEXs to optimize the liquidity of ReFi assets.

The transparency of the chain process and the trustless mechanism. ReFi’s natural asset on-chain process is more dependent on the cooperation of international third-party professional organizations, especially Verra has a high share in the carbon credit tokenization market. On May 25th, because Verra Carbon Credit thought that the ReFi project had brought chaos to the carbon credit market, and suspended related services, which seriously affected the market’s confidence in the carbon credit token project.

Of course, the problems encountered in the development will be solved in the development. Based on the public chain Regen network developed by cosmos SDK, it is exploring a decentralized natural asset chaining solution.

Prevent Sybil attacks and “double flowers”. With the help of web3 technology and decentralized architecture, the emergence of ReFi has greatly improved the transparency and capital efficiency of natural assets. However, information asymmetry and arbitrage abuse still exist. For example, a hydropower station uses the Toucan protocol to conduct regulatory arbitrage, arbitraging 1 million BCT (the standardization token of carbon credits of the Toucan protocol). In the design of the ReFi token economic model, the occurrence of such phenomena can be prevented by increasing the on-chain/off-chain fees, extending the on-chain time of natural assets, and limiting the amount of a single natural asset on-chain.

At this stage, it is not necessary for ReFi projects to issue governance tokens for two reasons:

  1. The ReFi field is different from the financial application scenarios of DeFi. There is no market demand for high-frequency trading, and the value capture efficiency of governance tokens is very low.
  2. The ReFi field is an expert-dominated field, and it is difficult for ordinary token holders to express mature opinions and actionable suggestions on ReFi, which makes governance tokens only nominal.

From the historical data, the performance of issued governance tokens such as KlimaDAO and in the secondary market (24h trading volume and price trend) is also unsatisfactory.

Of course, the premise of the above conclusion is based on the existing Web3 project value capture narrative paradigm. If the narrative paradigm shifts in the future, the fair market value of ReFi’s governance token will also be reassessed.

ReFi’s investment methodology

Although the ReFi ecological leader Celo is fully marketing the story of ReFi Summer, we know very well that ReFi is still a long way from reaching the scale and popularity of DeFi/GameFi/NFT Summer.

The investment nature of the ReFi track is an ultra-early stage investment, which is accompanied by high uncertainty and risk, and of course, it also contains a high return on investment.

Incorporating ReFi into a Web3 portfolio is somewhat similar to incorporating BTC into a traditional portfolio, which can reduce risk while increasing returns (free lunch from diversification).

The above is GeekCartel’s general understanding and investment principles of the ReFi track.

Specifically, whether to decide to invest in a ReFi project, our judgment dimensions include: the incremental positive externality of the underlying assets, the degree of decentralization of the asset on-chain process, the project’s ReFi ecosystem, the team’s values ​​and experience, and positive externalities. Token Economics.

The incremental positive externality of the underlying asset. GeekCartel believes that the underlying assets of ReFi projects must not only have positive externalities, but also incremental positive externalities.

For example, a hydropower station tokenized the ancient carbon credits through the Verra-Toucan carbon bridge, and successfully exchanged Toucan’s standard carbon token BCT 1 million. Although the operation of the hydropower plant complies with the platform rules, it is essentially a perfect arbitrage by the hydropower plant, and does not generate new positive externalities that make the planet a better place.

We believe this is a departure from the original intent of ReFi. The ideal ReFi should use web3 technology (currently mainly programmable money) to reshape the economic cycle and reward those behaviors that generate new positive externalities, such as creating a new forest in the Amazon Basin, building a new seabuckthorn field in the Mu Us Desert, Farmland where carbon sequestration farming was first attempted in the Mexican highlands.

The degree of decentralization of the asset on-chain process. As mentioned above, at present, the assets of the ReFi ecosystem rely on a third-party centralized organization, or more correctly, on Verra’s carbon asset certification. For example, the well-known ReFi projects Toucan Protocol and are currently using the Verra-Carbon Bridge solution for asset on-chain.

This is a major pain point in the ReFi space. Fortunately, the industry has been aware of this problem, and the ReFi project team, including the Regen network, is exploring a decentralized carbon bridge solution.

The ReFi niche of the project. There is a phenomenon of “fat protocol” in the Web3 field, and the protocol layer is in a dominant position in the value capture game with the application layer. For example, in the first half of 2022, Stepn became a phenomenon-level application, driving its public chain Solana’s token $SOL to rise sharply, but the Solana Foundation did not make equal efforts to obtain benefits, which is a typical “free rider” Phenomenon, the protocol layer receives the positive externality benefits of the application layer. Therefore, when we invest in ReFi projects, we prefer to invest in protocol layer projects.

The team’s values ​​and knowledge experience. The ReFi field is different from other fields of Web3, and the team values ​​must be inclusive, open and diverse. It’s hard to believe that an ardent Trump fan would heartily identify with the value of ReFi.

At the same time, the field of ReFi is also a high-threshold entrepreneurial field, which requires the team to have extensive professional knowledge and experience in the fields of climate warming, environmental protection, and biodiversity protection for many years.

The token economics of positive externalities. One of the core features of the ReFi ecosystem is positive externality, which should be the principle of the token economics design of the ReFi project. (3,3), Bond, multi-level Referral mechanism and other Ponzi-colored token economics designs should not appear on ReFi projects.


At present, the underlying facilities of Web3, such as public chains, protocols, middleware, etc., are relatively prosperous, but the application layer presents a scene of excessive financialization.

According to the different levels of financial complexity, we divide the token economics of web3 applications into three types: α, β, and γ.

  • α: There are token rewards, no additional mechanisms;
  • β: There are token rewards, yield farming or staking mechanisms;
  • γ: There are token rewards, yield farming or staking mechanisms, and Bond and PCV (protocol controlled liquidity) mechanisms or algorithmic stablecoin mechanisms.

Suppose the short-term return α is 1, β is 2, and γ is 3;

Suppose the externality α is 1, β is 0, and γ is -1.

Under the constraints of such a model, many web3 project parties who are economically rational people will choose γ-type token economics to pursue the maximization of short-term benefits, resulting in excessive financialization of the web3 application layer.

The excessive financialization of Web3 did not help realize the vision of web3 eating web2. Instead, it produced a large number of negative externalities such as ICO fraud, pyramid investment scam, UST crash, etc., resulting in many Web3 applications eventually becoming financial idling games.

The over-financialization of the application layer has led to the phenomenon of “big trees do not grow under the ground”, which crowded out resources for the growth of other types of web3 applications, which caused concerns among web3 industry leaders such as Vitalik Buterin.

This has also become one of the arguments for the authority of the traditional world to attack web3 as a dragon slaying technique, or a useless technology.

The future of Web3 cannot be 100% bet on financial scenario applications. Web3 needs to generate real value (neoliberal or environmentalist, good for others/society/world) to justify self-worth.

As Gitcoin founder Kevin Owocki (source: Bankless) put it: “Let’s face it…Cryptocurrencies don’t have the best reputation, and when mainstream media covers cryptocurrencies, it’s either portrayed as fast Dreams of getting rich are either portrayed as the Wild West of the Ponzi world. Can we describe the more valuable side of Web3 to the world?”

By combining web3 technology + decentralized architecture, ReFi creates a programmable economic cycle for the earth regeneration economy, which can sustainably promote earth regeneration and generate sustainable positive externalities, which is exactly what Web3 has developed to this day. righteous.

Moreover, paradigm revolutions always occur at the edge of the failure of mainstream paradigms. In the fields of climate solutions, biodiversity protection, carbon integration, etc., Web2 is generally ineffective. Perhaps the emergence of ReFi will be a start for web3 to swallow web2.

the term

ESG: Environmental, Social and Corporate Governance

MRV: Abbreviation for Measurement, Reporting and Verification

Positive externalities: The economic activities of one economic agent cause other economic agents to obtain additional economic benefits without the beneficiaries having to pay the relevant costs.

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INFOGRAPHIC: DeFi, ReFi, and DeSci – Breaking down      the acronyms

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