ReFi hopes to transfer the ecological assets to the chain in a real and non-tamperable way through the blockchain technology, and tokenize the ecological assets through the smart contract after the chain, and use the green public chain to enable individual investors around the world to use decentralized finance. The means are free to trade and borrow to increase the value of the ecological assets behind the tokens.

Written by: Xinyue

01 From DeFi to ReFi

The dominant narrative of Web3 never seems to involve the planet itself we inhabit. Compared with the shrinking Amazon rainforest, crypto-native residents are more concerned about the bloated and expensive Ethereum network. What's the latest encryption topic? "Pepe achieved a market value of 1 billion US dollars in 23 days", various benefit myths were spread, and investors rushed into meme projects with an average lifespan of less than a week. However, behind the hustle and bustle, the development of the Web3 industry is facing a crisis of narrative corruption. In order to realize the recognition and migration of billions of mainstream people to Web3, we obviously need to create some narratives that are more native to the blockchain, combined with the characteristics of encryption technology: "low-cost trust and free flow of encryption verification", To solve the most pressing challenges facing humanity in this era. The most valuable exploration in this direction is the attempt to combine web3 and environmental issues: ReFi (Regenerative Finance).

Different from the many controversies faced by the development of the encryption industry, it has always been the mainstream society to devote itself to improving the environmental problems faced by human beings through financial means. Impact investing, green finance and other concepts have also received support from mainstream institutions and have established their own ESG investment departments. Among them, the recorded carbon emissions trading market size in 2021 is 909 billion US dollars, a growth of 12% compared to 2021. In contrast, the current market capitalization of Bitcoin is $521 billion. Like RWA, the potential market of ReFi has more room for imagination than encrypted native assets.

Although ReFi's vision is to create a sustainable future for mankind and includes grand visions such as regenerative agriculture, environmental protection, and elimination of inequality. However, in ReFi practice, most of the current mainstream ReFi agreements focus on the explosively growing voluntary carbon trading market (different from mandatory carbon trading required by regulations). This is because, in the traditional voluntary carbon trading market, the unique attributes of carbon projects cause carbon offsets to be traded only in the form of differentiated products (carbon contracts), which strongly rely on the verification services of third-party central institutions (such as VCS provided by Verra ) and does not have the attributes of bulk commodities (such as corn or rice). Therefore, most carbon trading takes place in the OTC market, which lacks transparency to the entire market. This makes it difficult for end customers to know whether they are paying a fair price, and how much money is going to the original project developers.

Ideally speaking: ReFi hopes to transfer ecological assets to the chain in a real and unalterable way through blockchain technology, tokenize ecological assets through smart contracts after being on the chain, and use the green public chain to enable global individual investors Free trade and lending by means of modernized finance to increase the value of the ecological assets behind the tokens.

02 Current mainstream ReFi practice

The main attempts to combine blockchain technology to achieve ReFi goals include: ReFi Platform, ReFi Protocol, ReFi Dao and ReFi Game, etc.

Green public chain - Celo

Celo is one of the main promoters of the development of ReFi. Since its birth, Celo has been committed to providing decentralized financial services for billions of unbanked populations around the world through mobile devices. As a platform, Celo itself does not provide ReFi services, but it supports major carbon credit tokenization projects including Toucan, Moss, Flowcarbon, etc. Celo is also the first negative carbon emission public chain - automatically purchased from Project Wren through block rewards Carbon offset credits, thereby over compensating for its carbon dioxide emissions. They also plan to transition 40% of the Celo stablecoin (cUSD) reserve assets to tokenized rainforest and carbon sequestration assets within four years.

ReFi Protocol - Toucan Protocol, Regen Network

Toucan Protocol is an open source protocol for carbon trading based on Polygon, and it has been extended to the Celo network. His product architecture consists of two parts: Carbon Bridge and Carbon Token Pool, users can put their real-world carbon assets on the chain through the carbon bridge and then trade in the carbon pool. As a pioneer of ReFi, Toucan currently occupies a major share of the track (a transaction volume of 4 billion U.S. dollars), and has contributed to 50,000 tons of carbon emission reduction.

Carbon Bridge:

The Toucan carbon bridge is a simple process based on vcs verification: users first generate a blank BatchNFT and get the corresponding reference number (including transaction hash, chain id, toucan agreement number), and then destroy their own carbon credit assets in Verra , and fill in your own NFT reference number. Then add your own Verra destruction number to your own BatchNFT and wait for verification. After being approved by Toucan, the blank BatchNFT will be automatically filled with all the information about the project (carbon reduction type, quantity, time, etc.). The nft can then be extracted into Toucan carbon tokens (TCO2) with corresponding attributes.

Carbon Pool:

• The product logic of the carbon pool is to bundle carbon emission tons (TCO2 tokens) of multiple specific projects together to form a more liquid carbon index token and provide price discovery for different types of carbon assets.
• Not every TCO2 is equal in value *Categorization of carbon projects includes carbon removal, emission reduction, and emission avoidance, with each category having a different value.
• Pricing for carbon projects is influenced by several differentiating criteria such as project type, country, standard stringency, and co-benefits such as increased biodiversity or sustainable development goals.
• The Toucan carbon pool achieves some degree of commoditization by pooling similar carbon tokens. This is necessary to provide transparent price signals for different categories of carbon offsets. These standardized carbon tokens can be traded on decentralized exchanges and have deeper liquidity than individual project offset tokens.
• TCO2 tokens are locked in a carbon pool with the same attributes through a logical filter, and a carbon pool token (such as BCT token) is created and sent to the depositor's wallet. Carbon pool tokens are fungible ERC20 tokens
• Currently, Toucan has two carbon pools, BCT (Basic Carbon Ton) and NCT (Natural Carbon Ton).

Although the Toucan protocol is currently in a leading position, because its natural asset on-chain process relies heavily on a third-party professional organization (Verra), on May 25, 2022, Verra suspended related registration services due to concerns about the ReFi project, which also Shake the market confidence in related ReFi protocols.

Regen Network is different from Toucan, Moss and other ReFi protocols that use the Verra-carbon bridge solution, and is more inclined to build an open platform that they define as Global Ecological Accounting System (Regen Ledger), using the Tendermint consensus engine It is built on the basis of the Cosmos SDK to support the majority of third-party ecological projects to deploy the ecological value and state change verification they create on the chain, and provide a complete incentive framework for tracking ecological changes.

**Regen Network's products are mainly composed of three parts: Regin Registry digitizes real-world ecological assets, Regen Ledger manages and captures the value of ecological assets, and Regen Marketplace provides a trading market and liquidity for tokenized ecological value. **

Compared with Toucan's practice of relying on centralized organization verification services**, the implementation logic of Regen Registry** is more blockchain-native and easier to be recognized by the industry. Regen will directly sign agreements with creators of ecological value and directly collect ecological data through four channels:

• Raw remote sensing data (optical, infrared, lidar)
• GIS datasets (topography, soil type, water body distribution)
• Sensor networks (climate, moisture, vegetation)
• User collection

After the ecological data is uploaded to the chain, Regen will generate the credit analogy and credit batch to which the ecological asset belongs based on the metadata and Regen verification logic.

Regen Ledger provides three core ecological protocol frameworks: Ecological State Protocols (Ecological State Protocols, ESPs), Ecological Contracts (Ecological Contracts, ECs) and Supply Protocols (Supply Protocols, SPs).

ESPs is the core component to realize the unique value of Regen Network, and it is also the main reason to realize the original value of web3 different from toucan. ESPs are algorithms and standards used to verify a specific ecological state. Each ESPs will be individually tagged and managed by the Regen Foundation, such as the number of tons that will be adsorbed to the corresponding land at a specific time, the Boolean value of the groundwater reserve of the corresponding land, etc. Like the traditional web3 open source code base, different ESPs can refer to each other and make version derivatives based on specific versions.

SPs is a supplementary protocol built on top of ESPs, which is used to measure the output of the corresponding ecological value, and assist in verifying the entire supply chain circulation process of the output based on the algorithm on the chain.

**ECs is the core value proposition protocol and smart contract framework of the system. **Different ecological projects can submit their own funding requests or initiate crowdfunding based on ECs to achieve specific ecological goals, such as carbon sequestration. By setting staged tasks and conditions, the collected funds can be based on smart contracts to ensure that the corresponding goals are achieved and used transparently.

**Regen Market Place's primary trading pair is REGEN/EcoCredit. **In order to deal with the non-homogeneous properties of ecological assets, the value of ecological assets captured on the chain through the above ESPs process will be abstracted into a separate logical container, namely Credit Class, and then assigned Credit Type attributes (such as carbon points, Ecological protection points, etc.) and are collected into different Credit Batches. Each Credit Batch is non-homogeneous, but the Credit Batch contains a fixed set of interchangeable Credits, which can be freely exchanged and canceled. Through this logic, Regen Network can take into account the value differences of different ecological credits while improving the liquidity of EcoCredit as much as possible.

Combing the product components and logic of the above Regen Network, we can say that although Toucan Protocol is the pioneer of the Refi protocol and has a huge lead in TCL and transaction volume, Regen Network has taken a more open source path that is more in line with the spirit of the blockchain . It is worth mentioning that Regen Network and Toucan Protocol announced last month that they have launched a two-way bridge between the two networks, using NCT as a mutually recognized standardized carbon currency.

ReFi Game

The main mode of the current mainstream web3 games is X to Earn, which provides different game forms and focuses on the development of corresponding economic incentive mechanisms and token economic models. ReFi Game is no exception. It is generally called Impact to Earn, that is, to motivate players to create ecological value and positive externalities through economic returns. However, on this basis, Refi has also expanded another quadrant, namely Play to Impact. Contrary to the former, it encourages players to play through the output of positive externalities, similar to Alipay's Ant Forest.

Play to ImpactGame：

Guardians of Earth: The game realizes the twin mapping of the real world through the oracle machine. Players can pay to create their own "Nature Realm" on the chain and conduct ecological monitoring of the area. Other gameplays of the game are still under development.

Climate Guardians: The gameplay is designed for players to generate their own villages and form their own tribes to fight against the threat of rainforest disappearance. The project will donate the proceeds to the Amazon Rainforest Protection Fund.

Impact to EarnGame：

Wheel Coin: Use WheelCoin to reward players for low-carbon travel, which can be used to redeem train miles

Litter Coin: Encourage users to clean up trash to get LitterCoin, which can be exchanged for the encrypted token ada

03 The Future of ReFi

In the definition of the ReFi Foundation, ReFi is described as "a redesigned monetary system to better coordinate with the earth." Traditional finance has the problem of one-way value flow: natural resources and ecological value flow one-way to the human currency system, but this system does not reward the behavior of filling and restoring the ecosystem itself. Clearly, such a system needs to be radically overhauled.

Although the current mainstream ReFi practice is still mainly focused on carbon credit trading, we can optimistically predict that the development of ReFi will add more diversified natural capital currencies (Nature Capital-Backed Currencies) to our economic system and pass Blockchain verifiably transmits transactions, whether based on green agriculture, purified water sources or even the species richness of a protected area. As the writer Charles Eisenstein said: "If you back the money with more things you want to see in the world, you will get more of those things."