ReFi (regenerative finance) has been on the rise recently. That’s because sustainability concerns rise as cryptocurrencies contribute to the increase of carbon emissions and pollution, which is worrying experts. Bitcoin, Ethereum, and other coins have complex mining processes which not only hinder the mining process but are also consuming vast amounts of energy, similar to the
combination of a few states in America, for example.
But Bitcoin and Ethereum are also the best and most popular cryptocurrencies and are considered a must for building a stable portfolio. The best way to buy Bitcoin can be with either credit or debit card, bank deposit, or third-party payment, which makes Bitcoin highly accessible.
Besides their accessibility and possibility of high returns, more sustainable solutions must be introduced to make mining and crypto transactions less energy-demanding. One of them is ReFi, which we’ll discuss in the following paragraphs.
What is ReFi?
Regenerative finance is a recent trend in the cryptocurrency industry. The technology is a combination of regenerative economics and decentralized finance (DeFi). Both aspects incorporate the need for balanced capital flow and democratizing access to financial services.
ReFi is a successful attempt to change the way cryptocurrencies impact the world, as well as provide better methods and approaches to finances.
ReFi mainly works on a blockchain and provides an accurate estimation of an asset’s value based on its regeneration properties. In other words, here’s what a ReFi model on the blockchain does:
- Assesses the value of an asset in regard to its use of carbon sinks;
- Transforms this value into a tradeable asset on the blockchain;
- Creates liquidity for the asset;
Is ReFi making a difference compared to traditional finance?
Traditional finance is not keeping up with the constant changes in regard to the current economic and social technology developments. It has become inefficient, limited, and way too centralized, which is opposed to what blockchain brings to the market. Compared to ReFi, in traditional finance, the value of an asset is based solely on the resultant cash flow from utilizing it.
A ReFi economy can be achieved with blockchain technology. That’s because blockchain provides transparency, inclusivity, and accessibility while eliminating intermediaries. Here are some aspects in which ReFi makes a difference:
- Compared to traditional finance’s goal towards profits, ReFi is to be used as a way to create shared value with sustainable progress;
- As traditional financial institutions don’t prioritize sustainability, the need for greener methods is achieved by ReFi, which used tools to regenerate natural environments and overcome communities’ struggles;
- ReFi helps redistribute the economic control to individuals and entities whose contributions have weighted the most;
The benefits of ReFi
ReFi is the answer to all sustainable concerns regarding cryptocurrencies. For example, it’s a helpful tool through which businesses can be retargeted toward regenerative approaches. This way, the capital required for companies to grow is supplied while their impact on the environment is scaled.
The incentivization of organizations from ReFi provides beneficial social and environmental outcomes, which is something the crypto and the financial market lack at the moment. A long-term sustainable framework will become the base of any business that uses blockchain technology as ReFi investments reduce risk and promote a better and greener company future.
Finally, ReFi investments can provide plenty of other benefits, such as lowering operational costs, improving the efficiency of resourcing, and ensuring higher returns. At the same time, the positive environmental impact helps businesses grow faster.
Global benefits of ReFi
Although ReFi is a newer technology development, it has already been introduced in business operations and is currently changing the way we perceive finances and digitalization. For example, the following projects are enhancing the power of ReFi:
- Azolla Projects and ClimateTrade are partnering to build the first carbon farming pilot in Spain. The two organizations will quantify the environmental impact of regenerative agriculture and the generation of carbon credit with the aim of financing them. They will try to provide a regenerative agricultural model by mitigating climate change and soil desertification;
- Nori and Bayer ForGround are partnering for marketplace carbon removal. The program will offer discounts on crop inputs so that farmers will be able to earn revenue through the Bayer Carbon Program. This allows farmers to continue their activity without harming the environment;
Why do we need more sustainable blockchain projects?
As you may know, sustainability has been a considerable concern in the past years, as nature around us has changed, and the effects are detrimental to people’s health. The need for more sustainable and environmentally-friendly projects comes from a need to live a healthy life, which may or may not be possible at this moment since blockchain solutions are only in their first stages of development.
But it may be possible to slow down climate change through the use of blockchain technology. The aim is to swift traditional finance, which has become more inefficient and less optimized, to a decentralized approach that not only saves time and resources but is also able to scale businesses faster and better. This way, transactions can be managed efficiently, and the old and unsustainable processes are left in the past.
As blockchain solutions become greener, cryptocurrencies also need to change their mechanism. For example, Ethereum has a new PoS consensus mechanism, and it changed from the old PoW that used to consume a lot of energy and slowed down the network. More cryptocurrencies are using PoS and other mechanisms that help the environment and are also more efficient for investors and developers. Being sustainably-friendly doesn’t mean only using less energy but also managing resources so that people can have an improved quality of life that cannot be hindered by mining or crypto investing.
Regenerative finance is the latest trend in cryptocurrency sustainability. It aims to create liquidity for assets in regard to their value and compared to their carbon footprint, which helps the environment and also offers network participants the chance to have a more efficient and faster ecosystem.