We held a ReFi (blockchain-based regenerative finance) workshop at Devcon VI in Bogotá, Colombia, in collaboration with the Ethereum Foundation. This workshop aimed to discuss the current state of the ReFi ecosystem, strategize on how we can best collaborate and create interoperability across projects and platforms, and create a shared roadmap for the future.
“Technical components must be innovated and developed in collaboration with practitioners on the ground and climate experts. Historically, climate technology innovation has been slow. This is largely because it is part of the larger political arena of multilateral climate agreements like the Paris Agreement, which are notoriously difficult to enforce. However, this should not be a barrier, and we should look for ways to engage Paris Agreement participants in driving innovation and accelerating climate action. Web3 and the legacy climate system can inspire one another and develop evolving synergies.”
“While technological innovation is complex, the more significant challenges for ReFi lie in the ‘human component’ of developing tech solutions that truly benefit our planet and adopting these solutions to accelerate climate action to the required pace.”
The output of this workshop is the ReFi Ecosystem Litepaper (click here to download the PDF version) below.
ReFi Ecosystem Litepaper
Compiled by Marco Schletz
The Litepaper summarizes the findings of a climate ecosystem workshop held during Devcon VI in Bogotá, Colombia. The 'ecosystem'i s made up of participants from leading organizations working in the field of regenerative finance (ReFi). Here we follow the definition that ReFi is a decentralized movement that uses blockchain technology and web3 concepts to finance, govern, and regenerate common pool resources. In this workshop, we examined the current state of the ReFi ecosystem, identifying key areas for collaboration and laying out a roadmap for the future.
Technical components must be innovated and developed in collaboration with practitioners on the ground and climate experts. Historically, climate technology innovation in the multilateral climate agreements, such as theKyoto Protocol and now the Paris Agreement, has been slow are notoriously difficult to enforce. However, this should not be a barrier, and we should look for ways to engage ParisAgreement participants in driving innovation and accelerating climate action. Web3 and the legacy climate system can inspire one another and develop evolving synergies.
Creating interoperability across the many blockchain networks in the ReFi ecosystem is critical. This necessitates the development of web3-native carbon standards, token standards, and decentralized storage solutions, as well as implementations (smart contracts) and mechanisms that use them to tokenize off-chain digital environmental assets. Furthermore, new governance mechanisms, such as DAO infrastructure, could enable decentralized forms of governance and be used by more registries and other entities.
Improving interoperability, along with format and language standardization, necessitates effectively convening various internal and external communities to the ReFi ecosystem. Climate data is extremely diverse, varying by sector, jurisdiction (varying capacity in developing and developed countries), and the corporate sector itself. Coordination across these segments is therefore required to achieve the standardization and interoperability required to provide transparency and reconcile them into a globally integrated market mechanism (as envisioned by Article 6 of the Paris Agreement).
Another important area of innovation is the development of infrastructure that allows for and reduces the complexity and cost of bridging carbon tokens and data between blockchain projects or bridging from off-chain to on-chain. Mature, scalable ReFi solutions, for example, rely on the deployment of digital monitoring, reporting, and verification (dMRV) solutions to provide sufficient quality data and scalability of MRV approaches. dMRV is still in its infancy, and the application and development of use cases and pilots, ideally with government support, is the next critical step.
While technological innovation is complex, the more significant challenges for ReFi lie in the 'human component' of developing tech solutions that truly benefit our planet and adopting these solutions to accelerate climate action to the required pace.
There is a rapid growth of initiatives and an inflow of talent into the space. While there is generally an ‘open-source’ and ‘collaborative’ spirit, we need to ensure that this collaboration grows organically to avoid duplication and fragmentation.
Several efforts are already woking to improve the alignment and interoperability. For example, the Blockchain Infrastructure Carbon Offset Working Group (BICOWG) hosted a ReFi interoperability retreat in the heart of theColombian Amazon, focusing on human-level collaboration and resulting in working groups that are now moving forward. Similarly, the Blockchain x Climate Leadership Network (BCLN) organized the 'Greenland Ark,' a retreat on a cruise ship to Greenland to promote interoperability.
Here, using successful techniques from other open source communities can provide inspiration on how to grow in a more structured way (e.g., OpenDev community or “OpenSource is not enough”). To rally individuals and projects in the same direction in the future, it will be necessary to establish a shared narrative. ReFi in its current form is primarily focused on digital environmental assets like carbon credits and, more specifically, the voluntary carbon market at the moment. This focus is advantageous when tackling a specific problem and driving applied innovation. To stay true to the mission of providing "web3 concepts for the financing, governance, and regeneration of common pool resources," ReFi innovation should eventually expand into other common pool resources.
In the climate and web3 ecosystems, there is a growing awareness and recognition of ReFi. While there is still a long way to go in terms of effective coordination, initial efforts are already opening up dialogue and fostering synergies. The Gold Standard proposal to allow the creation of digital tokens for carbon credits and Verra’s public consultation on “Third-Party Crypto Instruments and Tokens” serve as critical assessments of existing linkages and will result in an expression of the incumbents' opinions, with the expectation that new policies will result in early 2023 that clarify the extent to which incumbent registries will support tokenization.
ReFi has already substantially impacted the voluntary carbon market (VCM), tokenizing significant volumes of credits while bringing unprecedented transparency, liquidity, and access. However, this is only the beginning of the space's innovation, which aims to drive the evolution of alternative business and funding models for project development and execution, while accelerating transparency via public, verifiable data available on outstanding credits, transaction history, retirement claims, and eventually the underlying environmental claims themselves via blockchain-native registries. There are currently over 60 carbon pricing models in use worldwide that must be reconciled into a global market to provide effective pricing. To achieve this, the ReFi space must evolve into a voice that is also heard at the national and international climate policy levels in order to co-create technical solutions based on the inputs of key Paris Agreement participants.
Furthermore, stronger integration with research can address current knowledge gaps in the ReFi and web3 spaces, as well as in the climate space, to identify leverage points and develop joint solutions. Outward education is critical for developing the digital literacy and capacity required to collaborate with climate decision- and policy-makers, as well as for adopting a shared language with legacy climate actors.
The roadmap was created as a workshop exercise to outline critical milestones or components for the ReFi ecosystem. While several of these components already exist at the conceptual or prototype level, the roadmap emphasizes the importance of scaling such solutions so that they are widely adopted within theReFi ecosystem or even on a larger multilateral scale as part of the Paris Agreement. The goal here is to scale the innovative solutions developed by ReFi into the context of the Paris Agreement, and for ReFi to become a recognized voice capable of inspiring national and international processes.
Documentation of Roundtable Insights
These insights are based on an informal roundtable that took place during Devcon VII in Bogota, Colombia. The insights are the joint opinions of key ecosystem stakeholders (see figure 1 for the participants and their respective organizations). The statements presented in the next sections are the original quotes from roundtable participants, just organized thematically for better structure.
These participants were divided into three groups during the roundtable to work on two exercises. The first exercise critically assessed the ecosystem’s status, identifying the top three accomplishments and challenges. The second exercise was to recognize future milestones and key achievements, develop a roadmap and define a high-level vision up to 2025. The preliminary results are documented in the following Miro board.