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- June 8, 2023, 10:00
The ReFi concept is a trend of decentralised finance (DeFi) that focuses on the creation of integrated and harmonised economic models. Businesses built on ReFi models can benefit the environment or contribute to solving social problems in addition to providing direct material rewards. In this article, the experts at Grapherex will talk about how the concept of regenerative finance works and discuss which economic models can contribute to solving environmental issues.
TradFi Hinders the Development of New Systems
The ever-evolving decentralised finance ecosystem has become a revolutionary and experimental alternative to traditional finance (TradFi). It has enormous potential, but there are also multiple challenges to overcome, including winning over the future audience.
TradFi mentality holds back the development of cryptocurrencies. Some TradFi features, such as prioritising short-term profits and extractive practices, have seeped into DeFi, preventing it from advancing and accomplishing its original goals. The effects of TradFi are obvious in wealth inequality and changing the planet’s climate for the worse. We see companies failing, centralised industries operating unscrupulously, and instances of fraud rising.
To break out of this trap, the cryptocurrency space will have to reconsider values and refocus on democratising access to finance. A transformation towards inclusiveness is possible through the adoption of a regenerative economy.
What Is ReFi?
Restorative or regenerative finance, like most Web 3.0 industry terms, has a multi-component definition. In short, it is a DeFi model that focuses on sustainable development and concern for the environment. Such systems aim for real-world impact, strive to give back more than they get, and ensure the equality of system participants and the equitable distribution of benefits.
John Fullerton, in his 2015 work Regenerative Capitalism, presented a comprehensive description of a new economic model. Fullerton describes the regenerative economy as one that values the replenishment of resources. As he said, ReFi is a self-sustaining economic system that focuses on constant renewal and seeks to democratise control over and access to financial services.
How the Crypto Ecosystem Can Contribute to ReFi Development
ReFi differs from all other current sustainability efforts in terms of its pragmatic approach, considering what can realistically be done as opposed to the best theoretical course of action. By looking at the complete system rather than analysis or decomposition, ReFi recognises the strengths of capitalism while correcting its weaknesses. It ensures that human and environmental well-being remains at the centre of decision-making.
A system of cryptocurrency and decentralised finance is believed to be the most promising way to develop ReFi. Both ReFi and DeFi recognise the value of transparent, collaborative, and decentralised decision-making that can change the future economy. As DeFi continues to develop, it can be a powerful instrument for bringing about systemic change, linking economic growth and social justice together.
How to Become a Part of ReFi
Within the ReFi concept, making a profit when dealing with liquidity is not the main goal. Instead, liquidity is a means to address societal, environmental, and scientific challenges comprehensively. The focus is on the circulation of capital rather than its accumulation. There are several practices that participants in current traditional and decentralised financial systems can do to get involved in ReFi to take advantage of its development.
1. Make Sustainable Sources of Capital the Top Priority
Companies wishing to take part in a regenerative economy should look for sustainable sources of revenue and diversify how they generate income. This will create a more stable and sustainable financial base. But what constitutes a sustainable source of revenue?
This depends on the nature of the company. Currently, a sustainable source is a long-term oriented way of generating income using renewable resources, reducing waste and pollution, respecting human rights, contributing positively to local communities, and ensuring accountability to stakeholders.
In DeFi, this can involve platform or protocol fees, rewards from token yield farming, grant programmes, and industry partnerships combined with a transparent reporting system. While fundraising through sustainable revenue channels may take more time and effort than traditional methods, there are considerable long-term benefits.
Having a variety of revenue sources can enhance a company’s ability to endure market volatility, foster financial stability, and support the growth and sustainability of a regenerative financial ecosystem.
2. Create Value and Maintain Cooperation
Adding value to your business does not only involve branding. You should have clear mission and vision statements that reflect your outlook and goals. Although what you bring to the system is often shown in the products and services you provide, there are many additional opportunities to create value.
With ReFi, creating value may include establishing collaborative partnerships with other businesses, investors, governments, and communities. A company could encourage open communication, innovative solutions, and collective actions. By ensuring transparency and cooperation, you can substantially strengthen the industry as a whole.
3. Be Realistic and Practical
One of the most effective ways to grow an industry and spread cryptocurrencies is to solve real-world problems. The value of the ecosystem is not what’s inside it but how it affects the world around it. This includes freer access to finance, faster cross-border transfers, the ability to file and exchange assets without being tied to banks, levelling up opportunities, and even improving the environment.
If ReFi can solve problems across sectors, it will expand the utility of cryptocurrency, create secure sources of capital, and increase sustainability. The real impact goes beyond paid work. Specialists are convinced that it’s unfair to take for granted the impact that cryptocurrency companies have on their community participants, investors, and partners.
While it’s difficult to quantify the value created for people participating in ReFi, it may still be witnessed because they get a true sense of ownership and decision-making power. These major incentives keep people in the regenerative system.
4. Adopt the ReFi Concept and Educate Others
To join ReFi, companies will have to align their current goals with a sustainable vision. But that alone will not be enough. A company’s renewed corporate culture will need to be properly communicated to employees, investors, system participants, and customers.
No single organisation can create a regenerative financial system on its own. It is important to create a network of people and companies that also explores similar possibilities. To do this, raise awareness of the benefits and importance of regenerative practices in finance. You could also provide educational resources to stakeholders to improve their understanding of the newly established financial concepts.
To sum up, at this stage, widespread ReFi adoption is the future, not the present, but it is very real. It has the potential to improve people’s lives, simplify finance, and help the environment. We can watch it evolve, and we can also be part of it, putting into practice easily understandable but complex steps and creating around us a network of supportive people and organisations.
