Crypto is Crucial to the Global Response to Climate Change

Regenerative Finance (ReFi) leverages the low-cost, low-energy global financial and coordination technology to make real change. Cerulean believes ReFi is critical to climate positive action at scale.

Photo by mohamad hajizade on Unsplash

Regenerative Finance - a sustainable approach to crypto

Regenerative finance combines financial technology with ecological principles to increase sustainable and profitable human relationships with the natural world. It leverages the power of the crypto and blockchain technologies that power trustless computing that we discussed in our tech deep dive last week. Trustless computing is uniquely suited to create new economic models that restore ecosystems and address social coordination challenges around public goods and common resources.

Yet like any technology that uses the power of crypto and truly like most innovations that are new to market, there are several misconceptions and misplaced fears. Regenerative Finance has been ignored or dismissed by many serious people committed to the environment and reversing climate change due to widespread angst over crypto’s energy consumption.

This is to be expected. Many new digital technologies are criticized for frivolous energy use in part because the technology itself is dismissed and considered frivolous or wasteful. Over the years the energy consumption of video games and later streaming media were questioned. Most recently AI has been faulted for being a waste of energy. And while critiques of crypto’s energy consumption are still common, the fact is that for the average user the energy consumption of a typical crypto transaction is equivalent to that of a Google search or two.

Last year the majority of the $1T crypto market moved away from the energy intensive security method called proof-of-work (PoW) to a new security model, proof-of-stake (PoS). Most notably in September 2022, Ethereum, the second largest community-owned and controlled computer in the world, worth about $250 billion, made the switch to this 99.95% more energy efficient system. [Credit card company, Visa, has an excellent in-depth analysis of Ethereum here.]

That’s a remarkable achievement for any technology let alone one that is open source and community managed. Ethereum, labled by onlookers as simply “another crypto,” is in fact a continuously operating ( 7 years), community-owned computer and network, which reached a market cap of $500 billion in half the time it took Google to reach that mark, and which cut its energy use by 99.95% through a community-wide effort to update its code to switch to proof-of-stake (PoS) security.

As more and more PoS crypto initiatives arise, more sustainable options and solutions are introduced. And the true power of these peer-to-peer networks, community-owned computers and decentralized governance systems is becoming clearer through the fog of a decade's old crypto hype and fud.

At Cerulean we're looking at the next big change that crypto can make - a positive change for our climate, our planet, our future. 

One of the most promising advances in the ultra low-energy PoS crypto ecosystem is Regenerative Finance (ReFi). ReFi is a new financial structure that takes an approach to finance by focussing on a broader set of social inclusion, environmental justice, and shared governance criteria to determine the worthiness of an investment. Over the last few years, distributed ledger technologies (aka Blockchains) have advanced to the point where real-world use cases are not only feasible but superior to previous Web2 systems. Because regenerative finance retains the unique properties of "crypto" -- individual power and autonomy, decentralized collective governance and an ownership model that gives every user of an app, network or protocol, a "piece of the action," -- it has proven potential to transform previously intractable social coordination problems, tragedies of the Commons and failures to fund public goods.

One of the pioneers in this area, Regen Network, has built a blockchain focused on ecological data in regenerative agriculture and climate-carbon markets. The network rethinks agricultural economics so that farmers and indigenous communities are valued as land stewards and smallholder food producers. Regen Network is a community that incentivizes and develops regenerative land use practices, which help to restore ecosystems and reverse climate change through carbon removal, ecosystem health and biodiversity support.

Addressing climate change and regenerating ecosystems by using open, transparent carbon markets secured by crypto is more than possible. After years of hard work by communities like Regen Network, it's becoming evermore probable. 

Today, using the Regen Network, blockchain projects and crypto stakeholders can offset their carbon footprint through their Carbon Credits and support multiple nature-based projects worldwide. Regen has opened an entire market for corporate and consumer carbon purchasers seeking offsets from high-quality regenerative nature-based projects. Hundreds of thousands of tonnes of carbon removals have been financed and transacted with Regen Network.

The Regenerative Finance investment thesis is core to the high-return, high-impact model of Cerulean Ventures. 

Another portfolio company that utilizes crypto and  blockchain technology is Ethichub which facilitates peer-to-peer lending and crowdfunding for smallholder farmers in large commodities markets. Ethichub creates fairer and more sustainable supply chains by directly connecting consumers with producers, promoting ethical practices and supporting local communities.

I hope you'll stick with us as we share more about what we learn and those whom we support. Our investments range from organic batteries, to regenerative Blockchains, to a bank that puts trees on their balance sheet.

Please, take a look at the list and let us know which we should cover next.

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