Blockchain/AI/IoT | October 6, 2022

Building and musing about blockchain-based regenerative finance in Medellin

Dan Keeler
Guest Author

Dan Keeler

ImpactAlpha, Oct. 6 – Blockchain eco-warriors descended on Medellin, Colombia last week to stake a claim for the role the technology can play in regenerating the planet. 

The Cosmoverse conference seemed a world away from the “crypto winter” that has deflated some of the utopian hype around the alternative currencies. 

The pioneers of regenerative finance, or “ReFi,” aim to use blockchain and crypto to direct capital via carbon credits to projects restoring ecosystems on the ground, from urban forest restoration in U.S. cities to regeneration of rainforest and wetlands ecosystems in the Congo Basin. 

On the face of it, managing carbon credits could be the perfect application for the blockchain, a technology that has been characterized as a solution looking for a problem. Demand for carbon offsets is exploding, driven by corporations scrambling to make good on their net zero pledges. The offsets don’t replace the hard work of emissions reductions, but they do channel money from wealthy corporations to local project developers working to protect and restore natural habitats that sequester carbon. 

But concerns about the quality and integrity of the offsets, which represent a ton of carbon removed or avoided, has held back the market. There is also a lack of transparency, with brokers and middlemen siphoning off the bulk of the value of a trade, leaving little for the forest stewards, wetland restorers and others developing projects on the ground. 

Attaching the credits – as well as all the data needed to value and verify them – to a distributed, verifiable blockchain enables every credit to be uniquely identified and tracked. 

“Blockchain holds so much wild potential, and beneath the hype of token price speculation are projects using this technology to make the world a better place,” says Gregory Landua of Regen Network, a leader of the ReFi movement. 

Landua was in Medellin, along with hundreds of blockchain developers, to present the firm’s new blockchain-based peer-to-peer trading platform, which will make it possible for nature-based project developers to list projects directly into a marketplace with no intermediaries. The platform is built on Cosmos, an open source blockchain and ecosystem.

“We expect this to radically shift the economics of carbon project development,” he told ImpactAlpha. Current marketplaces may channel as little as a quarter of a project’s asset value back to the project developers, Landua said. Regen expects to send an average of 85% of the sale value of carbon credits directly to the projects on its marketplace.

By day, the ReFi crowd hashed out techie details of creating a new decentralized system of finance to restore nature; by night, they explored the plentiful bars and clubs of Medellin.

New tools

Regen is hardly alone in trying to improve the carbon markets. 

The Carbon Opportunities Fund – anchored by the neobank Aspiration and biodiversity investor Cultivo along with International Finance Corp. and the crypto tech provider Chia Network – aims to source, “tokenize” and sell higher quality credits and track their attributes on Chia’s blockchain-based distributed ledger. At Climate Week, software maker Salesforce announced a marketplace to connect buyers and sellers of carbon credits. 

“What’s attracting people to blockchain is transparency, decentralization – it’s peer-to-peer so anyone can purchase or list – and liquidity,” Landua told ImpactAlpha. “But the real utility of the blockchain is in creating new institutional tools, new governance tools for on-chain crediting standards.” 

Regen’s trading platform will also enable the origination of credits for carbon-reduction projects from external groups that go through Regen’s peer review process, broadening the market for many smaller projects and expanding access to high-quality carbon credits. That gives companies and individuals visibility into the projects that back the credits they buy. 

The review process and the transparency provided by the blockchain, says Landua, will ensure there is no question about the quality of the credits issued. 

Green crypto

Regen Network is not shying away from the uncomfortable fact that blockchain solutions for climate change are based on a technology that is more often associated in the popular imagination with excessive power consumption. 

“An increasing number of blockchains are fully offsetting themselves with these carbon credits,” Landua says, while many – including Cosmos – are based on the much less energy-intensive “proof-of-stake” transaction verification system rather than the proof-of-work system that the Bitcoin chain uses. 

Like many tech projects, the development of the peer-to-peer carbon credits issuance and trading platform has taken a smidge longer than expected, and Landua was not able to demonstrate to the audience in Medellin how real people, not just institutions, will be able to buy and retire carbon credits online with full knowledge of the regenerative projects they’re supporting. 

“We decided not to follow the ’move fast and break things’ ethos,” he said. 

The platform is now scheduled to launch in mid-October with carbon credits available from projects including City Forests, an urban forest preservation and restoration project near Seattle, WA. The sale of those credits will help fund urban forest preservation and the acquisition of additional forestland. 

Regenerative agriculture and nature-based solutions have co-benefits such as water quality, biodiversity and climate adaptation, Landua says. By tokenizing such ecosystem services, they could be valued and priced on top of the carbon asset.

ReFi reverie

Regen closed a $10.5 million funding round last year, mostly raised from its community of “validators” who support the Regen blockchain ledger. It used some of that to make $1.5 million in grants to more than 40 open source projects pioneering work on ecological credits. Another source of income came from Microsoft, which purchased credits from a sustainable cattle ranch in Australia listed on Regen. 

“We’re trying to build a self-funded community approach to generate tools and innovate new approaches to market-based and commons-based approaches to climate action,” says Landua.

Despite its ambition to bring a wide user base to carbon trading, Regen’s new platform is still somewhat difficult to use, cautions Landua. “We’re working on ease of use and creating a more Web 2.0 interface,” he says. Early next year, Regen Network expects to add PayPal and credit card functionality to the site, enabling less tech-savvy users to dip their toes in.

As day turned to night in Medellin, the ReFi posse – or Regenerates, as Landua calls them – distributed themselves around the city, charting their progress in Medellin’s bars and restaurants with a stream of ebullient selfies. In true crypto fashion, they ended their night with a pool party at a small hotel-turned-AirBnB on a sleepy side street of the city’s fashionable Poblado district. 

A late-night discussion with Landua veered in a more philosophical direction, conjuring a vision of a future where crimes against ecology could become, well, a thing, and countries would be valued not on the basis of their GDP but on their importance to the health of the planet. 

The role that on-chain carbon credits might play in that future is still a work in progress, but the Regenerati have no doubt it will be pivotal.