By Ashley Taylor Buck, Co-founder and Strategy at ReSource
The world is burning, the markets are dropping and crypto is on life support - is the end near, or are we on the verge of a new beginning? To move forward and build a better system than the one before, it’s important to step back and understand the root causes of the current debacle.
We could blame the current crisis on the pandemic, Russia’s invasion and the ensuing inflationary shock caused by supply chains and the labor market breakdown. But what if this isn’t just a typical downturn? What if these events are merely exposing how fragile our global systems really are, and what if this process is just the beginning of a larger unraveling? Failing to dive deeper is a missed opportunity for humanity to leapfrog into a new economic paradigm, one created from solution-oriented, long-term focused, profitable endeavors.
Let’s look at the financial crisis from a macro viewpoint as a derivative of the centralized design of today’s political and economic systems. These systems are adept at extracting from both natural and labor based ecosystems to build wealth and thus power for the few - as evidenced by rising inequality across developed countries in the last few decades. At its peak this type of system yields a society dependent upon giant corporations who mediate our access to our basic needs, politics, and even each other. The failures of this model are evident all around us, from rising polarization to corporate-controlled public digital spaces, the rising costs of goods from non-resilient supply chains, to impending social unrest due to rising levels of poverty worldwide.
In identifying the root cause we can begin to look for pattern matching solutions. In the 1930s we had the New Deal response and the basis for the rise of ‘big government’. What would an improved approach look like this time? Let’s create systems that empower local and small communities to mold their own solutions, generating a more resilient, interdependent, global response, and forming the basis for a new decentralized, regenerative economy.
This vision is not just wishful thinking; 2012 Nobel Peace Prize Winner Elinor Ostrom and many other extraordinary researchers describe countless examples around the globe of how local governments and civil society today use new models to govern outside of the limiting binary of the market or the state. The work demonstrates how when groups of people are empowered to make their own decisions over the use of their common resources, they often develop fair long-term distribution methods.
So how could we start to spur the adoption of these practices at scale? This answer is actually what the blockchain industry at its best is attempting to build - a fair, just and transparent system of governance Bitcoin, for example was built as an economic tool in response to the 2008 bank bailouts. Bitcoin creator Satoshi Nakamotoeven encoded the front page of a Financial Times article on the bailout of the banks into Bitcoin’s genesis block as a commentary on centralized financial corruption.
Bitcoin introduces a new system of financial exchange; open-source, transparent, and less susceptible to corruption by central parties. As we envision a new future built using user-owned blockchain infrastructures, we begin to address the root cause of systemic financial crises.
But if you’ve been skeptical of blockchain thus far, there’s a good reason. As an entrepreneur in the space since 2014, I’ve watched the dominant culture become like a bunch of elite Michelin star chefs in the kitchen coming up with every type of new cuisine, but without any customers at the restaurant. They discuss and speculate on all the new, innovative dishes they dream of serving with each other, but they’re not thinking about how to fill the front of the house.
ReFi Provides a Way Forward
Fortunately there are a plethora of projects and developments in the space that are focused on the long-term potential which are now uniting under the brand regenerative finance or ReFi to distinguish themselves from the short-sighted thinking described above. Below I present a framework for identifying these projects as a tool for investors and citizens so that we can better support their emergence.
How to Understand which Blockchain Projects are Developing ReFi Solutions
Before driving into the framework, there’s a quick trick that we can use to understand the end-goal of projects in the crypto space.-Ask yourself,“is this system designed to primarily reward the blockchain industry community, or are they building for adoption for people outside of the industry?” If the answer is B. you’re on the ReFi path.
Crypto adoption is an important strategy to consider when evaluating a project in the space.Designing for adoption is different from designing for the industry itself, because you start with asking how will someone like a teacher, a chef, a construction worker, interact with a web3 product. This audience is not focused on investment and finance as their job, and therefore is not attracted to products that require that interest as a prerequisite.
Studying three projects taking this approach reveals some key principles to help understand what designing for adoption looks like, and thus how they are taking steps to build components of a regenerative economy by creating new and non-extractive financial models.
1 -Braintrust is a user-owned marketplace for freelancers who get matched to corporations to do gig work. They introduced a token model of ownership that members gain for doing work such as vetting new members, referring clients, and participating in other activities to build the community and marketplace.
Thus, they provide a basic cryptoeconomic model—participate to gain ownership—in an environment that is familiar to its users and that offers them direct, tangible value today, as well as new clients.
While the payments in the marketplace are still in USD, they’ve introduced this new audience to crypto without them needing to read a long white paper or watch a bunch of videos to understand, it’s just inherent in the design of the product. They’ve brought on a new customer segment into crypto, trained them on earning and using tokens, how to move them around across exchanges, and possibly even store them using their own wallets now that they are motivated to do so.
2 -ReSource (which is the protocol I am building) is pioneering a system called mutual credit, which enables businesses and communities to offer credit directly to each other without financial institutions or any upfront cash, backed by their existing resources and skills instead. Today small businesses and freelancers can join a cooperative where they transact in ReSource dollars (RSD) instead of USDollars.
No one has to buy RSD, they either earn it by making sales or they receive a credit line in it to start purchasing goods/services that they will later pay back with sales of their own offerings to the network. We believe that a key component of mainstream adoption is not asking people to buy into a new system, instead they can be rewarded for their participation. This approach also makes access to credit itself more democratic, addressing the issues with wealth inequality today.
3 -Ethichub is a platform to connect crypto-capital to farmers who receive loans they can invest in growing their farms. They make it easy and accessible for small farms to access credit often for the first time. For these farmers, the blockchain aspect of the platform is not the selling point. Instead its the ability to get a loan where otherwise they had no feasible option due to lack of financial infrastructure. Ethichub’s token model is based upon crowd lending as a replacement for non-existent financial institutions, which enables direct investment in the growth of regenerative agriculture that also helps preserve biodiversity and sequester carbon across the world.
A Regenerative Finance (ReFi) Framework
Key principles from these approaches exemplify parts of the ReFi Framework we have been developing as the basis for forming a Winterproof Alliance. The Alliance aims to bring together projects that are building infrastructure for the emergence of a decentralized, regenerative economy. Some principles are already present in the examples above, while others are more applicable to evaluating designs for future protocol development.
- Regenerative Impact - these projects serve to create regenerative, not extractive, relationships between humans and/or natural ecosystems by designing and implementing new economic models.
- Real Human Impact - They place humans at the center of the design process and serve to reward all participants, not just the creators of the system primarily. For today’s industry, this means projects serve people outside of the crypto industry today and who are not just investors/traders/speculators.
- Real Economic Impact - These projects integrate into and serve the existing economy of goods and services. Whether it’s freelancers, small businesses, or organic farmers, these protocols all provide credit or opportunities to facilitate the exchange of real products and services.
- Access - Non-crypto natives can use the product without having to learn how its tokenomics and technical underpinnings work
- Disruptive Capacity - These projects introduce a new model that would be impossible or unfeasible without blockchain by cutting out middlemen to improve access to financial services. Of course, this principle exists upon a spectrum and needs to be continuously evaluated as these projects grow.
Principles from the ReFi Framework Guiding Future Protocol Development
- True Decentralization - Decentralized computing and infrastructure aside, does the project at its core also aim to decentralize the access to building wealth and power? Does the project create ways for those who are disenfranchised under the rule of the current financial system to meaningfully participate, govern, and benefit? Thus, will the market, society and the world become more regenerative if these protocols are adopted at scale? While this outcome remains to be seen, it’s important to consider any potential barriers to that result in the early design of projects.
- Synergistic Potential - Does or can the project interface with others in the space, in ways that allow third parties to build composite products on top of it? Does it build a walled garden or provide building blocks for use outside of just its own ecosystem?
- Future proof sustainability - Can the project survive without destroying the planet and human society? Does the project create externalities that impede the development of a regenerative society? This includes minding our carbon footprint, equitable labor practices, and non-extractive economic dynamics.
This framework and projects applying these principles can help us understand how this bear market could instead be a phoenix. It can guide us to get to work to create something better, rather than just allow failing institutions to design a faulty approach on shaky foundations. The future is bright, if we decide to build it on a strong foundation..
Ashley Taylor Buck is a blockchain entrepreneur who joined the early Ethereum community in 2014 with a vision to further social mobility with this new economic paradigm. She co-founded ReSource to empower local communities and small businesses to grow cooperatively by offering credit to each other. Previously she was the first employee of ConsenSys, a Community Microgrid Specialist for LO3 Energy/Brooklyn Microgrid, pioneered the Cyberthreats and UN Sanctions program for Compliance and Capacity Skills International, and founded a community and events space ReGenCy in Brooklyn.
She received her B.A. at Duke University in Cultural Anthropology and Visual and Media Studies and has completed a bridge program in Computer Science at NYU’s Tandon School of Engineering and one year of an M.S. in Data Analysis and Data Visualization at CUNY Graduate Center.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.