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While the crypto industry as a whole is generally eagerly awaiting a policy to clarify things like what is security and what isn’t, and also (hopefully) focus on eliminating bad actors like former FTX CEO Sam Bankman-Fried regulations are seen as a necessary evil, that is, except in climate activist circles, where the crypto folks are keen on the idea that policy and regulation could become generative in their ability to accelerate the demand for and use of blockchain solutions.

As part of the regenerative finance (ReFi) space, which I recently proclaimed would have a real breakout year in 2023I think politics and regulation, primarily outside of crypto regulators, will actually be a major spur for innovation and adoption of ReFi solutions globally.

Boyd Cohen is CEO and co-founder of Iomob, developers of WheelCoin, a Move2Earn game that rewards users for going green. This coin is part of CoinDesk Political week 2023.

In order to explore how policy and regulation could drive ReFi adoption, I recently sketched out the ReFi climate battery as a visual tool to frame how teams leverage crypto rails to advance climate action.

(Boyd Cohen/Iomob)

(Boyd Cohen/Iomob)

As is the case with most blockchain stack frameworks, the ReFi climate stack is best used starting at the base and working its way up to the application layer.

Blockchain layer 0-2 policy support

One of the biggest achievements in crypto in 2022 was the ambitious and successful migration of Ethereum from the energy-intensive Proof-of-Work (PoW) consensus mechanism to the energy-efficient Proof-of-Stake (PoS) mechanism. . The merger, as it was affectionately known, raised awareness among the general public and policy makers around the world about the energy and carbon emissions of PoW blockchains such as Bitcoin. Indeed, most blockchains are based on PoS. In 2022, we have seen regional and national jurisdictions, including New York State going so far as to impose moratoriums on new bitcoin mining operations due to environmental impacts and energy consumed by miners.

Blockchains such as Celo, Cosmos, Hedera, Near and Polygon have rushed to prove their carbon neutrality, even carbon neutrality, in order to attract an array of players concerned about sustainability and climate change.

Emerging ReFi projects looking to deploy on crypto rails are increasingly citing the Layer 0 to Layer 2 carbon commitments they rely on as a key factor in their decision. It’s only a matter of time before it starts to show up in legacy and Web 2 business decisions, as well as government assessments of blockchain use cases.

Take, for example, the big energy companies, all of which have some type of blockchain activity going on. These same energy companies are increasingly subject to carbon emissions regulations. When deciding which base layer to rely on, you can bet that every energy company (and every other company in carbon-regulated sectors) will be looking for low-carbon blockchains.

The same goes for any government initiative to leverage blockchain for operations and service delivery. The number of use cases for blockchain in government is growing day by day. ConsenSys published a report on this topic highlighting the application of blockchain for smart cities, central banking, validating citizen credentials, tracking vaccines as well as student loans and grants and for collecting payroll taxes. It is impossible to imagine a world where governments would not make the carbon emissions of the underlying blockchain a key criterion in their public bidding and eventual decision-making.

Thus, the broader movement to regulate carbon emissions from business and public action will generate real opportunities for stack-based blockchains taking the lead on carbon neutrality.

ReFi financialization tools

Several blockchain projects have been launched to support the financing of ReFi projects as they represent a type of public good. The open-source development platform Gitcoin was among the first to do so. Now operating as a Decentralized Autonomous Organization (DAO), Gitcoin leverages quadratic funding – a form of crowdfunding – to democratize financial support for impact projects (off-chain and on-chain). Gitcoin relies on matching funds from larger donors, including governments seeking to support and fund ReFi projects that match their own ambitions for the public good.

I am confident that we will continue to see local, regional and international agencies and groups such as the United Nations adopt ReFi to help accelerate the Sustainable Development Goals. Funding can frequently flow through on-chain tools dedicated to democratizing the process while ensuring transparency in funding choices as well as the results of the use of funds.

Eco-credits and offsets

The carbon offset industry, which exceeded 270 billion dollars per year, is coming under increasing scrutiny due to the perception that much of it leads to greenwashing and that many offsets are generated and withdrawn with insufficient transparency. Dozens, if not hundreds, of ReFi projects have sprung up over the past few years, designed to leverage crypto rails to address coordination and transparency issues between different stakeholders such as project developers, investors, and developers. demand partners such as businesses, governments and end users. voluntary compensation.

KlimaDAO alone has helped facilitate the removal of 18 million tonnes of carbon dioxide (CO2), equivalent to taking nearly 4 million cars off the road each year, the string data is displayed. Climate change policy is growing in the face of worsening climate change impacts, and it is undeniable that an increasing number of companies will be required (or pressured by stakeholders) to pull themselves together. While this will put more pressure on companies to reduce their own carbon emissions from their operations and supply chains (which ReFi can also help), using on-chain tools to s Engaging transparently in carbon markets will also accelerate.

Application layer

As the layer closest to end users, ReFi can play its part in helping onboard the next billion users by creating engaging apps, non-fungible tokens (NFTs), and metaverse products that make going green fun. . Yet where I predict the most interest and attention from policy makers to this layer of the ReFi Climate Stack is actually on the metaverse. As ConsenSys highlighted in its report, smart cities are an area of ​​growing interest for governments and blockchain projects.

Within smart cities, digital twins and the metaverse are very much in vogue. Singapore was one of the first to invest heavily in (off-chain) digital twin technology, but Dubai is making the most waves in terms of metaverse adoption as part of the city’s official mecca strategy metaverse world, generating $4 billion for the local economy and creating over 40,000 jobs by 2030.

One of the main drivers of smart cities embracing the metaverse is to engage in hyper-realistic planning for new public and private infrastructure projects. By creating a digital twin of an entire city in 3D, city planners are able to assess the implications of a new highway, a new train line and new commercial real estate projects on traffic, quality of life and carbon emissions.

Additionally, cities that adopt these metaverse projects can more transparently share the potential impacts of future infrastructure with citizens by inviting them into the metaverse environment and to get citizen feedback or even improve the model by seeing how the citizens plan to engage with the resulting infrastructure.

The market for digital twins, including for cities themselves, has been estimated at $86 billion by 2028. As such, you can bet we’ll see many existing and new metaverse companies tackle this market to help policymakers modernize infrastructure investment decision-making.

Conclusion

ReFi is going mainstream and policy and regulation could very well act as an accelerator for the ReFi boom I predicted for 2023. Also beyond 2023, market opportunities for low-carbon blockchains , to solve coordination problems in the financing of public goods, to bring transparency to carbon markets and to adopt ReFi applications and the metaverse are likely to grow exponentially. Maybe politics isn’t bad after all.

Explore the rest of the 2023 Consensus Forum on Crypto Policy

The Crypto Policy Forumat the annual Consensus Meeting in Austin, Texas, convenes leaders from government and the crypto and blockchain community to discuss, debate, and determine where the business of the state should begin and end within the Web3 economy.



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