Using decentralized finance to implement climate-based solutions :
In the past decade, an enormous amount of capital has flowed from governments worldwide into the hands of agencies and individuals tackling specific social, economic, and environmental challenges. One of the most significant is Climate change. A recent study shows that the USA is projected to spend over $4.5 million to decarbonize its electric grid and over 3 million dollars over the next decade in climate change mitigation alone. This fact makes it evident that protecting this planet costs a lot of money.
As the problem of climate change gets knottier, society is increasingly looking at new alternatives to bring solutions to the problem. Leading these hopes are decentralized finance and blockchain technology.
DeFi and Climate: the Intersection
At first, Bitcoin’s shocking level of energy consumption and its subsequent carbon footprint presented a hot topic of debate between environmentalists and crypto maximalists. However, as time progressed, crypto technology has evolved to be more environmentally conscious and to consume less energy through upgrades such as “The Merge,” for instance.
Defi is now being recognized for its efforts to become more energy efficient and for its capacity to tackle other climate challenges at a much broader level. Defi is now channeling its resources towards environmental efforts by positioning itself at the center of the Regenerative Finance movement, or ReFi. While DeFi is concerned with decentralizing financial services, ReFi focuses on building systems that restore and enhance planetary well-being. And it does this through crypto technology.
There are several ways crypto infrastructure helps the planet go green. Firstly, crypto offers a new way of tracking, managing, and capturing data. So, for instance, smart contracts technology can enable the government to track carbon emissions at scale in such a manner that could never be done before.
Beyond that, crypto also enables the conversion of data to information that can be monetized via tokenization. So, for instance, plants fitted with crypto-based tracking systems and detecting whether or not they are generating renewable power. This information can be represented as a token and, in a crypto marketplace, can be traded for money and used to generate needed funding for climate-driven research.
There are already some crypto startups working to protect the earth’s climate. For instance, Reseed is an organization that collaborates with local communities around the globe to create carbon assets that provide direct compensation to farmers for drawing down carbon. Raiz uses NFTs to fund vertical farms. And Hillridge is a DeFi startup with insurance for extreme climate events like tropical storms.
The next and final step in the journey is regulation. Suppose DeFi startups and regulators learn to collaborate better. In that case, ways can be found to not only encourage financial and energy efficiency for these companies but also encourage projects that drive the earth’s sustainability.