The case for a small allocation to Regen

This essay is inspired by Wences Casares’ seminal essay: The case for a small allocation to Bitcoin

Summary

Regen Network is a fascinating experiment, but it is still just that: an experiment. As such it still has a chance of failing and becoming worthless. In my (subjective) opinion the chances of Regen failing are at least 20%. But after a first year of going from 0 to more than 10,000 wallets, the formation of a deeply liquid interchain carbon market on Osmosis (with a commitment to source 200,000 Nature Carbon Tonnes), and a recent partnership to onboard carbon and ecological credits from 150,000 farmers across 100M hectares of land, it has a good chance of succeeding.

What does success mean? Success is a world in which Regen acts as a schelling point for the financial flows of nature’s capital. In my (subjective) opinion the chances of this happening are around 30%. If Regen does succeed, 1 $regen may be worth more than $100 in 7 to 10 years, and more than $1000 by the middle of this century. That’s ~ 150 to 1500 times what it is worth today (at time of writing the price of $regen is hovering between $0.6 and $0.7).

I suggest that a $100,000 crypto portfolio should invest at most $10,000 in $regen (up to 10% but not more as the risk of losing this investment is high). If Regen fails, this portfolio will lose at most $10,000 or 10% of its value over 3 to 5 years, which most crypto degens can bear. But if Regen succeeds, in 7 to 10 years those $10,000 may be worth more than $1.5 million, and more than $15 million by 2050.

Regen’s thesis is that natural capital assets (ecological assets) will be the most critical and valuable form of the capital asset class in the 21st century. To paraphrase Regen’s co-founder Gregory Landua: while this might be a crazy thing to say in crypto, it turns out it’s not such a crazy thing to say outside of it.

If you believe there is a non-negligible chance this thesis will turn out to be true then Regen offers an interesting opportunity for a non-material exposure to produce a material outcome while betting and contributing to a better, more sustainable world.

It would be irresponsible to have an exposure to Regen that one cannot afford to lose because the risk of losing the principal is very real. But it would be just as irresponsible to not have any exposure at all.

What is interesting about the Regen network?

Regen is a network of sovereign blockchains devoted to catalysing a market transformation towards a regenerative financial system. It’s purpose is three-fold: to incentivise a bottom-up cambrian explosion of ecological restoration, to lay the foundation for embedding ecological health into the fibre of our economy, and to bring about a world in which anyone can access open, scientifically valid information about the current state of any part of our planet – be it a piece of farmland, a river, or an entire ecosystem – without having to rely on a central authority. Throughout this essay I often refer to “Regen” when I am referring to the Regen Network as a whole.

At the center of the Regen Network is the Regen Ledger: a domain specific blockchain for the domain of ecological agreements and data. You can think of Regen Ledger as the hub for regenerative finance within the Regen Network (which itself is a part of the wider Cosmos ecosystem). This hub bridges out to it’s own ecosystem of sovereign ecological commons (think DAO governed sovereign blockchains), some of whom might choose to be co-secured by the Regen Ledger validator set.

Regen Registry is the first application built on top of Regen Ledger. You can think of it as an open ecological credit registry. Scientists can upload new ways of verifying ecological health (formally known as methodologies), and land stewards can use these methodologies to create and sell ecological credits directly to buyers around the world. An eco-credit is simply an on-chain asset tied to ecological health and backed by verifiable and transparent ecological data. An on-chain carbon credit is an example of an ecological credit. Regen Registry is the first of many applications that will be built on top of Regen Ledger – as functionality starts to come online this year, you should expect to see a proliferation of regenerative finance applications (from green bonds, to ecological NFTs, to novel currencies backed by ecological assets).

It’s difficult for even crypto natives to grasp all of Regen’s moving parts. In part because Regen exists at the intersection of several complex topics – finance, environmental science, carbon markets, DAOs, and land stewardship – and in part because it is difficult for those who have cut their teeth over in Ethereum land to grasp how an interconnected but sovereign ecosystem of blockchains can add value. Perhaps the closest successful example of this sort of architecture in existance today is Terra. Today, the Terra ecosystem is made up of 100s of projects integrating UST in some manner. Although it is a Cosmos chain, this surge in projects has made Terra part of the Layer 1 conversation, with it being considered in the same breadth as other L1s. Some of the projects building on top of Terra are starting to discuss branching out into their own sovereign chains. One of the beautiful things about Cosmos is that it allows for this sort of fractal sovereignty.

If Terra’s role in the Cosmos ecosystem is to create the decentralized stable coin at the center of every app, Regen’s role in the ecosystem, and more broadly in the larger multi-chain universe, is to be the origination point for high quality, ecological assets. The more weight a community places on an ecological asset, the closer (from a network topology perspective) they will probably want to be to the Regen Ledger.

Another way to think of Regen is as open and permissionless public infrastructure for communities to come together to answer the questions of how they will govern ecological accounting, monitoring, and verification. Crucially, this infrastructure is not owned by a company but governed by a distributed network of land stewards, scientists, and regenerative financiers. Anyone who holds the $regen token can stake it and participate in governing this infrastructure and shaping its future (crucially, more than a 1/3 of the initial supply has been earmarked for value-aligned communities).

Today, there are more than 40 different groups developing eco-credits for the Regen Network: from blue carbon, to ocean conservation, soil carbon, agroforestry, forest conservation, indigenous land management… And more than 15 million hectares of land already engaging with the network.

sacha st. leger @ssaintleger

repeat after me: you do not have to choose between sovereignty and composability

sacha st. leger @ssaintleger

@_avichalp_ absolutely. on top of ibc, interchain accounts allow for composability, and interchain security will allow for any zone to share security with any other zone (which will allow for a much richer and pluralistic notion of shared-security)

Regen is founded on the belief that the real potential of p2p networks and consensus protocols is in community engagement and control over networks of shared value. In a word, sovereignty. While technological concerns are obviously important, at the end of the day they are secondary to the value of empowering the members of any given DAO toward their own sovereignty.

Sovereignty is important because it gives communities full control over their own destiny. Having full autonomy over features means that if it’s advantageous to make an upgrade at any level of the software stack, from consensus upwards, the community can initiate that change themselves. In particular sovereignty allows a community to bypass many of the problems associated with a one-chain-to-rule-them-all thesis: whether it’s passing on unpredictable transaction costs to users, the abdication of the fork choice to centralised entities, or the increasing complexity and fragility that comes from trying to pursue a one-size fits all approach. Another important feature sovereignty unlocks is tighter community incentive alignment. The strength of loyalty that comes from giving community members the ability to own and govern the network by participating in the proof-of-stake security of the system, without being beholden to a ruling class of early adopters and the soft power surrounding them, should not be discounted.

Not only is Cosmos the only protocol which treats community sovereignty as axiomatic, but thanks to IBC (Cosmos’ InterBlockchain Communication Protocol) it comes with an incredibly well-designed bridging solution out of the box (it’s worth noting here that as a general purpose communication protocol, IBC is in fact much more than just a bridging solution). Sending an asset from chain A to chain B using IBC does not require any additional trust assumptions. As long as both A and B’s validator sets contain an honest majority (as weighted by stake), the transaction cannot be corrupted. This allows for what Cosmonauts refer to as interoperable sovereignty (the emergence and evolution of sovereign communities within an interconnected whole). In particular, IBC enables Regen’s ecocredits to be reliably transferred across the interchain. This in turn unlocks the ability for ecological assets to be used as financial building blocks within the wider Cosmos ecosystem.

Why hasn’t ReFi coalesced around Regen yet?

Neal Spackman @NealSpackman

After 2 weeks courting and being courted by i don't know how many #REFI DAOs, i can't figure out why everyone isn't building on #REGEN. Feels like 100 different organizations are reinventing the wheel, but everyone's spokes are decorated slightly differently.

We are still very early. Many teams are just getting to the point where they are capable of understanding Regen. The staggering amount of learning that’s needed (finance, DAOs, carbon markets, environmental science, interoperable sovereignty…) before being able to understand the codebase makes for a very high initial hurdle.

On top of all this, Regen doesn’t yet provide all the features that a ReFi community needs to flourish today. This, however, is about to change. The next couple of Regen Ledger updates will lay the foundations for ecological bonds, NFTs, DAOs, and a fully functional decentralised marketplace. It may take some time though for the wider ReFi community to internalise this. While momentum is already starting to pick up, I expect 2023 to be the year we’ll really start to see ReFi flourishing as an ecosystem around Regen.

TMO | tmo.eth @tmoindustries

“Built on Regen” Is one of my favorite new taglines from the #ReFi interwebs We will be seeing a lot more of this very very soon $REGEN LFG! ⁦@regen_network⁩ ⁦@erde_kette⁩ ⁦@dave_fortson⁩ ⁦@rebeccamharman⁩ ⁦@gregory_landua⁩

Where can an open and sovereign platform for ecological assets add value?

In Gregory’s words:

The biggest issue we face as a civilization today is that a forest is worth more (financially) clear cut and turned into toilet paper, than as an intact thriving ecosystem providing oxygen, water, and habitat for generations to come. This is an issue that cuts to the heart of society, culture, and economics. What do we value? How do we value? Who decides what and how we value?

…[in order to fix this] we must be able to quantify both the value of the public goods in question (clean air, carbon sequestration, biodiversity, etc), as well as quantify the certainty related to the monitoring and verification methods underpinning the claim (how certain are we REALLY that there is a forest where someone says it is, and that the forest contains x tons of carbon?). These two variables (value of the ecosystem service) + (value of the monitoring and verification method) are the core components of a rational market pricing mechanism for the ecosystem services.

Within this context there are five key ways an open and sovereign platform can facilitate an economy underpinned by ecological assets:

1. Democratise access to existing markets

2. Increase revenues for farmers and landowners

3. Reduce the cost of ecological state verification

4. Increase the accuracy of ecological state verification

5. Allow for the bottom-up creation of new markets

With the launch of Regen Ledger 4.0 (expected in June) Regen will allow for land stewards to issue credits directly into the market place, setting their own price. The money from each sale will go directly to the land steward, project developer, and verifier.

You don’t need to wait until then to see how effective this sort of peer-to-peer trading can be though. Regen has already shown how the unit economics for farmers can be flipped on their head. In the intitial pilot of the first eco-credit – in which on the order of 100,000 soil carbon removal credits were sold to Microsoft – 85% of the payment went to the farmer. This is completely unheard of. Generally speaking, only 20% of a credit’s value ends up with the land steward, and 80% is eaten up by the complex byzantine middle.

To truly understand how Regen adds value requires diving deep into the pilot in question. The pilot was focused around modifying grazing practices to improve soil carbon sequestration on two cattle ranches (owned by Wilmot Cattle Company) located in New South Wales, Australia. Wilmot Cattle chose to use a new methodology developed by a team of scientists from within the Regen Network that minimises the need for soil samples on the ground, while significantly increasing the understanding of where the carbon in the soil is, and how that carbon has changed over time over the landscape.

If Wilmot Cattle had chosen to follow the ACCU (Australian carbon credits program) program and methodology instead, they would have been asked to take between 200 and 300 soil samples across their landscape. Since their landscape is about 2000 hectares in size, this would have required taking samples from 1 in every 10 hectares or so. They would have had to do this once to set a baseline, and then again whenever they wanted to measure the change in carbon. A single soil sample can cost anywhere between $200 and $300 a piece. So that’s a cost of approximately $50,000 every time. Not only that, but they would have been left with only a static understanding of the landscape (with the average measurement extrapolated across).

With the new methodology, rather than take 200-300 soil samples, Wilmot Cattle only needed to take 20-30. Since these samples have exact GPS co-ordinates attached to them, they were then able to use remote sensing (using publicly available Sentinel-2 satellite imagery) to correlate the data on the ground with the data from the satellite. They were able to do this because Regen’s scientists had found a 91% correlation between the ground truth data and a particular band of the satellite imagery. This made it possible to confidently extrapolate from a few soil samples to the entire landscape and still produce a very nuanced understanding of where the soil carbon is and where it isn’t (on a parcel by parcel level).

Not only does this methodology allow for a more transparent and granular verification, it’s also an order of magnitude cheaper than the standard methodology. This combination of more granular verification and significant cost savings unlocks the ability for any smallholder farmer to go from public satellite imagery to selling credits to an organisation like Microsoft. Even if they can’t afford the initial investment, it’s now significantly easier for them to obtain financing: financing for farmers to switch to regenerative agriculture becomes a whole lot easier when those farmers can bank on the fact that they will receive payments for ecosystem services down the road; if, as a farmer, you have some certainty that switching your grazing operation from conventional grazing strategies to regenerative strategies is going to produce carbon and other ecosystem credits that are going to guarantee a particular amount of income, you can now make a case for impact investors to get involved and expect a reasonable return on their investment. This is a trend we’re already starting to see.

Gregory Landua (🌳,🌳,🌳) (landua.eth) @gregory_landua

Do you want a carbon market where decisions about local ecosystems are made by technocrats in megalopolises? Or where local communities create markets and commons management systems at a local scale?

Today, there are two markets for carbon – a voluntary market, and a compliance market. Regen focuses on the voluntary market. In contrast to the compliance market which relies on government regulation to force corporations to comply with a pre-defined emissions limit, the voluntary market gives governments, firms and individuals the opportunity to voluntarily purchase credits to offset emissions generated by their actions.

The voluntary carbon market (VCM) saw $1 billion in turnover last year. This is a small sum in comparison to the $850 billion compliance market but nevertheless a record number fueled, in part, by increasing consumer and shareholder pressure on corporations to commit to going net zero as soon as possible, and the arrival of voluntary credits onto blockchains.

While it’s wrong to view carbon markets as a panacea, it is equally misguided to dismiss them outright. They have many flaws, but the more you dig in, the more you realise these are more akin to growing pains than unsolvable problems. This sentiment is well expressed in a recent paper co-authored by James Pittman (a Regen scientist and core contributor):

As interests and investments continue to scale, many current issues concerning transparency, manipulation, additionality, permanence, monitoring and reporting bottlenecks, friction, and transaction costs, will be made insignificant if not irrelevant due to the deluge of innovation and market participation we see in the space today. The flaws we see today are simply the growing pains of a maturing set of means to address the climate crisis. What seems unsolvable and unacceptable now will undoubtedly and indeed, imperatively produce a net benefit for our climate, environment and society

According to McKinsey: enhanced credibility in the voluntary carbon markets could enable them to grow substantially from their current size of ~$1 billion to $100 billion by 2030. $1 trillion is the higher end of the size of the carbon removal market that is required by 2050 (according to the IPCC, assuming 10 gigatonnes of C02 traded per year at a price of $100 a tonne). However, today the voluntary carbon markets are very opaque. It’s very difficult to find out what’s being sold at what prices. The size of the market is handicapped by this. It’s too fragmented and complex. Many credits have been discovered to indicate emissions reductions that were, at best, questionable. Consumers are unsure if they are paying a fair price, and suppliers are unsure how to handle the risk of investing and working on carbon-reduction efforts without knowing how much consumers are prepared to pay for carbon credits.

In the words of an American Timber CEO:

The current design of the voluntary carbon market is doomed to fail

One of the key problems is a shortage of verifiable high-quality nature-based credits. The twin bottlecks on this front are the integrity of the credit and the cost and speed of the verification process (it can take tens of thousands of dollars and more than 15 months for a project to be verified today). An open and sovereign platform for methodologies and ecological assets can help tackle both of these issues.

According to the Taskforce on Scaling Voluntary Carbon Markets, if supply increases at the same rate through 2030, the supply of carbon credits in 2030 will be approximately 1 GT. However, the practical supply potential sits at 10x this amount (10 GT). Achieving a 10 GT yearly supply in 10 years will only be possible if we embrace profound technological change vis-à-vis verification, trade, and post-trade infrastructure. To give you an idea for the sheer scale of the ramp up needed, if we were to consider reforestation alone, it would take a forest more than 20x the size of California to consistently sequester 10 GT per year.

If we are to meet the potential supply this decade, 60-85% of it will have to come from Natural Climate Solutions (NCS). And scaling NCS requires significant efforts from smaller-scale project developers. Getting smaller-scale land stewards on board has historically been a problem. It just hasn’t been cost-effective for them to go through the verification process. Legacy registries (such as Verra or Gold Standard) are simply not set up for projects less than 500 hectares in size. To put this in context, today 80% of agricultural land sits on farms smaller than 500 hectares.

In sum, while there are many crypto projects focused on the demand side of the carbon markets, the real potential lies in scaling the supply side ethically; Where ethically here means in a way which benefits smaller farmers and land stewards directly while provably removing CO2 from the atmosphere. Getting this right requires a deep sensitivity to local sociological and cultural contexts. Threading the needle between all these complex issues is what Regen Network is all about.

If Regen succeeds, one can expect most offsets on Regen Ledger by 2030 to be Regen Registry offsets. Earthbanc, a ReFi app that has partnered with the United Nations Convention to Combat Desertification (UNCCD) to finance 100M hectares of land restoration offers a glimpse into what this future looks like. Restoring these 100M hectares requires onboarding 150,000 farmers. There is no way this can be done effectively with the legacy infrastructure and registries that exist today. This is why Earthbanc plans to issue all the regenerative land management outcomes from these 100M hectares as eco-credits on Regen Ledger.

If there’s one takeaway from the above it’s that the supply side of the carbon markets cannot scale to its full potential without embracing decentralisation (this includes at the land, methodology, registry, and marketplace level). The sheer rate and complexity of the necessary scale-up requires the need for a global response rooted in effective local action and bottom-up organisation. This is Regen’s raison-d’être.

Gregory Landua (🌳,🌳,🌳) (landua.eth) @gregory_landua

@JoanieLemercier @cosmos @regen_network But really i'd encourage everyone to move beyond offsetting entirely to a concept of regeneration. How does our action, our art, and our economy transform to regenerate ecosystems? Eco-accounting like carbon offsets are a baby step in the right direction.

While carbon is important, carbon offsets should be properly understood as a first step towards a pretty radicle re-invention of finance and money that starts to re-embed humans in the larger planetary carbon cycle in a culturally and socially conscious way. Carbon is the first milestone but what’s particularly exicting about Regen is the open source and scalable framework underpinned by a blockchain that can use this catalyst of carbon to take nature’s capital in all the directions it needs to be taken to heal the earth (whether it’s water, soil health, or jaguar habitat restoration).

Regen Network is not myopically focused on carbon. Carbon is not the only problem with the world. The problem is a very holistic set of circumstances in which carbon is just one of the indicators. We need to sequester carbon, but just as importantly, we need to build healthy soil, biodiversity, and habitats back into our landscapes. There really is no limit to what a set of open source building blocks for financial applications backed by ecological regeneration can achieve. Perhaps the main hurdle Regen has to clear to become successful is the development of a robust decentralised oracle system that allows the market to accurately price in the inherent uncertainty of ecological claims. While progress is being made, achieving this across all relevant natural climate solutions this decade is quite an ambitious goal.

What does a world in which Regen succeeds look like?

Gregory Landua (🌳,🌳,🌳) (landua.eth) @gregory_landua

Imagine a DAO governed carbon registry system. Imagine Landscapes themselves, indigenous peoples, scientists, global citizens governing that system. Imagine it integrating seamlessly into DeFi markets. Imagine @regen_network... No need to imagine: contribute, colab and regen

Regen Network (Hiring!) @regen_network

This is where the power of the Regen Network model comes into full view. What will YOU design to serve your community, corporate or institutional climate goals? https://t.co/SEj1mMUdkJ

I don’t think I can do better than quoting Gregory here:

Half the earth — oceans included — is wild (this does not exclude humans: it just demands the humans living in those spaces are low density and living an indigenous lifestyle).

Working lands (ag, forestry, etc) are incredibly diverse. These farming landscapes have deeply integrated agroecosystems, with managed herds moving at a landscape scale. Integrated multi-story Agroforestry is the norm. Most crops are Perrenial. We produce most diverse food, not less. Bioregional food sheds are the norm.

We’ve increased soil organic matter on all arable and ranch land by several percent. We are well into sequestering 600 giga tons of carbon into ecological and agroecological systems. (Let’s say we’ve accomplished 300 tons of carbon removal, plus turned all at carbon negative)

$regen powers the transparent public infrastructure for monitoring ecological claims and minting ecological assets. It’s owned and used by all the stakeholders who need to participate to ensure these certificates of regeneration and the resulting assets are of the highest quality

$regen holders have ensured there was no “sub prime carbon” crisis. The value of regen can be rationally calculated by the volume, scale and quality of impact produced by the community working together to incentivize regeneration.

$regen secures the worlds biggest open source graph and governs a registry of open source methodologies and ecological state protocols. Regen SDK (independent forks) is used to run regional blockchains for ecological health backed local currencies, and watershed governance.

Regen Network is an ecosystem. A Network. Interoperable nested accounting at a global scale, but controlled at the local a grassroots level is achieved.
There is a global regen reward currency generated as an index of all the approved credit types.

Why not another schelling point instead of Regen?

While ReFi has really exploded over the last 6 months, Regen contributors has been working since 2017 on the basic building blocks for how communities, individuals, companies and nations can create a high integrity, transparent process that links economic value to ecological health. There is a sense in which Regen has always been 10 steps ahead of the market.

Regen has three founding assumptions that deeply influence the direction of the project:

1. Natural capital is the most important form of value in the 21st century: the health of our economy, society, and our very survival depend on our ability to create market-based and commons-based solutions to account for, and regenerate ecosystem health.

2. The financial and commercial systems of the future will be 100% digital.

3. The failures of our financial and commercial systems are largely due to a lack of transparency and user/community governance.

If you agree with these assumptions then you’ll understand why it’s paramount that the financial flows associated with nature’s capital be recorded on an open, distributed, and community governed piece of infrastructure. Nothing short of this will enable us to overcome the present-day challenges of aligning economic wealth with ecological health, in a way which can avoid being corrupted over generations.

In Gregory’s words:

These assumptions translate to three primary attributes that any platform built to successfully link market forces to ecological health and regeneration should have:

(1) Digitally-native monitoring, reporting and verification systems; open source, low cost, scientifically rigorous verification and quantification of ecological state
(2) Distributed, decentralized, and public infrastructure
(3) Community governance of the full stack

Each of these pillars is a core component of Regen Network’s approach. There is no other project out there for which this is true: there are a handful of others working on (1) but in the absence of (2) and (3) neither credible neutrality nor a cambrian explosion of bottom-up regeneration can be achieved. We’re back to trusting a centralised entity, usually funded by private interests, which can and will end up abusing that power in pursuit of greater profits over time (not to mention the inevitable drag on bottom-up innovation).

Ari Paul ⛓️ @AriDavidPaul

4/ it’s not that any of these guys are necessarily evil or liars. It’s that a corporate structure almost inevitably prioritizes profits as it grows. Even an idealistic founder is under immense pressure from shareholders, employees, etc.

Through its public network approach to ecological accounting, Regen gives us an inspiring alternative. To quote Gregory one last time:

The beautiful thing about building in public, building open source, and launching a public network is that the tools we are building can be the foundation for a broad suite of other ideas from brilliant minds aiming to serve planetary regeneration. Carbon credits are only the beginning. They are simply part of the first step towards the holistic economic transformation in which value is transformed from extractive and degenerative power to regenerative potential.

Cosmos facilitates a form of fractal interoperable sovereignty rooted in local autonomy that no other ecoystem allows for. As the fourth IBC chain, Regen’s core contributors have a particularly close relationship with the Interchain Foundation (and in particular, the Cosmos hub team). They have played an integral part in Cosmos’ development (in fact, they are the primary maintainers of the Cosmos SDK). At a more abstract level, Cosmos’ architecture seeks to mimic life itself. All of this makes it a natural home for ReFi.

Gregory Landua (🌳,🌳,🌳) (landua.eth) @gregory_landua

Some people ask why we started with soil monitoring systems to integrate carbon removal into the @regen_network marketplace. This is why. Also have a look at the wetland systems, and boreal peat…. Thanks for the leadership @NealSpackman

Frank Mitloehner @GHGGuru

Comparison of plant vegetation vs soils as sinks for carbon. Forestry and agriculture are the main societal sectors that can pull carbon from the air and store it. | IPCC https://t.co/V1Rm9hyDT8

There are very few technologists in web3 with a holistic understanding of nature, and in particular, the importance of soil. Capturing a soil-based carbon economy is a grand challenge, but with urgent and assertive action, one that is attainable in the decade ahead. Today, agricultural farming emits 25% to 35% of all CO2 into the atmosphere — more than all modes of transportation combined. The trend has contributed to extreme changes in weather that are reducing crop yields and making livestock more vulnerable to disease. All this threatens the global food supply as demand from a booming global population grows.

The fact of the matter is that unless we are able to intervene in new and conventional crop production systems to enhance soil carbon we won’t be able to meet our food security targets and demands for the future. While trees and reforestation make the headlines, it’s a little known fact that croplands and grazing lands have a 10 GT per year carbon sequestration potential. This is a similar potential impact as reforestation.

But soil is much more than just a carbon sink. It is the medium of life. The management of soil comes with all sorts of co-benefits that are essential to biodiversity and our water and food security. For example, if you increase the soil organic matter by just 1% on an acre of land, you increase its capacity to hold water by something like 20,000 gallons, this in turn has a positive influence on crop yields.

When it comes to the science and verification of soil regeneration, Regen’s contributors have already proven that they can operate at the cutting edge. When Microsoft put out a request for proposals for higher quality carbon credits last year they received hundreds of applications. While they ended up choosing 15 projects to source their carbon from, the only soil carbon credits that they judged to be of sufficiently high quality were from Regen (all the others were either forestry or direct air capture).

How can Regen fail?

Regen can fail in many different ways. Financial institutions, governments, and regulators may try to put a wedge between crypto and the wider climate finance world. Heavy-handed regulation could end up killing the voluntary market while gatekeeping the supply side of the compliance markets. Cosmos’ network effects could start to slow and/or come to a halt. Regen could be displaced by a better platform. The Earth could cross a climate tipping point that renders it uninhabitable. And Regen can probably fail in many ways that we cannot imagine yet.

Because Regen’s value depends on the strength of the communities building on it, if Regen fails to attract a critical mass of ReFi communities, Regen may not fail but it may never become mainstream. This may be because ReFi ends up coalescing around an alternative chain with already established network effects (for example, Polygon or Celo).

If Regen fails to bootstrap a large enough network of fiercely loyal ReFi communities, $regens will still have a price, but probably not significantly higher than they do today. This is probably the biggest risk to Regen. In my (subjective) opinion the chance of this happening is at most 50%.

Regen’s price action

Regen launched in April of last year (2021). The first time it had a price on Coingecko was June 28th ($2.25). The price gradually increased until the middle of September (where it reached a peak of just over $5). Since then it’s been on a downward spiral (today the price is hovering at around $0.6). There doesn’t seem to be a good reason for this drawn out collapse in the price. At least nothing to do with the fundamental soundness of the project.

Many small farmers have been onboarded over the last 6 months, and it’s possible some may have been forced to sell $regen due to lack of extra capital. This sell pressure may have been magnified by the fact that $regen has very thin markets and few market venues.

The lack of strong demand at this stage likely comes from the fact that the Cosmos and broader ReFi community haven’t really wrapped their heads around the project yet. I don’t think it’s an overstatement to suggest that Regen is as difficult for folks to grasp today as Bitcoin was back in 2011. There really is no shortcut here; patience is perhaps all one can ask for.

Why do I believe 1 $regen may be worth $100 in 7 to 10 years and more than $1000 by the middle of this century?

How much a $regen may be worth if Regen succeeds in becoming the schelling point for nature’s capital is pure speculation. Today Regen is worth a total of ~$75 million (~ 125 million $regens in circulation * $0.6 per $regen).

Total value locked is a useful proxy for estimating market cap. For example, Ethereum’s market cap is 3x TVL, while Terra’s is closer to 1.25x. If Regen ever becomes the world’s preferred ledger for ecological assets its TVL may have to be more than the financial flows of carbon alone and less than the value of all of nature’s capital.

Carbon markets have the potential to generate up to $1 trillion per year in financial flows by 2050. A lower bound estimate for the value of a subset of nature’s capital is $100 trillion.

Using a conservative estimate of TVL = Mcap, and assuming there will never be more than 1 billion Regen’s in existence, this puts $regen’s potential value anywhere between $1000 and $100,000 by the middle of this century.

Focusing on the nearer term (2030), we can get a feel for a lower bound by looking at carbon alone. Assuming a demand of 2 GT a year of high quality carbon credits by 2030, and assuming voluntary commitments make up 60% of this demand, that’s a total demand of 1.2 GT per year.

If the price of carbon reaches $100 a tonne, and Regen can help field 0.2 GT (in other words supply 1/10 of the total demand for carbon credits), that comes to $20bn of value locked every year.

Taking 2.5 years as the average time locked – generally, offsets with a vintage year within 5 years of the emissions to be cancelled out are most desirable – gives $50bn in TVL from carbon alone. Taking a conservative Mcap/TVL ratio of 1 again, and assuming a supply of no more than 500 million $regen in 2030, gives $regen a value of $100.

In closing

This essay is focused on making the case for a small allocation to Regen. It therefore focuses on the possible financial gain to be had if Regen succeeds. But if Cosmos and Regen do for ReFi what Bitcoin and Ethereum have done for DeFi, the prospect of an economy rooted in ecological regeneration is much more exciting than any possible financial gain.

I was lucky enough to spend much of my early childhood on a small farm in the south of France surrounded by forest. I recall endless afternoons of climbing haystacks, picking berries, playing with the sheep dogs, teasing the bulls, riding shotgun on the farmer’s quadbike at 80 km/h on a winding country road without a helmet… There was no such thing as health and safety, just a pure feeling of limitless freedom surrounded by pristine beauty. That feeling has stayed with me ever since. It subsequently shaped my childhood dream to become a ski racer, which ultimately led me to where I am today: after sustaining a career ending injury at 15 I spent the next 5 years trying to re-invent myself to no avail; at 20 I was lucky enough to stumble across and fall in love with creating software (in large part because it gave me that same intense sensation of freedom again). It deeply saddens me to think that we are on course to leave this planet in such a sorry state that my grandkids may not be able to understand and share in those experiences that so profoundly molded me into who I am today. Nothing would make me prouder than to be able to tell them that I was part of a very large community who helped Regen succeed. And that because Regen succeeded, millions of smallholder farmers, regardless of location or nationality, can earn a noble living for doing the right thing for mother earth. So that that feeling of marriage between the soul and nature, that so deeply shaped me and countless others as kids, will never disappear.

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Thanks to Jessica Steiner, Thomas Morgan, and Gregory Landua for reading drafts of this.