Regen Network: Environmental Accountability with Crypto and Blockchain Technology – Projects to Watch 2023

Fiat currency derives its value from the laws of supply and demand, assigning economic value to goods and services. (Most) cryptocurrencies largely follow the same logic. What these models are not particularly good at is encompassing other types of values; socially, environmentally and ethically. Perhaps that is why the unintended consequences of transactions are known as “externalities,” as if the effects on air and water quality, for example, of a company’s work have zero impact on the company’s costs down the line or the people running the operation.

“Everything you buy has some financial cost, but none of the planetary, none of the ecological impact is factored into it,” said Christian Shearer, co-founder and chief investment officer of Regen Network.

In addition, the complexity of modern economies makes it very difficult to assess the impact of any transaction. How can an individual track the environmental or social implications of a product with components from 43 countries on six continents, made from materials sourced from several other places? (It’s your iPhone, by the way.)

For natural resources, this complexity is often resolved by centralized entities. Carbon credits, which try to create market incentives for positive steps in capturing or avoiding greenhouse gases, rely on intermediaries, traded on what are called voluntary carbon marketplaces, which in turn become judges for evaluation and verification. This often means a lack of transparency, which has led to serious criticism of their effectiveness, and rejections from the marketplaces.

Underlying the pursuit of this transparency is the belief that a measurable impact can ultimately be reduced. So the question is, how do we measure the true cost of our economic activity?

Back in 2017, Gregory Landua, Christian Shearer and Brecht Deriemaeker were sustainability consultants who saw crypto as a possible solution to the lack of transparency in transactions that hindered environmental responsibility.

The three men worked together at Terra Genesis International, which Landua founded and then headed. The consultancy today continues to work with companies looking to improve the sustainability of their supply chains or products, but also works in wider regenerative agriculture projects. Previous work includes sourcing rubber for Timberland, Vans and North Face.

In this consulting work, the three men “felt that there was a real lack of digital infrastructure to be able to account for ecological health,” Landua said. Much of the time, the regenerative projects they worked on would be composed of stakeholders “who all broadly agreed that they wanted something to happen,” such as carbon neutrality, soil health or biodiversity, he said.

The process used to create trust in such ecological impacts was “archaic”, “opaque” and “fraught with perverse incentives,” he said. This meant that “even when you have all these stakeholders who have really good intentions, our observation was that most of the time projects and outcomes were not met,” Landua said.

Amid the initial coin offering mania of 2017, new ideas around money and its role in societal systems became mainstream, Landua said. The blockchain ledger, with its key attributes of transparency and immutability, seemed like the right technology to try to tackle some of the fundamental problems surrounding ecological assets. It can dissolve some of the opacity of carbon markets and be used to build consensus around ecological outcomes. Landua, Shearer and Deriemaeker decided to start the Regen Network to bring the power of the blockchain to environmental responsibility.

The technology the three founders and their team have built is essentially a blockchain tailored to create ecological assets. Moreover, the methods of capturing data and distributing value related to these assets are also stored on the blockchain for all to see. Once digitized and on the blockchain, buyers of ecological assets will be able to select those that suit their needs, as well as audit the methodology behind their claims and thus their effectiveness.

The Regen Network is a layer 1 blockchain, meaning that it is the underlying technology that makes up the network. It defines the consensus mechanism used to record transactions on the ledger, who can participate in it as well as other basic components.

The blockchain is developed on the Tendermint consensus architecture, which is also the basis of the Cosmos blockchain. This architecture describes a public blockchain, meaning it is open to participation, using proof-of-stake consensus. It is agnostic to the programming language used.

One of Cosmos’ key advantages is that it can be used to build application-specific blockchains, just like the Regen Network. In contrast, on the Ethereum network, specific applications are built as layer 2 applications, while the processing of transactions and consensus occurs in layer 1.

Regen’s digital ledger is built to house three types of protocols essential to ecological accounting, according to its white paper.

Basically, Regen will “steer” the creation of these protocols, bringing together developers and researchers. First, they work on carbon sequestration. The Regen Marketplace, where ecological assets are traded, was launched in October and has so far only included carbon credit projects. Several types of protocols are proposed in the white paper, involving grassland health, regenerative agriculture and blue carbon, so that more climate-positive behavior is stimulated.

The different types of protocols will also take into account methods of measuring environmental characteristics and results, so that buyers of the assets can see exactly what they are getting into.

The governance of a blockchain ecosystem is critical to the mission. Without proper governance, it is likely to fall into the same pitfalls as the intermediaries it works against – centralization, opacity and inefficiency.

Regen Network is, like other projects, initially governed by a centralized entity, chosen by the founders. A for-profit entity manages the token issuance and sale of its native crypto, REGEN. The founders have created a non-profit organization, the Regen Foundation, to be an independent guardian of the network. The Regen consortium manages the foundation, which is also open to non-token holders.

The Regen Foundation is based in the U.S. The point of the foundation is not to raise money, but to “empower network participants, such as indigenous peoples, natural rights organizations, researchers and activist groups, who actually need to be part of generating the trust system,” Landua said.

The foundation’s members were originally appointed and now rotate, with the vote of the consortium.

Currently, the consortium’s members, who are mostly in regenerative agriculture, are looking for more crypto-native organizations to join, Szal said. The consortium controls 5 million of Regen’s token, which “enables us to maintain at least 35% voting power in locked governance DAOs [decentralized autonomous organizations]” to “optimize for community engagement in the governance of the blockchain,” according to the white paper.

Allowing non-token holders to participate in the governance process is an unusual call for crypto. It “is clear that the distinct user communities that may not be able to purchase tokens” should also have a seat at the table, the white paper said.

The governance system may not be perfect, but the team did their best to “create appropriate decentralization and checks and balances between a set of actors, and not just have it be like, ‘Oh, these VCs [venture capitalists] own all of this,” Landua said.

Realizing this vision is something of a Catch-22. The whole idea is to build a new value system, beyond financial incentives. To do that, the Regen Network must work within the current system – which by definition does not match the goals.

VCs usually look at the size of the market, the rate of return on their investments and possible risks. A project that literally tries to redefine economic value away from money is unlikely to score well in most of these categories.

“We’re not selling a simple hype story, we’re selling a story about creating public open infrastructure, which by its very nature shouldn’t [be] to extract as much value from the participants as possible,” said Landua.

For investors whose “primary goal is to extract as much money from a system as possible, Regen Network is definitely not the right thing […]because the whole premise is that that’s not the way to build these public goods markets,” he said.

Shearer explained why it’s “frustrating” to get investors on board: Especially in the blockchain space, people often ask, “Why are you building this green thing? It just seems like some kind of charity effort. It doesn’t sound like it’s going to make me a lot of money . […] Maybe I’ll give it a donation sometime.”

But for him, “ecological assets must become an incredibly important asset class in this century. Because if they don’t, we are all doomed, he says. “Carbon is already on the way and shows that it is becoming an important asset class. Biodiversity is right on its heels – water quality, that sort of thing.”

If Regen’s efforts pay off, which is likely to require a good deal of government policy, natural capital and ecological assets will be “a multi-trillion dollar industry being born before our eyes,” Landua says. So even “a small responsible percentage of that is “a crazy amount of capital.”