ReFi Needs Better Plumbing

Rex St John
6 min readJan 21, 2023

The purpose of this article is to outline a simplified understanding of what effectiveness means in ReFi. In particular, I want to make the argument that ReFi is fundamentally a tokenization or Realworld Assets based movement and cultural, governance and social layers are the “Value Creation” (Impact) layer.

Furthermore, I wanted to advance the argument that until Regenerative Finance is able to solve foundational (plumbing) challenges relating to effective tokenization of natural assets, the movement will be highly constrained in its productivity (as measured by demonstrated conservation or impact related output).

I also believe that the single best use of time in the current environment is intensive focus on developing new standards to tokenize new asset classes with a similar degree of rigor being applied to tokenized carbon offsets.

A brief recap of ReFi in 2022

In 2022, the market reminded ReFi that it is an extension of DeFi. The crypto industry, which had decoupled from reality due to excess availability of liquidity, got a bit of a reality check.

Checking across the portfolio of tokenized carbon credits, we see a consistent pattern: A shocking rise followed by a collapse in price. This pattern repeats across most of the major carbon tokens. So what happened? How do we move forward? Is this the end?

I believe this is just the start. With the removal of distracting “Excess Market Liquidity,” it is clear that solutions focused projects continue to remain in the market and are focused on laying the policy and standards foundation for a more economically sustainable next-generation of Regenerative Finance projects.

The Nature of Regenerative Finance

Now that the smoke from FTX, Luna and others has cleared, and the tokenization of carbon standards continues to progress — It is a good time to return to the foundational roots of the movement: Transferring natural assets on chain to better conserve them. In other words, the effectiveness of Regenerative Finance is based in “Tokenization.”

An implicit underlying foundational belief in the Regenerative Finance space is that natural assets are best conserved by making them liquid, traceable and enabling price discovery. A further element is that defragmenting and federating disjointed natural asset standards provides efficiencies for conservation efforts.

Carbon Offets are just the beginning

The tokenized asset which has captured the majority of the attention has been carbon offsets, which have been the first to “cross the chasm.”

This diagram demonstrates the complexity of taking a natural realworld asset or finance primitive and making it liquid on the blockchain. It is a non-simple process.

For example, KlimaDAO and Toucan Protocol have made carbon offsets liquid and tradable on the blockchain which has enabled small buyers to make transactions, something which was never possible before. Likewise, carbon offsets previously were “fragmented” in that there were many different standards from different years of different quality levels floating around in the market. Attempting to coalesce these fragmented offsets using clever technology has allowed a true global market to form for the first time.

But carbon offsets are only one class of natural asset. With the recent release of Verra’s 170 page comments on the state of tokenization for carbon offsets, it is clear that major progress is being made on one front.

What about the rest?

For the full scope of Regenerative Finance to manifest, numerous other assets must be transported on chain with similar levels of rigor. It’s time to take a step back from carbon and ask: “What’s next and how do we get there?”

Water, Trees, Ocean, Natural Capital and many other forms of assets will need to be tokenized, standardized and linked systematically to the blockchain. This process will take many years. We are extremely early.

The social, cultural, governance and community of ReFi represents a major attraction for projects to join the movement. However, now is a good time to remember that activity rooted in effective and measurable real world outcomes for underlying assets is at the heart of the effectiveness of tokenization as a strategy. And that system all begins with DeFi roots.

The next wave is all about standards

If you have not yet, I recommend reading this fascinating whitepaper released by ADDX on the topic of Realworld assets and what is required to tokenize them and make them liquid.

This is a flow borrowed from the whitepaper demonstrating the steps to convert a given asset to something that can be traded legally as a token.

I believe the consequence of the crypto market collapse should ideally be focused almost entirely around developing and implementing new standards to extend the promise of Regenerative Finance to new types of natural assets.

Im personally expecting to see a wave of new standards, perhaps building on or borrowing from the extensive groundwork being laid by Verra and others.

ReFi as a Realworld Assets and Tokenization Movement

Ok, back to the diagram I shared at the beginning of the document. I wanted to provide a simplified understanding of what needs to happen in ReFi and where the value is created through positive action.

The diagram flows from bottom to top: Assets are located, then they are tokenized with standards, then activism, governance, marketing, community and conservation can occur.

If we don’t have a solid foundation, the top half of the equation cannot function. Therefore: Significantly more effort should be dedicated to the middle and bottom layers of the equation in coming years.

Where the value is created in ReFi

I would argue that the majority of the “Value” created in the ReFi space occurs at the top of this workflow. Locating, certifying, tokenizing underlying assets is necessary and fundamental work. However, the act of “Conservation” (including increasing biodiversity, cleaning up waste, reducing carbon etc) happens at the top of the process.

Source of Inefficiency

One of the largest sources of inefficiency in the ReFi space is attempting to own “Vertical Slices” of particular asset classes due to a lack of liquid markets in these assets. As a result, many ReFi projects must spend the majority of their time building the top to bottom (end-to-end) marketplace prior to engaging in conservation activities.

The ReFi movement would be served best if the majority of projects could spend the majority of their time focusing on the top of this “stack.”This could take the form of an alliance or series or partnerships with providers of RWA foundational technologies.

Closing Thoughts

Thats about it. My argument is that the lessons and key learnings from carbon offsets need to extend to many other classes of natural resources, that the ReFi movement should reset to DeFi standards and tokenization best practices, and that effort should be make to reduce the number of projects undertaking full vertical slices of the equation.

Unifying around a common RWA foundation or set of foundational providers would help the majority of ReFi players spend more time delivering value (impact and conservation) rather than plumbing.

Thanks for input

This article had input from some talented ReFi folks. ReFi Summit organizer, Jeth Odom. Thanks Jeth! If you haven’t yet, please take a moment to check out ReFi Summit (, coming soon to Seattle for a second year. I was inspired by the ReFi Stack published this month by Boyd Cohen (big shout out here) to try to make this diagram visual. Thanks also to Irthu from Atlantis DAO and ReFi Summit co-organizer Jeth Odom.



Rex St John

Exploring the intersection between AI, blockchain, IoT, Edge Computing and robotics. From Argentina with love.