From Degen to Regen: How does Web3 move towards rebirth?

Author: Kevin Owocki, Founder of Gitcoin

Compiled by: Deep Tide TechFlow

Back in the summer of 2020 during the DeFi summer—long ago in the Web3 era—the term "Degens" emerged. This meme is generally used to describe Web3 enthusiasts who speculate on high-yield (APY) and high-risk projects. It’s a playful term that also reveals the self-serving and profit-driven side of the industry.

In the first two years of this decade, driven by headlines, price surges, and FOMO, thousands of traders entered Web3 with the intent to make quick money. Despite a sharp sell-off this year, cryptocurrency has not been deterred from becoming mainstream. Crypto ads appeared during the Super Bowl, and there were news stories about banks using decentralized finance (DeFi). Yes, there were also negative headlines about crypto companies going bankrupt.

Sadly, with the collapse of custodial systems like BlockFi and FTX, many people lost money. This is truly unfortunate for those affected and a devastating blow to the space.

Since Satoshi Nakamoto addressed the Byzantine Generals Problem in the Bitcoin whitepaper, cryptocurrency has experienced cycles of boom and bust, akin to natural systems from an evolutionary perspective. In times of abundance, thousands of new projects bloom. In times of scarcity, projects fail. The survivors will become the dominant species in the next boom.

Survival of the fittest is a simple yet powerful mechanism observable in the Web3 ecosystem—the fittest are those who best meet market preferences. This may explain why Degens are only interested in short-term gains rather than long-term successful projects, a behavior that leads to their demise. It turns out that pure self-serving behavior is maladaptive in Web3 (as it is in many places in nature).

In fact, the industry now referred to as Web3 has always had its other side, not just greed and profit. Cryptocurrency is a tool for building collaborative organizations and sharing resources—these long-term trends have always inspired participants.

Recently, there has been growing awareness and attention to blockchain. Public goods are things we all rely on (like open-source software or privacy research), but they are difficult to maintain and fund.

Another term in this regard is "regenerative economics," which is the idea of incentivizing communities to solve systemic problems with money. Even if open-source projects fail, if everyone moves along the same axis toward social improvement, this work can benefit other projects. Innovation, iteration, evolution, repetition.

This is why, even in the winter of cryptocurrency, 2023 has matured into the year of regeneration (Regen).

Degen to Regen

Degens came to Web3 seeking economic benefits. Regens are those who work or build within the regenerative crypto economy. They have a long-term vision of how Web3 can benefit the world, but not just in financial terms.

Regens believe that financial systems can be designed as channels for greater human flourishing, serving the needs of all humanity. My friend Gregory Landua, co-founder of Regen Network, believes that people have eight basic needs that can manifest as forms of capital. Beyond financial capital, there are our social, material, living, intellectual, experiential, spiritual, and cultural needs.

With programmable money, we can encode our values into our currency. Cryptocurrency itself has the capacity to create systems that are as extractive and fragile as the existing financial system.

When a Degen trades, they are playing a zero-sum game—tokens leave their wallet and enter an opponent's wallet, and vice versa. But Web3 can also establish more positive-sum agreements that expand resource capacity over time.

The Journey to a Regenerative Crypto Economy

In the regenerative ecosystem, there is a common thread that connects many people. They were once Degens! Lured by the promise of providing a better economic environment for themselves and their families, they entered the ecosystem to make a profit.

However, over time, they gradually became enchanted by the promise of collective action—often through contributions to a project or direct experiences using the project. Their attitudes and motivations changed. This is by design, built into the structure of the crypto economic system. For example, decentralized autonomous organizations (DAOs) allow people with a shared mission to come together and pool resources—everyone involved is at least partially aligned in values and commitment.

When you join such a community, you begin to learn how to manage risk and navigate volatility. You think differently about capital allocation.

Many Regens were previously Degens who embarked on this path during the last cycle, in 2017. And this is part of why I am so optimistic about the future of regenerative systems. There are thousands of people who are relatively new to cryptocurrency, having entered Web3 over the past year or so, and they may now be in the second step of their journey (the downturn). They have made mistakes and learned from them, creating a knowledge base that can inform a more pragmatic approach for the next market cycle.

For newcomers to Web3, the window of opportunity is here for them to enter the third step—finding communities and discovering regenerative use cases for cryptocurrency. From there, they will build projects for the next cycle, many of which will have a positive impact on the world.

The Impact is Already There

Sometimes people say to me, "Hey, Kevin, the discussion about regenerative crypto economics is great, but are there any theoretical examples in practice?"

Regen is not just talk. It is happening! In fact, Alejandra Borda and I wrote an entire book detailing 100 different project examples of people using crypto technology to rebuild the world.

Here are a few examples: Proof of Humanity, Celo, Kolectivo, and Gitcoin are all doing meaningful work.

2023: The Year of Regeneration

In this downturn cycle, we have the opportunity to filter noise from signals and rediscover our purpose. Through decentralized and peer-to-peer technologies, we can build a fairer, more just financial system. We can bring more democratic and organic financial tools to the masses.

As individuals, we can find communities, join DAOs, and BUIDL projects that can serve as the foundation for the next era of Web3.

To regain legitimacy, the Web3 ecosystem must find ways to shift capital, attention, and talent away from projects with the best Ponzi economics to those that will create the most lasting positive impact. What we want is not just "cryptocurrency is okay for the world," but rather that cryptocurrency can benefit the whole world.

Many of today’s most mainstream cryptocurrency projects have positive externalities. For example, the largest non-fungible token (NFT) marketplace, OpenSea, allows thousands of artists to monetize their work, with this form of income being less extractive than their Web2 counterparts.

Lens Protocol is a Web3 social media platform that has gained increasing attention in the crypto space as Twitter changes. Lens allows people to truly own their data and saves it for them, transferring it from one site to another. Web3 social media has the potential to disrupt tech giants.

Proof of Humanity is a registry containing 18,000 Sybil-resistant identities that is using UBI tokens to pay people stipends. Gitcoin is a crowdfunding platform that has provided $72 million in funding for public goods and recently launched a set of protocols that allow others to crowdfund for their communities. Kolectivo is a set of protocols that allows local communities to launch, fund, and manage their own regenerative economies.

Web3 carbon credit systems like KlimaDAO and Toucan Protocol allow for better, faster, and cheaper carbon credit trading. While carbon credits are not perfect, systems supporting Web3 (like Hypercerts) allow users to reward projects with observable outcomes. Additionally, Hypercerts can be used in impact areas beyond climate, such as education, healthcare, AI safety, and open-source software.

2023 will be the year of regeneration. We will not only rebuild and regenerate the Web3 space but also our communities and ourselves.