ReFi's Unholy Trinity

ReFi projects face a set of three challenges I like to call the Unholy Trinity: low user adoption, undercapitalisation, and lack of attention. This tragic trifecta usually emerges at the MVP stage when ReFi solutions require user feedback, funding, and visibility to scale. ReFi builders often split their focus across these issues, preventing them from effectively addressing any single one. This cycle leads to stagnation, burnout, and, ultimately, project failure.

ReFi projects struggle to generate revenue or attract investors, leading to funding shortages. Limited funds restrict marketing capabilities, making it difficult to compete for visibility and attention. Without awareness, potential users never discover the solution, reinforcing low adoption and the cycle continues. This creates a self-reinforcing cycle where each problem exacerbates the others.

If the Unholy Trinity were solved, ReFi solutions would be able to go from an MVP to achieving success. However, for this to happen, builders must develop targeted strategies to break through a single problem rather than attempting to tackle all three problems at once.

Members of the Unholy Trinity

ReFi solutions are particularly susceptible to the Unholy Trinity because they are pseudo-operating in two sectors: crypto and sustainability. First, getting down to using ReFi solutions requires going through a longer learning curve which involves learning to use web3 wallets on the crypto side and learning to enjoy seemingly mundane activities like cleanups and tree-planting on the sustainability side. Furthermore, the issue of misaligned incentives across both sectors create friction, as crypto's short-term profit-driven culture often clashes with the long-term impact goals of the sustainability sector. Finally, there’s the difficulty of addressing dual narrative requirements, needing to effectively communicate their value to both the crypto and sustainability communities, which often have differing expectations and priorities.

Low User Adoption

This refers to the slow rate at which ReFi projects acquire genuinely interested product users. Although most ReFi solutions are built to incentivise ecological and social outcomes from about 4.8 billion smartphone users across the globe, they are Web3-coded. This restriction limits seamless product use to 560 million smartphone users (11.62%) that are crypto users and the remaining 88.38% have to go through a relatively steep learning curve because they do not have the technical know-how. This barrier creates a limited adoption rate even for the intended audience (impact workers).

Unfortunately, the 560 million users that already possess the technical skills do not want to use the product because the product isn’t providing enough financial incentives. Majority of crypto users are driven by humongous incentives and given that no ReFi product currently can afford the desired level of incentives, I’d say ~99.99% of the crypto-smart population are less likely to use the solution.

Undercapitalisation

Undercapitalisation describes a scenario where ReFi projects lack sufficient financial resources to operate effectively, potentially leading to failure. ReFi projects are perpetually in a state of undercapitalisation with high dependence on grant funding to survive. This is because commercialisation is a big economical and moral problem. Economically, a good number of ReFi solutions try to incentivise people to execute net-positive actions like cleanups and recycling. The problem with this operational model is that it is economically impossible to commercialise dynamic incentive distribution. Morally, ReFi solutions suffering from the economic consequences of the above would rather shut down than pivot to other models simply because their builders believe that it is morally wrong to sacrifice impact on the altar of profit.

Because of the above problem, we have newer solutions, like Regen Bazaar and IXO World, that are trying to tokenise and sell impact. Although a great idea, there’s no market for tokenised impact and these solutions are literally undercapitalised too. Traditional investors will listen to pitches from teams behind such solutions and marvel in confusion because it takes seismic levels of comprehension to understand why undercapitalised solutions are trying to build and sell potential solutions to undercapitalisation.

Lack of Attention

Between 2020-2022, when ReFi was touted as the next big solution to the complexity of the voluntary carbon markets, it was easy for ReFi projects like Toucan and KlimaDAO to gain widespread attention, funding, and revenue immediately they launched. Few years later, ReFi has become one of those forgotten ecosystems and projects still building in it are continually struggling to get attention and visibility for their work.

It has become terribly difficult to get attention to the newer forms of solutions in the ecosystem because they’re not easily understood, adoptable, and immediately marketable. In the space of a year, I’ve spoken to over 30 ReFi builders about their solution, and at some point, there’s always the mention of a dedicated onboarding phase where they teach people how to use their solutions because it is not easily understandable. To worsen it all, these solutions cannot even afford the cost of structured and sustained attention from PR to marketing professionals and everything in between.

Identifying the Ringleader

Unlike the Holy Trinity where the hierarchy remains constant, the leading member of the Unholy Trinity will vary across different ReFi projects. Although the problems seemingly occur simultaneously, there’s the major one that is causing the rest. A ReFi solution, like any other startup, uses different positive metrics to quantify progress and a consistent decline in these metrics indicate a problem somewhere. For the tragic trifecta, here are three core metrics to help identify them:

• Low User Adoption: Day 1/7/30 retention - This metric refers to how many users remain engaged with a product after 1, 7, and 30 days from their initial interaction. Strong Day 1 retention means users see initial value, but strong Day 7 and Day 30 retention means they stay because the product continues to meet their needs. Strong retention across each interval indicates healthy adoption, while stagnant or declining numbers suggest low user adoption.
• Undercapitalisation: Runway - This metric measures how many months a ReFi solution can operate before running out of initial funds at the current burn rate. If a ReFi solution cannot guarantee a runway long enough to establish Product Market Fit (PMF), this indicates undercapitalisation.
• Attention: Traffic Growth Rate - This measures the percentage increase in unique visitors to the website or app of a solution. An attention-healthy solution should see consistent monthly growth in traffic. Declining or flat traffic indicates insufficient attention.

Tackling the Unholy Trinity

There’s not one particular method that is 100% efficient in identifying the ringleader problem. To achieve the best result possible, combining a slew of highly efficient methods which I list below is the way.

Track historical metrics

Before ReFi builders jump head-on into tackling the Unholy Trinity, it is important that they analyse trends over time to identify which key metric listed above showed signs of decline before others followed. Understanding the sequence of these problems can help pinpoint the ringleader of the Unholy Trinity.

Conduct user interviews

If from tracking metrics, it is noticed that low user adoption reared its head first, engaging directly with users can help understand whether the lack of adoption stems from usability issues, unmet needs, or general awareness.

Analyse competitors

Examining how similar solutions are performing, particularly those that have better funding or more effective marketing strategies can help. If their success is driven by resources rather than product differentiation, the primary challenge may be outreach and positioning. Before VeBetterDAO, there were existing projects offering clean-to-earn, recycle-to-earn, exercise-to-earn solutions. Unfortunately, VeBetterDAO solutions like Cleanify and ST3PR have taken over because they have access to greater funding to facilitate marketing and user-retention.

Measure conversion rates

Assess whether your traffic is turning into actual users or customers, as a high number of visitors but low conversions suggests an issue with product-market fit. If many people show interest but fail to take action, then the solution may need better messaging and appeal.

Analyse user retention

Track how long users remain engaged after their initial interaction with the product, as a sharp drop-off indicates potential usability or value perception issues. If users try the solution but don’t stick around, the problem is likely within the experience itself rather than a lack of visibility or funding.

Although not exhaustive, the steps above should be able to help a ReFi project identify its ringleader problem. Once this major problem is properly tackled, the remaining two will gradually vanish, leaving behind a successful solution with a regularly increasing percentage of users, funding, and visibility.

The Unholy Trinity - low user adoption, undercapitalisation, and lack of attention - have held back many ReFi projects, trapping them in a cycle of stagnation and failure. However, by identifying the ringleader problem and tackling it, projects can break free from this loop. Although the path forward isn't easy to determine, targeted problem-solving and prioritisation will help ReFi projects emerge stronger. I hope as time goes by and builders implement this strategy, we will recognise the importance of systematically addressing these challenges, and we’ll see a new wave of projects breaking through to scale and impact.