• Proposals
  • KIP-33: Allocate a portion of the retirement aggregator fee to the DAO wallet

Summary

Update the retirement aggregator to allocate 80% of the convenience fee to the DAO wallet, where it will be periodically swapped for KLIMA to fund ongoing operational expenses. The remaining 20% of the fee will continue to contribute additional reserves to the treasury for backing KLIMA tokens.

Motivation

The KlimaDAO retirement aggregator (RA) smart contract includes a 1% convenience fee for carbon credit retirements, charged in terms of the carbon to be retired.

Currently, the RA contract simply sends this convenience fee to the treasury, where it serves as additional backing for the KLIMA token and extends staking reward runway. Per KIP-17, the Policy Team has been delegated the authority to add additional carbon credit tokens into the RA, but this KIP does not address how RA fees should be allocated.

When the RA was first released in February 2022, the treasury was still bonding carbon credits - providing DAO wallet inflows - and staking rewards were high compared to the rate of carbon credits being bridged (prior to the Verra one-way bridging moratorium and implementation of KIP-23). Therefore, the most sensible place to send the RA convenience fee was directly to the treasury, where the carbon credit tokens collected serve as additional backing for the KLIMA token.

Currently, without new tokenization of carbon credits, there is little motivation to restart bonding carbon, and at the current staking reward rate the treasury already has 2000 days of runway (about 5 and a half years). Splitting the fee between the treasury and the DAO wallet will contribute to long-term funding of the DAO's ongoing operational expenses (such as product development, partnerships, and infrastructure) in direct proportion to the throughput of the Retirement Aggregator - one of KlimaDAO’s core products.

Proposal

Update the retirement aggregator contracts such that 80% of the convenience fee is sent to the DAO wallet, where it will periodically be swapped for KLIMA.The remaining 20% continues to serve as KLIMA backing.

The initial implementation of the fee swap would rely on manual execution by the DAO multisig, but in future a smart contract would be deployed to swap any fees collected in the DAO wallet for KLIMA, which would then be automatically invoked periodically by a Chainlink Keeper, Gelato, or similar automation service.

Any changes to this fee split are subject to a subsequent KIP governance vote.

Links

Polling Period

The informal forum poll begins now and will end in approximately 6 days on February 6th at 17:00 UTC. Assuming in favor, this vote will go to Snapshot.

Split the RA fee as described above

This poll has ended.

I like the idea of using carbon tokens to market buy KLIMA. Also deep financial sustainability for the DAO is a no-brainer. There's no way to build without people to build it. The DAO has done a great job using its first mover advantage to acquire a massive carbon treasury, I see this move as helping to rebalance the financial picture to keep things moving along smoothly.

Yes - Keep accumulating Klima for the DAO

I support very much the idea of the DAO getting funding from actual usage of the protocol.

A few questions nevertheless:

  1. What is the current DAO funding need (monthly average run rate)?
  2. have you calculated the funding that would be achieved with this move (now and at forecasted growth of retirements through the RA) ? How much of the current run rate would be covered?
  3. And most important question: I don't know how the 1% was determined and whether some AB testing was done on other percentages as well. Why don't you consider e.g. a 2% convenience fee and then do a 50/50 split backing/DAO funding. 2% is still incredible low versus the traditional VCM overhead. I personally retired a few tons already through klima and wouldn't mind a 2% fee instead of 1%.
  • Hugh replied to this.

    SVNatK-Lo

    (1) Current burn rate is ~$200K / month for the DAO. Right now, we pay contributors with USDC (following KIP-30 - https://forum.klimadao.finance/d/134-kip-30-reserve-usdc-to-fund-operating-expenditure), rather than $KLIMA (since prices for $KLIMA are low). Proposals like KIP-33 help us to grow a war chest for when $KLIMA prices are high, and other proposals like KIP-32 help us to drive upward pressure on the token. The combination of these two forces is how we can build strong defensibility around the token.

    (2) Not personally - but Policy may be able to step in here. For reference, over the past 12 months we retired nearly 200K tCO2e through the RA, which is about 2/3 of the overall volume for the digital carbon market. To accurately calculate the funding we could achieve, we would need to make assumptions around growth rate of retirements from this baseline, as well as price change for the underlying tokens retired.

    (3) There is a difference between the fees you can charge as the technology provider (for bridging, transfer and retirement) versus the spread you can make from connecting supply with demand. The biggest opportunity we have to maximize throughput is to enable the entire VCM to run off our technology. If we can do this, our volume will not be solely driven by internal efforts, but rather the efforts of many different projects and teams. So the decision on adding fees was a carefully considered one that factored in the risk our solution might be bypassed by ecosystem partners. Will be sharing more thoughts on this in the coming month (incl. evaluating these fees over different time horizons).

      15 days later

      It is clear an enormous amount of work has gone into this proposal. It is a well-crafted next important step forward towards creating utility for the token and bring value to the DAO-community!

      Every community has to think of self-sustaining models which can be utilised for community development, funding future projects, and other initiatives. Thank you!

      a month later

      in favor, Can you please add me in discord ?still blocked for no reason

      looks like a nice way to bolster the DAO's reserves through the retirement aggregator.

      I'm in favor. aye.

      6 days later
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