completely for reduce apy
KIP-9: Protocol Maturation and APY Alignment
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Rene A few answers to your point. The first is our comparison with olympus, bear in mind that our backing asset is not a stable coin but an asset expected to appreciate and so Olympus needs to bring in less revenue than klima to mint new tokens. The flip side of this is that by driving up offsets prices through bonding we naturally increase treasury value as our backing asset appreciates. A robust treasury is what indicates the value of a protocol not the APY. The second point is related to your statement on why price is tanking. This has been answered hundreds of times by now in the discord but a quick summary is 1)inflated starting price not matched by treasury due to hype around launch 2) liquidation cascades by leverage 3)general bearish sentiment in the market in the last month (Olympus itself has fallen 70% in the last month). These are parts of the volatile space that we find ourselves in. As for no new people getting in that is something that is a main focus of the klima team. We have many participants in Klima who have never been in defi before which goes to show this protocol is attractive but we have to make it easier for retail people to join the space which is no easy task.
coingecko Thank you for your input - makes a lot of sense from probably a lot of Klima investors POVs. It's a delicate balance.
The integrations just passed (KLIMA/USDC LP Bond, KLIMA/gOHM LP Bonds) will be sources of revenue for Klima holders, but they will also be sources of dilution as capacity is required to bond them. Hopefully over the course of the polling period we can help our users see this proposal is actually going to put the protocol in an extremely strong position to sustainably expand. These reductions on the reward side are best to happen now so we can implement the capacity changes on the bond side for the least dilution, and greatest benefit, of all holders.
I am for the APY reduction as soon as possible. I understand that some people who are down at current prices have been calculating their time to break even based on current APY, and therefore want to extend current APY until that time. I urge these investors to lengthen their time horizon and make decisions in the interest of long-term success of the protocol and thus to their investments.
We should not hold up necessary rate reductions because people want to break even sooner. I will be voting For on this proposal.
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I’m for reducing APY to help the protocol maintain heath, but think it is too soon. I’m not talking about extending it all the way out to my personal “break even” point, but a month or so. We just had an APY reduction not that long ago, and I feel reducing it again this soon is going to drive more people out of protocol and discourage new people from coming on board. Just my opinion.
Brian33 I would support this if it was married with additional restrictions on pKLIMA. Such as no pKLIMA sales until we reach 100 million circulating supply
Thanks for the proposal and all the great work the core team is doing!
Regarding proposal 1 I advocate for more transparency. You write
"In an effort to set proper expansion expectations and remain aligned with the framework approved in KIP-3, the Policy team proposes..."
Regarding the first part of that sentence: the expectations were set in KIP-3:
We are at 1.6MM supply so the current APY can be expected.
Regarding "remaining aligned with the framework": the current APY is aligned with the framework and a drop to 8000% @ 1.6MM supply could be characterised as "unexpected".
That's why I come back to transparency: I think most members understand if you argue to change policy, but we should argue transparently why we need the changes. I saw some contenders for good reasons in the comments:
- Is it about the falling KLIMA price and thinner margin between BCT & KLIMA
- Do we need more power to incentivise new bonds & project. What are the calculations behind that?
- Do we need to stabilise the the price because of the impermanent loss on the LP
- ...
I would find it great if the policy team would share their thoughts in a bit more detail.
Brian33 I am pro of the APY reduction, but not as quickly from 28k to 8k in just one day, that will be great if you spread that reduction in a 5 month span. Investor will not scare the hell out so quickly.
BAT414TheRedApeFamily Hello ser, thanks for your input. I hear where you are coming from: If APY decreases our reward decreases - right? Well, not really.
To clarify: An APY reduction won't hurt early holders of the project. It's actually going to help them.
This reward rate reduction may slow the rate at which our sKLIMA grows; but most importantly it will allow us to bond more assets (BCT, MCO2, gOHM) for less KLIMA. This rate reduction is the going to be a great first step in kickstarting the age of integrations, and allowing Policy the lee-way to add more pairs and more capacity for existing pairs.
Sirob More specifically, the assets we do bond will be cheaper in KLIMA terms. The protocol will, in essence, be getting a better deal on our open market operations.
This opens up a lot of interesting Policy doors, like potentially allowing us to redirect previously existing sell pressure (higher reward rate) to new sources of revenue...
So a decent analogy to boil it down is kind of like this: instead of a highly inflating token backed by the same sized pie; we strategically redirect those emissions toward making the pie bigger for everyone.
Crypto_Coin_Guy pKLIMA data is readily available and verifiable (e.g. here: https://dune.xyz/queries/279113). pKLIMA sales are a non-issue.
Rene Will people invest in a Klima that isn't sustainable and without ability to redirect capacity towards integrating more carbon types?
You could make an analogy to climate change - we need to make some very serious corrections to how we handle things there, but since the measures seem so harsh to us now, we are constantly pushing them into the future - but in a way that means it'll be exponentially harder to implement and will feel exponentially worse in reality, due to the less workable baseline we will be if postponing it.
I'm not sure everyone had the chance to attend the informa policy chat that was also a sort of 'vibe check'
https://www.notion.so/klima-dao/Informal-Policy-Chat-12-January-b3b437b3ef7c4890a3d059f690784155
https://cdn.discordapp.com/attachments/841609815817060393/930890734087856229/KLIMA_PolicyTalkJan12th2022.mp3
Here are links to recording and rough transcripts, they follow through at much greater length than the how the reasoning is presented in just the OT above.
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If I am not missing some gigantic piece of information, a lot of what is being aimed on this KIP rides on demand not getting lower as a result of it. However I can not see any guarantees for this.
I mean this would have been easily made into a shit sandwich like; "Here is our shiny new website online! Oh by the way we are poroposing to lower the APY a bit early in light of recent developments. And here is our new marketing campaign to keep demand up." This would have made all this much more palatable.
As things stand a lot of people will feel you are asking too much of them, and I fear this will create the opposite effect of what is being aimed here.
grap Hello fren, really appreciate the measured response and valid points you raise. To address these:
1) It is less about falling KLIMA price, and more about efficient use of emissions. When we reduce reward rate, the assets we do bond will be cheaper in KLIMA terms. The protocol will, in essence, be getting a better deal on our open market operations.
2) We certainly want to put ourselves in the best position to sustain integrations. Reduced reward rate will definitely make new bond incentives cheaper to sustain for the protocol. Also, intaking new assets aids in decoupling KLIMA & BCT price correlations - which will stabilize our volatility over time.
3) No. We don't have any official sKLIMA or wsKLIMA LPs so IL is a minimal concern here.
Lastly: regarding 'aligned with framework' - It's important to note this scale is exponential, not linear.
Hopefully this shined a light on some of your questions!
I believe it is too early to reduce the APY given the massive drop in price. I have not sold any KLIMA, I have only been accumulating. Even with DCA, and KLIMA growth, my average price is still around $350. While the earliest of adopters got in extremely low, those of us that came in after several weeks to support the Carbon initiative of KLIMA have paid and paid dearly to be part of this with NO signs of breakeven, forget profit for many months to come. I really don't like the attitude of some the earliest acquirers of KLIMA, it's basically I've got mine, too bad for you. Not really the spirit-ethos you should want to have! At some point people will abandon the project and that's will NOT insure success irregardless whether early adopters have theirs. I will say it again, it is too early to reduce the APY given price drop, desire to have a wider adoption, and ability to incentivise participation. So I am voting NO, whether I am whistling in the wind or not. Thank you for allowing us to express our opinions!
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SeaDawg thanks for taking the time to give your input SeaDawg.
To clarify: this is in alignment - APY will scale down exponentially, not linearly. I hear you that a lot is developing, and things happen fast - it can be confusing. To be absolutely clear: This is us staying the course and building value for all Klimates.