• Proposals
  • KIP-9: Protocol Maturation and APY Alignment

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.

    grap
    great points you make. @Brian33 and the policy team please give a bit more details on that.

    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.

      optima Could you please elaborate on the "bond more assets" point? Do you mean that with less APY, there is an expectation that the Klima price will increase, thus the bonding price will increase? Or is this based on some other dynamic? Thanks.

        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.

          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.

          Brian33 Why would we agree to a reduction that’s not in alignment with KIP-03? Stay the course and build the value. Too many changes confuse the average Klimate.

            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!

                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.

                CronosZ

                CronosZ
                posting links here again to the scheduled Informal Policy AMA where policy lead did a vibe check and polled people bout the idea before posting it to the forum. I found the argument more fully laid out there:

                optima So the effect is that the market premium ($Klima - $BCT) will increase? Could you please translate your point in a numeric example - thanks a lot 🙂

                  At this point in time and space I erased all numbers. Voting with only my heart and trust for Klima 😉

                  optima without the “financial incentive” you have got nothing more than a “well meaning dream” After all the reason behind the establishment of KLIMA was to provide financial incentive to increase the cost of carbon. Those that have chosen to back that dream deserve the same consideration.

                  grap in conjunction to what @optima said , the drop seems significant because the reward rate is projected over a course of a year. Its a much smaller value then actually is felt.

                  Brian33 This is equivalent to:
                  A 0.35% Daily Reduction.
                  A 1.87% Weekly Reduction.
                  13 more days to double your sKLIMA balance.

                  At current emissions, it is very much a hard task to keep metrics up as time goes on, and we are feeling that pressure today. I've been reading a lot of suggestions, and I've been taking them to heart. One of them is to reduce the reward rate when the market or metrics are significantly better, but there's been a lack of discussion on how we get to that state. The most optimal way to get it, outside of variables policy can control, is really through reducing emissions. Increasing capacity does work to an extent, but comes with its own set of problems (most notably a larger distribution of rewards to bonders rather than stakers). Increasing capacity with the higher reward rate also harms us more as we have to constantly pay more compounding rewards as time goes on.