Summary

Reserve $1.2M USDC from the Treasury to fund H2 2023 DAO operating expenditure.

Motivation

Context

KIP-30, which was passed in December 2022, allocated $1.5M USDC from the Treasury to fund operating expenditure for the DAO. This injection of capital enabled us to deliver several projects that continue to position KlimaDAO as the market leader in digital carbon globally.

  • With the launch of Carbonmark, we have delivered key technologies covering the entire value chain for digital carbon, from tokenization and trading through to retirement and analytics.
  • Through our webinars, reports and direct engagement with industry bodies, we have improved credibility and educated the market about the benefits of digital carbon.
  • Through our solutions and sales efforts, we have directly (and indirectly) retired tens of thousands of tonnes of carbon from companies and individuals around the world

The DAO Treasury currently holds $8.3M in USDC, and it is anticipated that by the end of June 2023, the DAO wallet will hold $125K in USDC (and 44K $KLIMA). As per our current policy, the DAO will continue to utilize USDC as the primary payment token for all operating expenditure for the foreseeable future.

To continue to fund project development and growth, the DAO is now requesting an additional allocation of $1.2M USDC from the Treasury for H2 2023 (July to December 2023).

Mission and strategy

The mission of KlimaDAO is to build the transparent, neutral, and public infrastructure needed for the Digital Carbon Market to accelerate the delivery of climate finance on a global scale. Our key business objective is to maximize the throughput of Digital Carbon through protocol-owned infrastructure (in terms of supply creation, trading and retirement volume), in order to expose the carbon markets to the benefits of our infrastructure. Maximizing infrastructure throughput yields two broad benefits: (1) increasing climate finance delivery to carbon mitigation and removal projects; and (2) increasing the value of $KLIMA through governance and future accrual streams.

To deliver against our mission and business objectives, KlimaDAO aims to coordinate its efforts and resources across four key areas:

  1. Pursue an integration-led go-to-market: Drive demand for KlimaDAO’s digital carbon credit inventory through building end-points and integrating those with retailers and other sources of consumer demand. Continue to improve the value proposition to forward thinking demand aggregators through product innovation and deep, bespoke integrations.

  2. Improve access and grow the ecosystem: Remove frictions for accessing our technology, showcase real-world utility, and build strategic relationships across the carbon markets to support adoption. Position KlimaDAO to be a catalyst for growth in the VCM.

  3. Educate the market on KlimaDAO: Continue to educate the market on the role that KlimaDAO, the tech, and the $KLIMA token plays in unlocking transparency and accessibility for the VCM. Position KlimaDAO as a “public good” for the VCM.

  4. Organize ourselves to build trust: Improve relationships with VCM stakeholders, regulators and influencers through re-thinking our structure and ways of working. This will involve taking steps to decentralize the project and optimizing our legal structure to interface more easily with the real world.

Note, more detail on our strategy can be found in the following document.

Progress made in H1 2023

Over the past six months, the DAO has been instrumental in delivering critical infrastructure, products and partnerships that support the project’s overall mission and strategy. Below is a selection of achievements across commercialization, product development, ecosystem growth, marketing and branding, and policy.

  1. Product development: Launched Carbonmark.com and introduced key enhancements, including improved project descriptions and imagery. Migrated the /buy and /retire aggregator functionality to Carbonmark, streamlining our retirement process. Incorporated a Retirement Trends page in the Carbon Dashboard, offering detailed insights by pool, token, chain, and beneficiary, while also ensuring data pipeline fault tolerance. Developed a web2 API and invoicing solution, and advanced an integration with SAP S/4HANA for transactional offsetting.

  2. Commercialization: Acquired several new Carbonmark clients across aviation, finance, e-commerce, logistics, and web3. Developed an extensive pipeline of organizations considering Carbonmark for their next retirement purchase. Held 150+ appointments with prospects, driven largely through cold outreach (2,000 leads with a 6% response rate) and the On Set Webinar series. Conducted extensive customer research, which validated our Web2 API product and led to the successful onboarding for our first business user.

  3. Ecosystem growth: Partnered with two of the largest carbon project developers to secure new carbon supply for KlimaDAO, allocating $500K from the Treasury toward projects in Ghana and Bangladesh. Partnered with Circle to provide digital asset custody services to Carbonmark users, enabling them to more easily hold and manage digital carbon assets themselves.

  4. Marketing and branding: Launched and established the Carbonmark brand, used by major companies like FlyAir, Meetmagic, Rioz Global, and others to show proof of climate action. Expanded our global reach through the On Set Webinar series, drawing over 1,750 registrants from over 85 countries across governments, corporations, registries, universities, consultancies, and developers. Reached over 2 million viewers on Twitter and over 100,000 visitors to our website.

  5. Policy: Introduced Retirement Bonds, enabling efficient large-scale carbon retirements that accrue value to the DAO and decrease $KLIMA supply. Implemented the Aither ARBO and StarCB EEIMP initiatives, providing future liquidity and delivering 62.5K tCO2e of digital carbon for the years ahead.

Note, more information on product and engineering updates can be found in our Release Notes and GitHub Activity channels on Discord.

Breakdown of operating expenditure in H1 2023

By the end of June 2023, the DAO will have spent $1.27M on payroll and other expenses year-to-date. This includes ~$400K on R&D (Engineering, Product and Policy); ~$500K on S&M (Sales, Partnerships, Marketing, Community and Creative); ~$250K on G&A (Operations and Legal); and ~$100K on expenses (events, travel, accommodation and software licensing). A detailed breakdown month-by-month for spend can be found below.

OPEX breakdown

Proposed funding for H2 2023

The DAO is now requesting an allocation of $1.2M USDC from the Treasury to fund operating expenditure for the second half of 2023. Alongside our existing cash balance, the H2 budget request will extend the runway for the DAO until January 2024. This includes ~$188K/month for payroll, and $12K/month for other expenses (e.g. travel, accommodation, events, software, etc.). Note, this runway calculation excludes any future inflows of $KLIMA or $USDC from the sale of digital carbon, trading fees, retirement bonds or traditional bonds.

Use of funds

We propose the following deliverables and workstreams for H2 2023.

Product (Engineering, Product, and Design)

  • Upgrade Carbonmark with complete core trading and offsetting features
  • Speed up implementation of user-driven features, performance, and UX enhancements
  • Expand offerings for integration and automation partners, including APIs, SDKs, and data analytics

Growth (Sales, Marketing, Creative, and Community)

  • Acquire new Carbonmark customers through coordinated sales and marketing efforts
  • Drive volume by engaging, educating, and deepening relationships with existing customers
  • Update brand and launch no-code website to drive funnel performance for KlimaDAO and Carbonmark
  • Gather and share customer insights to support marketing campaigns and product development
  • Enhance moderation and support, amplify engagement, and implement systems to drive loyalty

Ecosystem (Partnerships and Policy)

  • Nurture relationships with VCM and DCM participants, focusing on integrating carbon registries into KlimaDAO
  • Collaborate with supply-side stakeholders to diversify carbon supply and align technology stack
  • Represent KlimaDAO in carbon-focused industry groups to establish presence and drive the conversation
  • Calibrate bond capacities, manage liquidity, and oversee treasury assets for alignment with goals
  • Translate strategic objectives into actionable policies, focusing on stability, efficiency, and carbon bonding

Organization (Operations and Legal)

  • Enhance performance visibility through metrics and tracking for informed decision-making
  • Drive efficiency via financial management, automation, and resource optimization
  • Implement DWG recommendations to drive transparency and accountability throughout the organization
  • Manage legal and compliance risks and advance our go-to-market from a legal perspective

Detailed breakdown for the use of funds of each department can be found here.

Vote

This poll has ended.

Myself and the team will be available to answer questions over the coming days.

    Speaking for the Product and Engineering team, we greatly appreciate the continued support and trust placed in us by the community as we build the critical infrastructure required to scale the global digital carbon market.

    We've been hard at work building since launch and have doubled down on our commitment to open source by including the recently launched Carbonmark in our public KlimaDAO monorepo.

    As always, you can view our development activity and code in GitHub:
    https://github.com/KlimaDAO/klimadao/pulse/monthly

    Hugh Is there anyone left that’s not part of the team?

    Sure, might as well give you more money at this point, all the other value has been drained.

    Thanks @Hugh and core for continuing to relentlessly build thru the current market conditions :

    • I was wondering if there is some sort of financial dashboard or reporting being done to predict the current runway given this burn rate?
    • Aside for the main strategies listed here, is there appetite to engage in yield farming to make the stables go a little further?

      Whilst I'm broadly supportive of this, I'd like to see the team shift the marketing strategy.

      From personal experience at multiple companies, conferences and community events are a low ROI. Whilst necessary to some extent, and I'm not discounting these entirely, I have never seen these ever work out in the short to medium term (which where we are now) to grow a product or project. Least not if that project was reliant on actual earned revenue and not entirely funded by grants.
      The grant hamster wheel is to be avoided in my (limited) experience.

      What we do have in defi is a still vibrant ecosystem that is looking for more utility for the tools that are being built.

      What is the team's plans to tap into the defi and web3 ecosystem for revenue growth?

      For example we're starting to see projects spring up that enable protocols to run a validator on a network (aka Marinade Finance's Directed Stake on Solana https://marinade.finance/blog/introducing-directed-stake-with-mSOL/) and harness their crypto community's existing assets to grow the protocol and return value to their participants.

      There is definitely a desire amongst the broader public to utilise carbon credits. The genius of KlimaDAO has been to offer a way to participate in that isn't a 100% cost. There's a longer term investment element here via staking. Staking makes a lot of sense to non-crypto people; it's easy to understand.

      Is there a roadmap as to the broader adoption of sKLIMA across the defi ecosystem as a defi primitive?
      Is there anything on the roadmap planned to expand the functionality of sKLIMA as yield bearing token?

      I would be supportive of proposals to provide liquidity incentives to help speed further adoption. Partnership with up-and-coming web3 gaming and social dapps (Lens Protocol is soon to go open access for example and it's already on Polygon POS) I think should be a key point on the marketing and user acquisition roadmap.

        Klima team is doing a good job. Just keep on building the business. It needs work to educate the market and achieve credibility. You will do it!

        Hi AndrewSaul, thank you for your comments and questions.

        Re. conferences and events, you raise a great point, and we've had several conversations internally about how much we should be allocating toward events and conferences, and how we can track their success. Where we have landed is that in order to generate activity across both sides of the marketplace on our infrastructure, we need to build trust and develop relationships. The VCM is an industry entirely built on trust and relationships. When thinking about our relationships with registries, developers, traders and retailers, the ROI of attending a conference is very hard to assess - though it is essential to our success.

        On the other hand, as we think about commercialization activities, the focus over the past six months has been on three main areas:

        • Speaking with customers to de-risk product and marketing decisions (e.g. our Web2 API)
        • Building real-world integration use cases (e.g. SushiSwap) to showcase the solution and its benefits
        • Educate the market on these use cases and how companies can leverage it to their advantage

        Attending conferences with the goal of finding potential users of our technology does have ROI, and we are now hitting a point where we are going beyond POCs to real B2B sales deals. The sales cycle in our industry is typically long, at least with respect to an integration. This means that meeting decision-makers in-person at these events can often be a really important part of building the relationship and closing the deal.

        Re. crypto versus VCM conferences, the team had a conversation last night about this topic in fact, and we are going to be prioritizing attendance at the largest commercial crypto conferences going forward, including Consensus (which we were at earlier in the year) and TOKEN2049, amongst others. This will be in addition to some of the larger carbon market / environmental conferences and events, e.g. the S&P Global Carbon Markets Conference. It is important to remember that the market opportunity in the broader VCM is ~ 1,000x larger than the current size of the Digital Carbon Market. However, we also recognize that being a DeFi project and our relationships with other builders in the space is a key capability that we'll continue to leverage going forward. Staying close to the latest developments in DeFi, as well as exploring opportunities to partner with others in the ecosystem (e.g. Polygon and others) will certainly continue going forward.

        Of course, we would always welcome any warm introductions you could provide with contacts in your network from other projects in Web3/DeFi.

        Re. our plans for tapping into Web3/DeFi and plans for broader adoption of sKLIMA, I will defer to @Cujo or @MarcusAurelius on the protocol / tokenomics side to explain their thinking.

        jengajojo

        Hey Jenga,

        We talked briefly about this on Friday, but just for the benefit of others reading this forum post

        • re your first question, I updated the forum proposal last week with a breakdown of operating expenditure by team and expense category over the first half of this year. Following on from the DWG "working in public" initiative, we are also going to start sharing monthly reports with the community via our public notion page. More will be shared about this over the coming weeks.

        • re your second question, we performed a deep exploration into this earlier in the year, and the team agreed that the risks outweighed the benefits. Having said that, Maker's updated DSR has certainly piqued interest again in this topic, so we may revisit the conversation again. The economic analysis needs to look at the likelihood that our position goes to 0 (in the case of a hack or something) versus the upside over the holding period (i.e. the interest we could get from yield generating activities). It's a tough one, but we err on the side of caution here.

          AndrewSaul thanks for these comments and your continued support

          Totally agree re: grant hamster wheel, thankfully KlimaDAO has clear levers for capturing value from its products and services (e.g. liquidity provider fees, bonding, retirement aggregator convenience fee) so we aren't reliant on grants, but adoption of digital carbon for a diverse set of use-cases is critical to drive activity through those systems.

          Historically we've worked with a variety of DeFi and broader web3 projects to compensate for their historical and ongoing emissions using KlimaDAO's digital carbon market infrastructure, such as Goldfinch, Alchemix, and Polygon PoS itself. This is definitely an important area to continue to focus on, but ultimately is a pretty small segment of global emissions.

          In terms of integrating sKLIMA as an asset into other DeFi protocols, KLIMA isn't a network-specific gas token like SOL - it's designed as a liquid medium of exchange for environmental assets and the governance token for managing the KlimaDAO protocol and treasury. So, I'm not sure the analogy with liquid staking tokens like mSOL or rETH is super relevant - curious to hear what specific kind of integrations you have in mind.

          For instance, there has long been a borrowing/lending pool that includes sKLIMA on market.xyz: https://polygon.market.xyz/pool/5

          We've also led the market in developing climate positive NFT strategies, some of which involve sKLIMA, as outlined in this blog post: https://www.klimadao.finance/blog/climate-positive-nft-guide

          In terms of integrating KLIMA and carbon credit retirements into other on-chain services like gaming and social, definitely on the radar. For instance, I've been trying to get a carbon credit retirement Collect module added to Lens Protocol since last year - it took them awhile to figure out their process for enabling community-contributed modules, but I worked with a hackathon team at ETHPrague last week to get a proper Lenster integration built out, and look forward to that module being accepted by the Lens Protocol community.

          That said, I'm not sure staking is "easy to understand" for non-crypto people. In my experience, technical terms like "stake," "wrap" and "bond" tend to confuse non-crypto users, so we've limited those interfaces to the KlimaDAO dApp and moved the more "user facing" functionality for buying and retiring carbon credits to a separate application, Carbonmark, that is more user-friendly and less crypto-focused.

          Hope that addresses your questions, happy to discuss further

          Hugh

          Thanks for the clarification. The risk of a position going to 0 is a valid concern, however, I suggest evaluating this risk for the entire treasury which includes the LP positions. If we are confident about keeping tokens in sushi and quickswap, then this should be used as a benchmark for evaluating risks for any other platforms or positions we want to make. I'm happy to discuss further about this and make a proposal if you all agree.

          5 days later
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