KIP-12: Inverse bonds

asincuka

This is not how carbon blackhole works. How can we get anything back from the otherside of blackhole?

Ananth

Very interesting.

How is the backing decided? The backing keeps changing depending on the price of KLIMA, the BCTs in treasure vs KLIMA issued.. etc. Is it based on a moving average (MA)? MA could be considered for calculating the backing.
Assuming no additional demand for KLIMA (say in a crypto winter), the price will hover around the backing and it'll be a cycle of bonds and inverse bonds. Wouldn't the backing value stagnate? We should've a mechanism to keep increasing the backing.
Currently KLIMA is backed predominantly by BCT. But in the future each KLIMA would be backed by xBCT + yMCO2 + zNCT +...+... and so on. Then, how would the backing be determined and how would inverse bonds work for all the assets.
Are those who buy the inverse bonds primarily bonders, who'll eventually bond with KLIMA? If so this is just a stabilizing mechanism and won't help in increasing the backing.
Any thoughts on increasing the floor of KLIMA? This would automatically bring up the IV and hence the price. But yes if the floor is increased, then if the KLIMA price falls, then the protocol might have to shell out more KLIMA to buy a high quality Carbon Tonne.

1 KLIMA was supposed to be backed by 1 Carbon Tonne (CT) not 1 BCT. But what happens if the price is below 1 CT. For example, at present, if we had BITMOs and an EU based CT was $100, then based on today's price, we've to issue 3.33 KLIMA for 1 EU CT...

I'm confused on this aspect... Maybe Brian could shed some light on this during the policy chats that are planned.

dnobel22

Brian33 I think that this should be given a lot of thought as I see the potential of a death spiral where people sell the BCT as a huge possibility.

ChuckBass

is this pertaining RFV (~$18) or the IV?
Is the Intrinsic Value 1 BCT?

Cubby

Agree with all the sentiments of skepticism here.

I understand the mechanics of the proposal, but not sure I understand the incentive from Klima's side of things?

How does this benefit the protocol? Unless I'm missing something, seems like it only hurts it. Would love to be proven wrong and shown otherwise though!

Alanos86

In this proposal the protocol can buy Klima from the market with less price than backing value of each outstanding Klima. So it is profitable because after protocol burns the newly bought Klima token the backing value per Klima token goes up. So I’m in favour of this proposal.

It’s possible that inverse bonders’ Carbon tokens get then dumped and Carbon price in USD terms go down. But Klima backing in terms of Carbon tons go up; that is the priority. The Carbon price should then be bought up again to fair market value by those willing to burn tokens for offsetting alongside new investment flowing to klima. At least I hope so but it remains to be seen. I think burning is the key missing piece to validate onchain Carbon market. It’s just not very likely that DAO participants can suck up all that Carbon and alone fund the onchain Carbon market forever. At least not with current market conditions.

InTheDark

Alanos86 in that scenario, wouldn't KLIMA no longer be backed by 1 carbon tonne per token, it wild have a backing that shifts higher or lower over time?

Brian33

DonkeyKong
Sorry, I mean to say that the users who would trade their KLIMA for BCT (if we gave it in that asset) would use it for offsetting.

The most easiest path forward is utilizing some of the freed up USDC if part of the BCT/USDC pool was redeemed. In other words, users are able to redeem USDC for Klima.

Alanos86

InTheDark It seems that there are a couple of different backing figures if you look at the Main Dune https://dune.xyz/Cujowolf/Klima-DAO. The current backing seems to be about 4 BCT that is BCT in treasury divided by Klima supply. Another backing figure is about 6 BCT. That counts also BCT that is owned by Klima and exist in liquidity pools. Yes, those two backing figures may move up and down. The intrisic value (IV) of Klima, that is one Klima equals one carbon tonne, is another story. Maybe somebody more knowledgeable could explain that. And that IV will be defended too if needed but with no inverse bonds but directly buying Klima?

gui_m_p

Why a inverse bond Klima/USDC have a vesting period of 5 days? With a regular bond a vesting period is necessary to prevent instant selling, but since the bonder will receive USDC, couldn't be instantaneous or shorter?

Brian33

gui_m_p

A vesting period allows us to manage our resources more effectively, as its spread out over time. If we did it instantaneously it would be similar to a rage-quit and use all the resources at once.

The most common example of this you see in banks today is the insurance a bank gives you to prevent bank runs. Because insurance is in place, many people are content with leaving their assets their, securing a larger value than what actually can be secured.

classwar

I dont understand at all how inverse bonds would work, how this would affect KLIMA, or how so many people can be for something that is so unclear. I don't want to spread FUD, but I think we need to have a much more clear explanation of the value proposition, impact, and how this would actually play out.

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