Partner with Solid World and SCB, become a Solid World Guardian and deploy capital to create the first liquid forwards market of cookstove credits in the world.
Solid World is a commodities trading platform that makes climate financing liquid and transparent. By leveraging innovations in DeFi, such as AMMs and non-custodial rewards contracts, Solid World can create forward liquidity for carbon projects. This creates broadly accessible options for any stakeholder to participate in climate finance at whatever scale is appropriate for them. Suppliers benefit by having a direct path to liquidity for additional working capital with no exclusivity requirements.
In addition to the legal contracts backing the on-chain primitives having supplier-side replacement clauses in cases of non-delivery, Solid World minimizes the chances of non-delivery by leveraging its CRISP (Carbon Risk Identification and Scoring Principles) framework. This informs the forward-selling allowances for projects, minimizing the chances of over-selling supply, in the first place. Currently, Solid World only considers existing planting activity when calculating allowances, as planting timelines can be a major source of uncertainty and subsequent shortfalls.
We will be able to create the first liquid-prepaid market for cookstove credits, expanding market accessibility for project developers via real-time price discovery and a deeply liquid market.
As we have learned from existing efforts to bring liquidity to the Digital Carbon Market, opinionated curation is needed to minimize race-to-the-bottom effects of projects with drastically different price points competing for the same liquidity. Solid World collaboratively defines narrow categories of carbon projects which share a single pool token for price discovery and liquidity. Access to any category of Solid World’s pools is not an arbitrary decision by the internal team, as the top Liquidity Providers have a veto on any new projects attempting to enter the pool. These are the grounds for how governance for pools is done - consensus from those with skin in the game.
Solid World’s smart contracts have been audited by Dedaub, a well-respected blockchain security auditor with a track record of working with major blockchains and protocols. The two audits we have received as well as our smart contracts can be publicly viewed on Github. We work with PwC Legal Estonia to ensure appropriate legal structuring.
Engaging as an LP in forward pools
This KIP provides a framework for KlimaDAO’s policy team to deploy ex-ante credits issued by SolidWorld for the Improved Cookstoves for Rohingya Refugees project in Bangladesh. KlimaDAO previously passed KIP-32 to deploy capital toward funding this project and now has an opportunity to earn yield in a liquid forwards market that SolidWorld can facilitate on their platform. Concrete steps to realize this opportunity are as follows:
A New CRISP-C Pool Launched with KlimaDAO x Solid World x SCB
Initial Liquidity Deployment State
- KlimaDAO brings $500,003 USDC (50% of initial LP value)
- SCB brings 53,909 tonnes (50% of initial LP value)
- 6-month lock-up: both parties can not move their position for 6 months from deployment.
- KlimaDAO <-> SCB deployment value: $1,000,006 (USDC & carbon value at launch price)
- Risk-mitigation: $403,590.85 Non-delivery fund (allocation from KlimaDAO)
- KlimaDAO expected rewards: 10% vAPR USDC , 4% vAPR CRISP-C, 50k USDC/ yr
- Solid World waives all fees for all KlimaDAO deployments.
- KlimaDAO to be 1 of 7 Guardians on the Curation Council , securing a veto over new projects and newly tokenized CBTs.
Liquidity Deployment Update (est. 2-3 months)
- KlimaDAO will swap in its own CRISP-C compatible tonnes with those deployed by SCB (31,152 tonnes)
- LP distribution after this update is estimated at 78.83% for KlimaDAO and 21.17% for SCB
- KlimaDAO expected rewards: vAPR 10% USDC, 4% vAPR CRISP-C, approximately $79k USDC/yr
Deployment details for the above scenarios can be found here. Note that parameters regarding fees and Guardian participation for the Curation Council remain the same after the liquidity deployment update occurs.
Listing prepaid carbon contracts on Carbonmark
Solid World is an ideal partner for Carbonmark when it comes to listing prepaid carbon credits. Our platform offers a unique opportunity for carbon project developers to tokenize their forward supply and access liquidity through our prepaid carbon liquidity pools. By collaborating with Solid World, Carbonmark can enhance its marketplace by providing a diverse range of premium forward carbon credits that meet stringent sustainability criteria.
One of the key advantages of partnering with Solid World is the transparency and reliability they bring to the table. The CRISP framework ensures that all collaborating projects adhere to rigorous standards and undergo comprehensive risk assessment prior to ex-ante tokenization. This level of transparency instills confidence in buyers and promotes trust within the VCM.
Additionally, Solid World's approach results in transparent pricing, enabling Carbonmark to showcase accurate and up-to-date market prices for prepaid carbon credits. This transparency empowers buyers and sellers to make informed decisions based on real-time market dynamics.
Solid World's forward carbon liquidity pools provide continuous access to inventory, enabling Carbonmark to list projects at various price points and cater to the needs of a diverse range of buyers.
Furthermore, Solid World is committed to fostering strong partnerships and providing incentives to successful integrators. We are open to working closely with Carbonmark to deepen our relationship and explore mutually beneficial incentives that encourage increased market activity and liquidity on the Carbonmark platform.
KlimaDAO has already entered into a standard VERPA agreement with SCB ensuring delivery of these tonnes. However, given that a liquid market is now being created, a new long-tail risk is created in the black-swan event of non-delivery of KlimaDAO’s future position and a redemption from Solid World’s pool that could leave KlimaDAO with less carbon than is owed. In this rare event of future non-delivery with subsequent redemption of liquid credits, KlimaDAO elects to earmark a portion of USDC in a non-delivery fund. The non-delivery fund will be entirely USDC, will be equal to 140% the carbon value of deployment, and will be placed in Aave to maintain purchasing power against inflation. The fund will remain in the DAO wallet, will be earmarked for any potential non-delivery risks, and will be removed whenever the delivery risk is completely removed from the position.
The polling process begins now and will end at 17:00 UTC on September 11th, 2023. Assuming the forum proposal is approved, it will advance to Snapshot.