• Proposals

  • KIP-45: Separate Carbonmark from KlimaDAO and fund expansion strategy

Hey! Ryan from Provide here again voicing my support once more and with some added context of the benefits I see in this proposal plus a few ideas that should address concern and encourage others to join in support of this KIP.

First: I'm glad to see Carbonmark's role as a web2/enterprise sales channel for KlimaDAO being pretty well understood throughout this thread (plus a big thank you to those of you recognizing Provide's contributions too!).

As its own legal entity, Carbonmark will be equipped with even more tools and capabilities to drive value to the DAO and to customers. Banking and invoicing is a key one. As glad as we are at Provide to invoice users of Carbonmark - we think it would be a better customer experience for the invoicing party/legal entity in such cases to strictly be Carbonmark (but still operating from the API and SAP solutions by Provide as a technology partner). Also to mention - our customers understanding, confidence, and willingness to engage with digital carbon is greatly furthered with Carbonmark as a designated legal entity. And when Carbonmark API and SAP users graduate to other enterprise blockchain offerings by Provide - this also enables us to offer a share of those revenues back to Carbonmark. Our end-to-end business process re: API simply works better with Carbonmark as a legal entity of its own.

I like to think as well - there will be a boom in the years to come in sustainability driven funding and grants driven by a number of businesses, non-profits, governments, NGOs, etc. KlimaDAO/Carbonmark would actually miss out on taking full advantage of such funding opportunities without the organizational structures to effectively interface with such institutions. I think this would be a good funding channel to pursue regardless of how much Carbonmark is authorized to receive from the treasure in this KIP

With the direct revenues of the API and this additional institutional reach, I believe you would see Carbonmark ultimately become self-sustaining and while also driving a lot of value into KlimaDAO. And KlimaDAO itself could sharpen its focus that much more purely into operating the digital carbon market protocol.

There's a lot of good conversation on how to protect and enhance the interests of token holders on a $3 million commitment or other significant amount. Here's a few ideas of mine:

  • Form a board of directors at Carbonmark elected from and representing the interests of KlimaDAO to overlook operations and expenditures
  • Find an appropriate way to reward $KLIMA holders in some way during operation of the USDC liquidity pools we use for API
  • Carbonmark to produce an auditable financial statement and annual report to the public
  • Carbonmark to set a goal to use its profits to accumulate $KLIMA and/or contribute directly back to treasury

Accountability is key when you're handling millions! All this might even make ops expenditures even more transparent than they already are.

    ryfleisch Thanks for your post! Really good ideas how to enhance and protect Klima token holders interest still providing continuity for Carbonmarkt employees and no rigid periodic DAO funding rounds. Also good information and justification why separate legal entity for Carbonmarkt is needed. I hope there is demand upcoming for Carbonmarkt services. One viewpoint I would like to raise that have not been discussed very much: how to incentivice and engage future Carbonmarkt employees so that they have aligned interests with Klima token holders? Assuming that Carbonmarkt is a non-profit entity with Klima aligned governance. We do not want to loose good talent.

      optima @Archimedes

      For transparency and those who do not know me, I'm jabby the KlimaDAO and Carbonmark product manager and DAO contributor since Jan, 2022.

      100% for accountability but your comments infer that this has not been happening which is simply not true.

      The product & engineering (R&D) team at KlimaDAO embraces transparency and accountability, and leads the way on working in the open. This is not just a qualitative statement, we have the quantitative data to back it up. Our GitHub is available for all to see, and as you know we maintain rigorous and verbose documentation internally so all internal stakeholders have visibility on the work of the product team.

      What we work on day-to-day is not random, it is always linked to our strategy and based on what we are learning from markets, competitors, customers, and our users. We are a problem solving, outcome focused team with well established, best-in-class, light-weight discovery and delivery processes as guard rails. This allows us to strike a balance of being structured, focused, and efficient while nimble enough to pivot based on what we are learning.

      KIP-30 and KIP-38 (still in progress) funding proposals were already milestone based. We put forward our strategic goals and high-level tactics to achieve those goals in the proposals and the community debated and voted on the funding. I will proudly stand behind the outcomes that were delivered for that funding. The product features we shipped 100% delivered value to users and the business. Those key outcomes were shared in the office hours slide presentation but worth repeating here:

      H1 2023 (based on KIP-30)

      Q1

      • Carbonmark (beta)

      Q2

      • Retire & Buy in CM
      • Retirement receipt in CM
      • Carbonmark API PoC
      • Carbon Dashboard infrastructure migration
      • Subgraph v2
      • Retirement bonds

      H2 2023 (based on KIP-38)

      Q3

      • Retire page in CM
      • Retire with credit card
      • Carbonmark REST API v1
      • Carbonmark docs
      • Project list & map view

      Q4 (in progress, planned delivery)

      • Carbonmark contract v2 & Seller listings (Oct)
      • Carbon Dashboard (Klima Data) frontend redesign (Oct)
      • KYC beta (Q4)
      • New credit supply(Q4)
      • Start of Carbonmark v2 features (Q4)

      It is worth emphasizing that Carbonmark is just getting started. We only had a MVP at the end of March and the maturing product is barely 6 months old. We are very much still in the realm of finding product-market fit in a rapidly changing and nascent market full of competitors. Our conviction of what we are building in engineering in the next quarter is high, but future "bets" are still being shaped, researched, and de-risked (and yes we have a defined process for idea/bet management as well). At this stage we need to have flexibility and stable, longer term funding. We are not at a product maturity stage where we can predict feature development. In fact, handcuffing the product & engineering team to milestone-based funding tranches promotes premature convergence on high-risk bets and increases the likelihood of building the wrong thing which is the fastest path to wasting funding.

          @jabby09 Thanks for the detailed breakdown Jabby. I think we have consistently been the most transparent, cost-effective, cohesive and organized team within the DAO (thanks to you). Very good point about the potential for milestones to handcuff us.

          Still, concerns about accountability and incentives between the orgs are valid. For my own sake, I want to try re-framing things so I can better understand where there is tension, and where there isn't.

          1. Top-level DAO strategy: we need transaction & retirement volume, and our path to get there is by building out the UI, API, and marketplace and by eliminating web3 friction. The DAO and community has been extremely well aligned here ✅.
          2. This strategy requires heavy investments in software development, engineering, and sales. On this we have also been strongly aligned past budget KIPs have passed with little controversy ✅.
          3. The market is best served by a standalone brand. The product, partnerships, sales, and protocol teams were all aligned when we created Carbonmark to address challenges faced with the KlimaDAO brand ✅
          4. We critically need an organizational entity for this brand (see my post above). We have strong alignment here as well, even within this thread ✅
          5. This new org should manage itself to reduce DAO organizational overhead, reduce DAO software maintenance burdens, and for Carbonmarks own longevity, agility and resilience. ⚠️Tension: how much management control should the DAO have over the new org?
          6. This new org must continue to consume the DAO’s tech stack (specifically the Retirement Aggregator contracts, Retirement Bonds, and liquidity). This is a no-brainer as the products whole USP is oriented around Digital Carbon, most of which is owned by the DAO. ⚠️Tension: can we prevent Carbonmark from abandoning the stack in the future?
          7. This new org must continue to contribute to the DAO’s tech stack. This is status-quo, as the product team already develops on both fronts. ⚠️Tension: can we prevent Carbonmark from abandoning this responsibility, switching to forked & closed-sourced versions?

          From my perspective, Carbonmark and KlimaDAO’s fates are bound completely. Carbonmark is nothing without the DAO and nobody on the product team has any interest in rebuilding our foundations. I struggle to think of a practical arrangement that can can fully alleviate these tensions without creating more headache. I would much rather we secure a single tranche of funding so we have a guaranteed runway and peace-of-mind for contributors. Other arrangements are too far outside my domain of expertise (I’m not a lawyer) and I haven’t heard any real actionable suggestions yet.

            jabby09 Atmosfearful KIP 45 and 45a have a large difference in the allocated funding, which seems to mostly impact the ability to develop features for Carbonmark. How much development would you see as really necessary at the current point? Isn't the current main challenge in engaging with customers the legal problem, which is unrelated to product features? In other words, if Carbonmark becomes a private company with its existing product, would this already attract customers and start generating revenue? Do you think it would be possible to build features in a much leaner fashion and directly derived from the customer experiences? To what extent would you see customers to be able to put funding into the development of their individual features wishes, which would still be part of the open source code? P.s. KlimaDAO could in still add funding, too, e.g. in the proposed way in KIP 45a.

                  rrrmmmmm

                  Thanks so much for your questions; appreciate your interest in our work.

                  I'll be happy to answer these but just wanted to let you know it will be late Monday before I'll have time in my schedule to do this.

                    rrrmmmmm

                    thanks for your questions! I'll do my best to answer them below and then atmos may also have perspectives to share.

                    How much development would you see as really necessary at the current point?

                    Consider that we only launched a very MVP version of the product at the end of March. Since launch, we have been using the MVP to engage and learn from customers and users while in parallel building a more feature complete beta application (major feature areas I highlighted in my comment above). The next quarter and first half of 2024 will be focused on delivering on the solutions we have validated with customers and users. These include broad themes such as overall redesigned user experience in Carbonmark (beyond an MVP), improved onboarding (KYC/KYB/AML), asset management (custodial wallet, fiat on-ramp and off-ramp), registry aggregation, and additional platform integrations (includes API enhancements). The other significant and critical activities over the next 3-6 months is the substantial technical work to integrate new credit supply into Carbonmark (related to KIP-37, KIP-39, KIP-41 and more to follow).

                    Beyond that, important to recognize we are very much still in the realm of finding product-market fit in a rapidly changing and nascent market. We will need to continue to learn and pivot to build a product that solve customers problems better than our competitors. That is how we will dominate market share and win. How long that takes is unknown, nobody has that crystal ball.

                    Isn't the current main challenge in engaging with customers the legal problem, which is unrelated to product features? In other words, if Carbonmark becomes a private company with its existing product, would this already attract customers and start generating revenue?

                    It is both. By working with customers with our MVP, we have learned that traditional web2 organizations are very challenged to commercially engage with our solution given our DAO status. So there are organizational changes that are required (the primary focus of this KIP) but also additional features we need to provide (outlined above), generally to eliminate web3 frictions. Our hypothesis is that with these changes we will be able to unlock the huge potential of the KlimaDAO / Carbonmark ecosystem and move towards a self-sustaining revenue model.

                    Do you think it would be possible to build features in a much leaner fashion and directly derived from the customer experiences?

                    As eluded to above, our engagement with customers and users is already being used to validate the bets and feature development we work on and that will continue.

                    To be honest, we are already very lean. We have one PM, one designer, an engineering lead and a handful of developers (working at various levels of FTE). These are the core roles required for a product team to function. Most product teams would also have a dedicated QA role but we manage that using existing contributors (including myself).

                    For some additional context, I've been leading product in various startups since 2019 and have been working with software development teams for over 20 years. While there is always room for productivity improvements, and we welcome feedback on pace of delivery, code quality, etc., based on my experience this is a very high performing and efficient team. Overall I'm very proud of culture of professionalism, transparency, and accountability that we have been able to foster with a global remote team within a very challenging DAO organization structure.

                    To what extent would you see customers to be able to put funding into the development of their individual features wishes, which would still be part of the open source code?

                    I'm not a lawyer so I won't comment on funding. However, we 100% welcome ideas from the community and would be happy to include them in our portfolio of bets ideation and prioritization process. Another approach to this could be regularly scheduled and funded hackathons to encourage new ideas from outside of our internal team.

                    I hope this helps, let me know if any follow up questions and thanks again for your participation in this process and support of the project.

                        jabby09 Thanks for the message! I’m in favour of this proposal in general but thinking about the viability of Carbonmarkt non-profit entity after the funding. I have not understood from this discussion the assumptions or calculations how Carbonmarkt is going to generate money to pay its costs after the funding is ended at month 18. How many tons of carbon is assumed to be sold and what is the business logic (how the revenue is generated)? What are the revenue streams and assumptions behind them?

                          jabby09 @rrrmmmmm Hey there, I wanted to offer some more detailed insight on just how lean our team is, to help add some perspective from inside the team. We

                          Hi, I'm Professor A. I'm the designer Jabby mentioned in his post. In my experience, a product of this size normally has a design team of 4. Currently we have only 1. Just me. I'm doing the work of UX Researcher, UX Architect, UI Designer, and Prototyping Engineer.

                          In my experience, a product of this size and feature set normally has a front-end dev team of 6-10. We have like 2 full timers and maybe 4-5 part time contributors.

                          In my experience, a product of this size and complexity has a back-end dev team of 5-10. I have no idea what our back end staffing looks like (that's a question for @MarcusAurelius), but I can assure you it's far below industry standard.

                          We're already running leaner and more efficiently than most other projects I've worked on. And nonetheless shipping features on an unfathomably fast timeline. I've worked on projects with 1/3d of the complexity that took twice as long to ship from inception to MVP. Understand we shipped the Carbonmark MVP in 5 months from blank page to deployment, while being understaffed by industry standards. AND, this same team was shipping improvements to the Protocol simultaneously. I hope I've been able to provide some insight (edited to remove superfluity)

                              In regards to questions directed toward viability, I wanted to provide some additional context

                              Carbonmark's business model

                              Carbonmark’s core revenue stems from brokerage fees tied to trading volumes. In order to build market share and maximize transaction volume, we are currently pricing our services competitively. These brokerage fees would be distinct from the existing fee system that exists in the KlimaDAO Protocol (e.g. those that come from the Retirement Bonds). In addition to this, as we continue to build value-added features and services on the core product, we anticipate new revenue streams to open up, which may include subscription and advertising fees.

                              We believe that by having a commercially-incentivized ecosystem built on top of KlimaDAO's infrastructure, we can maximize the chance of success for all stakeholders involved.

                              Carbonmark currently aims to serve three key users within the Voluntary Carbon Market:

                              1. Companies looking to offset their carbon footprint programmatically.
                              2. Developers of carbon projects seeking direct access to buyers.
                              3. Intermediary traders.

                              Critical to addressing the needs of (2) and (3) are the changes we propose making as part of KIP-45, including establishing a fit-for-purpose legal entity and delivering a set of key features to enable greater accessibility to the underlying technology.

                              Beyond these user groups however, we believe our addressable market extends far beyond the VCM. Extending into other environmental asset classes is high on our priority list.

                              Our organization

                              During the early stages of the DAO’s life, the flat management hierarchy and lack of structure resulted in an unwieldy organization. Since this time however, we have focused on driving efficiency, accountability and alignment within the team. We have sought to strike the right balance between speed and burn, and improvements in core operations have resulted in a much-reduced team size of dedicated and talented team members.

                              The Carbonmark core team and advisors consist of experienced world-class technologists and carbon market industry experts:

                              • Andrew Bonneau, Business Development & Partnerships. Co-founder of KlimaDAO, C3 and Offsetra. Previously at First Climate and BioCarbon Engineering. MSc in Environmental Governance from the University of Freiburg.
                              • Gabriel Kent, Product Owner - KlimaDAO core team contributor since October, 2021. Experienced startup CTO and former co-founder at Adext AI, Defilanthropy, Virket Holding, DASH, and others. Successfully involved in numerous capital raises and exits / acquisitions.
                              • Brice Walsh, Principal Product Manager - KlimaDAO contributor since January, 2022. Over 20 years experience as a builder in software studio consulting agencies and startup organizations. Leading product and scaling technology startups since 2019.
                              • Brendan McGill, Head of Engineering. Co-founder of KlimaDAO and Offsetra. Previously at Esri and Ioki. MSc in Environmental Governance from the University of Freiburg.
                              • Giorgio Alessandro Donà-Danioni, Head of Legal. Co-founder of KlimaDAO and C3. Previously at Studio Pirola Pennuto Zei and Borgonuovo & Partners. J.D. from LIUC - Università Cattaneo and Barcelona's universitad Abat Oliba
                              • Peter Noszek, Marketing. Co-Founder of TOKEN2049, previously Head of Growth at Montu – Australia's fastest growing tech company. MA from University of Cambridge and MSc from the London School of Economics.
                              • Liam Ellul, Head of Solutions - Senior technology strategist with 9+ years of experience in leading tech firms, as well as zero-to-one product and business growth environments.
                              • David Peyronnin, Consultant & Operations. 25 years of experience in IT OPS and in crypto since 2013. Co-founded various startups and worked on projects including TheDAO, VISA DLT pilot, Polkadot during its launch. Co-organised the Ethereum Meetups in London since 2014. Worked as head of delivery for Barclays and delivered front to back trading platforms for tier 1 investment banks worldwide at FIS Global. He is also the proud father of 2 teenagers.

                              With that core team and a group of incredible contributors and community members, we have significantly de-risked the market opportunity and delivered several key milestones (with H1 and H2 2023 milestones listed below)

                              With KIP-45, Carbonmark aims to become profitable and self-sufficient as a standalone entity. This means we are aiming to rely less on KlimaDAO's treasury for funding. Further, spinning off Carbonmark with a more traditional legal framework will allow us to more easily recruit top talent, work with major institutions, and generate profits, which in turn supports both our mission and KlimaDAO’s (specifically, increasing the throughput of tokenized environmental commodities across the foundational infrastructure that KlimaDAO has developed).

                              Finally, the team recognizes that the market is significantly more competitive than it was when KlimaDAO first launched back in 2021. We need to maintain some degree of commercial sensitivity around things like pricing, partnerships and roadmap to avoid risks from competitors. Having said this, the KlimaDAO protocol is actively working through the recommendations from the Decentralization Working Group, and a key pillar of this is around transparency. We believe KlimaDAO is one of the most transparent DAOs in the market, but we are working toward continual improvements in this area.

                                Hi @jabby09 The-Professor-A Hugh , thank you all for your additional insights. I will try to address the key points below.

                                In summary, the funding of $3M is a large number for KlimaDAO. To my knowledge, it's the majority of KlimaDAO's USDC treasury funds? Yes, Klima has funded the development of Carbonmark already until now, but the separation and asked funding would mean that KlimaDAO gives away control over these funds.

                                Even though Carbonmark is a direct spin-off of Klima and even though it's largely the same people working on both projects, I believe we need to treat them as being separate and understand the consequences for both sides.

                                Carbonmark is an ambitious project and it can lead to KlimaDAO's success, but it can also fail. If it fails, then KlimaDAO will be left behind with even less funding and operational ability. We're putting a lot of eggs into one basket here.

                                The requested funding with no formalized value recapture is a big risk for KlimaDAO. I'm not sure how many investors would do such a bet of this size, relative to their total budgets.

                                KlimaDAO needs to grow. The token value needs to grow. Only when this growth is achieved, KlimaDAO will have the ability to do more. The treasury will grow and there will be more ability for operational activities. This definitely requires the right signalling to attract individual investors. Right now, however, we are only thinning out the treasury with no visible promise of growth. This will only work for a finite time. Then it will be over.

                                Let's assume that Carbonmark can be a success, but needs this amount of funding. Are there no other sources of funding available? Investors, VCs, must be lining up if they believe in CM's vision. Perhaps CM should have a profit-oriented business model?

                                On the other hand, I'd like to challenge some of the points given regarding the feature implementations.

                                For example, what is the required effort to integrate new carbon asset classes to CM? It sounds as if this is a big deal, but is it really? We're talking tokenized carbon here. Toucan protocol built their complete bridge, the NFT model and the first 2 pool token types within 3 months and I believe with an even smaller team. KlimaDAO was built in the same time. What is the effort, for example, to integrate ICR's credits? Isn't this basically just publishing new smart contracts with the code being mostly copy-paste from other ones? And if CM wants to build more UI/UX around this, shouldn't ICR then be willing to contribute to the development with additional funding?

                                Does CM really need a KYC solution right now? Individual customers surely don't. And if a company, who wants to offset their footprint, brings their own custodial wallet, isn't the KYC story already solved for them?

                                Doesn't Carbonmark basically only need one customer that has a lot of carbon throughput? This customer could serve as a precedence for others to follow. With a large throughput and a related large cost reduction, this customer could be willing to contribute to the funding of some features, if needed. If there are customers waiting to partner with Carbonmark, then surely some of them should have a reduced entry barrier, right?

                                If we see Carbonmark as an independent organization, then it is one of various possible approaches for generating supply and demand for tokenized carbon. Other approaches might exist as well. CM follows a traditional corporate carbon offsetting strategy. This can work. Other approaches could let the advantages of tokenized carbon shine more. They might be more web3-centric and would only take off after the next general adoption wave of web3. For KlimaDAO, the question really is about risk and operational ability.

                                I strongly believe that the DAO should not put too many eggs in one basket.

                                For KIP 45 I personally would either ask for a more formalized value recapture mechanism or for a different funding strategy. How difficult would you see it, to find $2M from other sources and get $1M from KlimaDAO?

                                    I think we should continue on the selected strategic path and it would be best to separate CM now to a nonprofit entity. That would best ensure alignment of Klima and CM interests. Klima DAO should have representatives in CM’s governance to ensure alignment and strategic steering of CM. VC funding and a profit entity would potentially distract strategic focus and endanger alignment. We need to continue building CM and that way acquire retirement volume and that is the right move given our thesis of digitalization of Carbon market. It may happen slower but I think it will. This is a risky bet, but what is the other big strategic alternative? We should continue building CM and hopefully during 12-18 next months we will also get some tailwind from the Global economy and crypto markets as well

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