• Proposals

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

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

        3 months later
        Cujo locked the discussion.
        Write a Reply...