I agree with the proposal and $300k on legal expenses, but $2.7 million in the middle of a bear market doesn't sound great especially since $1.5 million was allocated to operating expenditure in KIP30 and since then the KLIMA price has continually declined. I'd like to see a financial breakdown of exactly how the $2.7 million would be used
KIP-45: Separate Carbonmark from KlimaDAO and fund expansion strategy
IntoTheEther
As you can read previously, the goal is to have more months rather than the previous budget.
Rationale is, instead of asking continuously, have one single ask.
What happens after 20 months? If there is no sustainable business, ramp down the whole operation? I remember that once upon a time it was said that klima core team has external funding for a long time to keep operations running. Has that funding now ended?
While I am fully in favor of separating interests of Carbonmark and KlimaDAO. I am completely opposed to funding it to the tune of 3MM USDC. Why is $3MM needed? This is an irresponsible amount of funding to be taking from the DAO. Ultimately, there's no accountability to deliver on any sort of metrics of success and the 3MM is handed to the org as a speculative bet in an uncertain time in the market.
For this to be done properly, I'd rather see a proposal that outlines specific milestones and metrics of success that unlock tranches of funding. Clear objectives, achievable milestones, funding that's allocated in stages.
In the proposal’s current form, Carbonmark would not meet any reasonable milestones that could be set out by the DAO. The biggest retirements and offsets that occurred in the history of the DAO came from personal connections to larger orgs, none of which came during the time of Carbonmark or from the team that currently works on it. These were all largely done in 2021 and early 2022.
This is why it's important to keep this funding tranche incredibly well documented and marked with high quality objective milestones. Otherwise we are speculating on the potential of a product that has yet to create tangible value for the DAO. KlimaDAO is in the business of facilitating carbon markets and not funding speculative ventures. The reality of the situation is that even the markets top leaders in offset sales are having a hard time selling anything in this saturated market. Believing that Carbonmark can come close to that or even more naively, believe that we can outperform market leaders is not only misplaced and will be very costly for the DAO. The data so far shows exactly this, it is costly and to date has produced no sizeable results.
To justify further spending on this, I want to see strict assurances of success put in place such as milestone based funding. So that if they are not met, the DAO can halt funds, reduce spending if there are no results and protect the interests of the DAO.
I completely understand and agree with the notion of separating, the commercial need for this is clear. However, funding should be a separate discussion entirely with more strict assurances put in place. My interest here is to protect the DAO and ensure its longevity and its success.
The proposal isn't to wind up the DAO's operations at any point. Nor is there any need to for a number of years with current funds and burn rate (whether the KIP passes or not).
The "20 months" simply refers to how long the Protocol Team could in theory continue at current spend, if the KIP was to pass and remaining KIP-38 funds were left for the running of the Protocol (not Carbonmark).
That is not to say that Protocol Team would not change their burn rate, or present new KIPs to the Community for OPEX funding, in the interim. Obviously what happens there would be at the Community's discretion.
Carbonmark on the other hand would not be expected to request any additional funds from the DAO.
To summarise, these funds would essentially give both projects around a year and a half of security with no additional funding asks.
Slide from today's discussion attached for those who missed it for additional context.
Archimedes Your concerns about the 3MM USDC funding allocation for Carbonmark's separation from KlimaDAO are valid and echo prudent business practices. The absence of a milestone-driven funding strategy in the initial proposal does indeed leave a lot to be desired in terms of accountability and risk management.
The demand for detailed metrics and phased funding aligns with best practices in venture capital and should be considered the gold standard for any DAO aiming for longevity and fiscal responsibility. Your point about the market saturation and the struggle even for market leaders provides a sobering context for this funding proposal. Carbonmark needs to prove it can be an exception in this challenging landscape. Carbonmark should be funded, but the amount and the goals must be tethered in a pragmatic business case.
Given that the ultimate goal is to benefit both KlimaDAO and Carbonmark by focusing on their core missions, the funding should indeed be subjected to rigorous conditions. Such an approach not only protects the DAO's interests but also helps to refine Carbonmark's operational focus.
Hence, I completely support your stance that the proposal must be revised to incorporate milestone-based funding tranches tied to measurable outcomes. This will provide the necessary safety net and enable a more strategic allocation of KlimaDAO’s resources.
Smart funding follows performance; no milestones, no money.
Archimedes Are you the Archimedes the founder?
Why your so strict when you never put milestones and metrics of success for all the previous funding requests? What are the milestones of the actual departments?
Milestones and guarantees must be given, but it seems strange that this comes from a founder.
@Archimedes
I have the same opinion as @Archimedes,
is there any way to revalidate the proposal?
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Head of Engineering at KlimaDAO here
Creating & funding this entity is an absolutely critical step for both Carbonmark & the DAO.
I only wish we'd done it sooner. Since day one, our approach to building products has been blockchain-first, and permissionless. These technical decisions have tradeoffs touching everything from user onboarding, to transaction speed and website performance. Some of these Web3 tradeoffs are simply insurmountable for the segment of the market who would adopt Digital Carbon at scale. Managing wallets, gas, and permissionless assets is simply too much to ask from carbon brokers and project developers who have long-established KYC and accounting practices. Many quality of life features that I want to ship-- Stripe integrations, wallet abstractions, KYC and AML, and more, are simply not possible in the current DAO structure, so me and the product team have deprioritized them. This has been deeply frustrating for me.
Our legal designation has also made my job as a manager and team-builder more difficult, as I can't compete on the same level as software companies who can offer more familiar employment contracts. Thankfully KlimaDAO and Carbonmark are exciting, high-impact projects: plenty of top-tier builders have showed up to contribute. The team I work with right now is incredibly efficient and talented. The next phase of growth, however, is going to require a more traditional talent acquisition process.
As I've come to understand (I am not a lawyer) the only way to bridge these gaps and solve these problems are to establish a legal entity.
Right now, most dev time is already spent on Carbonmark. KlimaDAO invented ReFi and the Digital Carbon Market, but it absolutely can not succeed without a product like Carbonmark. I want Carbonmark to be the most comprehensive UI and API for interacting with the Carbon Market end-to-end. The DAO liquidity engine has already made the impossible possible-- the largest and most diverse supply of carbon credits with open access, instant settlement & instant retirement, and a set of APIs that allow anyone to integrate carbon into any application.
Now, we believe we have enough feedback to address fundamental issues and really unlock the scale we've all been envisioning.
For those who are worried about my commitment to the DAO going forward: Me and my colleagues will continue to maintain app.klimadao.finance for the foreseeable future. The DAO marketing team has already made huge strides towards taking full control of the website & blog, so they are no longer dependent on us developers for their new content and campaigns. In addition, the DAO will benefit from the fact that projects like Klima Infinity, KlimaDAO Pledges, and the carbon-oriented sections of the app can be deprecated and no longer be a burden on the DAO to maintain-- these have already been re-implemented (and much better!) in Carbonmark with the same value-sharing mechanisms for the DAO.
Finally; we work in the open and plan to continue doing that as well. Concerns or complaints about our pace, code quality, roadmap or spending have always been welcomed. So far the product and engineering teams have received nothing but praise, our team outperforms any team I've ever been on dollar-for-dollar, and is improving every day.
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Archimedes an interesting set of perspectives!
Thus far the DAO has spent ~$11,000,000 since it was launched - with budget approvals on a six monthly basis all that have been required for accountability. This level of spending / unaccountability cannot continue, and although internal cuts are hard, that ~$200k all in spend we now find ourselves at feels much more reasonable and where it should be.
The proposal clearly continues to force efficiency within the CM team, whilst also cutting off the proverbial lifeline -a step required to force it to become viable within 18 months.
By all accounts this feels like an efficient and responsible next step for the project. Far more so than continuing to try and navigate the internal challenges, and expose dev work to uncertainty due to the difference in opinion on funding the project is facing internally.
Re PMF and market thesis -- your POV is one we have discussed at length and as you well know I disagree with it. I do however think there is a general misunderstanding on the USP of Carbonmark: scalable, automatable solutions will be an important component of the next iteration of the VCM. Carbonmark would do well to position itself at the front of the pack as the market begins to turn (and we need more work to achieve that). In any case, we can hypothesize on this forever and likely won't align at this point; more importantly is how do we force an outcome to either stick to our guns and try it, or go home, instead of stuttering along in a setup that doesn't work.
Therefore for a number of reasons (arbitrary and counterproductive requirements for productivity being phased in; maturity and needs of Carbonmark; needs of KlimaDAO; challenges we will likely face with conditioning funding; issues that tranches funding continually pose for the project) I am personally in favour of the proposal as it stands.
I look forward to more comments from the team and community as we chart out next, and critical steps, in the DCM.
While I generally support spinning off Carbonmark into a separate entity, this proposal does not clarify how Carbonmark and it's future contributors will be aligned long term with KlimaDAO, hence I have voted no on this proposal.
I'd like to suggest the following amendments:
a. Milestone based funding as many have outlined here
b. Some way for KlimaDAO to verifiably benefit from funding CarbonMark. This can be done in any of the following ways:
- An IP-NFT (more info here: https://www.molecule.xyz/blog/introducing-ip-nft-v2) owned by KilmaDAO multi-sig
- Mandate CarbonMark to buyback and stake Klima in a custom staking contract controlled by the DAO with clear clashing conditions for violations
I'd like the community and core team to think of this step from a long term perspective. If we as a DAO are able to successfully spin out CarbonMark and ensure that there is a verifiable way for it to add value back to the DAO, then this gives a roadmap for other groups to spinout of the DAO and form their own legal entities and add value back to the DAO. However, if this legal entity spins out without proper value alignment, then there is no guarantee that future employees of CarbonMark will be as value aligned as current contributors and may decide to take the legal entity to follow its own independent path.
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KlimaDAO also did not start with specific target milestones in terms of retirement volume, product features, adoption .. etc. The main reason was that we pioneered the launch of the DCM and it would've been impossible to set milestones for a nascent market with everchanging dynamics.
In less than 2 years, KlimaDAO has built the base layer for carbon by creating a permissionless, frictionless, open-source inrastructure for the on-chain carbon market.
We did have unpredictable setbacks when Verra stopped bridging. But we continued to build with an eye on the future.
I think the vision should be the same for Carbonmark. To build a frictionless, permissionless carbon marketplace with unparalleled user experience for retiring or trading carbon credits.
While the VCM as a whole is going thru multi-dimensional changes (Verra FUD, Quality issue, additionality, bogus claims..etc) and retirement volumes are unpredictable, we should be building Carbonmark with an eye on the future (net zero goals, new partnerships, on-chain registry, climate finance, institutional investment)
Then KlimaDAO x Carbonmark combination would be rock solid. Also, I strongly believe that Carbonmark is just the first of many to come.
jengajojo I've a couple of thoughts
Firstly, I think setting milestones and tracking them is possible for matured systems / processes where metrics can be set as they've been modelled and proven to be replicable. I think it's difficult to do it for the DCM - ecosystem, products, marketplaces.. etc. But, I'm definitely open to ideas on what to track and how.
Secondly, if you tie funding to milestones and if due to external factors it's not met, then do we stop funding? (Imagine Verra stopping tokenization, what if we stopped funding KlimaDAO). I don't think it's prudent. There is no DCM marketplace for web2 companies which can feed into KLIMA's growth. That's the reason Carbonmark was built. If that halts, then I'm not sure if there's an alternative.
I definitely value accountability, but I think we are in very early stages of an evolving market. I'm just not sure how to do it in a way where we don't hamper growth.
Arthurian There were milestones for previous requests. Check out this one: https://forum.klimadao.finance/d/230-kip-38-dao-funding-request-for-h2-2023
This proposal, it looks good, you know, if we want more people to use Klima's products. I understand that making a whole market switch to a new technology can be tough. It's like taking a big chance, but with a big potential reward. When you compare it to other DAOs that are out there, the way they've been showing what's been happening behind the scenes here is quite good. Check out the office hour recordings for example.
If you think that using markets are an important part of how we deal with climate change, I still think KlimaDAO and Carbonmark are the best options around. The whole industry is only set to grow.
keep building. I support.
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Appreciate the comments and ongoing input you give to the project!
To elaborate on the challenges with milestone & tranche based funding:
- Accountability: Carbonmark primarily represents a product and engineering effort for the time being - this group are in reality already the most efficient and accountable group within the DAO, and are building out against a clear vision to operationalize KlimaDAO's carbon - is it even proportional to milestone them given the track record and professionalism demonstrated?
- Decision making: who would be the adjudicator of performance in a tranched funding model? There are already differences in opinion in terms of what and who should be funded. Would it not make most sense to have a CTO (or other leadership structure) with a defined funding package & mandate to call the shots and drive growth. I say this as CM essentially looks like an internal tech company already, and I don't think anyone is querying whether going further down that route (for CM only) is a good idea. Alternatives are essentially an internal DAO team who (may) have different stated priorities? Or the Community which is demonstrably a mix of stakeholders with different perspectives and timelines for their priorities? There will at best be inefficiencies here, or unintended consequences at worst.
- Tranched funding creates consistent problems internally: already discussed elsewhere in the RFC period. One of the objectives is to protect Carbonmark from the volatility of building software in this manner in the short-term, whilst also forcing it to seek viability without subsidy in the med-term.
On a personal level, I am not against clear milestones -- although P&E have already defined their roadmap and give extensive updates on a weekly basis internally, and monthly externally. This roadmap is given ample opportunity to be reviewed and challenged publicly. Commercial milestones will likely be challenging to define until the appropriate business infrastructure can be wrapped around the product itself.
Regarding long-term strategic alignment: KlimaDAO's interest is in Carbonmark utilising DCM liquidity. I think other "nice to haves" from the DAO perspective could dilute CM's ability to pursue this mission and are not particularly pertinent to either organization's success (e.g. IP is currently open-source). P.S. one would of course expect Carbonmark to be an important "governor" of KlimaDAO over the long-term to solidify that strategic alignment!
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The last 6 months have been difficult as we’ve navigated several internal challenges and worked to respond to an increasingly competitive market. Carbonmark’s core function has always been to serve as a gateway to the DCM landscape – making it easier for players both new and old to the Web3 world to access the liquidity that KlimaDAO has incentivized and facilitated on-chain.
A number of community members have highlighted the need to ensure alignment between Carbonmark and KlimaDAO. I certainly understand this sentiment, and believe the following factors will de facto ensure that these entities are aligned long into the future:
1) There is no other widely available interface for players to access KlimaDAO’s carbon liquidity. Period. While there are some players in the past that have promised such access and alignment, they’ve since turned to playing the same old games that the traditional industry has been by gating off their marketplaces and trying to own their own DCM tech stack. Long term, I don’t see these actions as viable strategies, and believe openness leveraging the network effect of countless builders together will be vastly superior. What’s the point of building a blockchain-based system if you’re not utilizing the advantages that come from the composable and interoperable nature of DeFi tooling?
2) Carbonmark’s entire raison d'être is to open demand channels to KlimaDAO’s liquidity while making it easier for supply-side participants to add their own liquidity to the Klima ecosystem. The projects have been symbiotic from the start and will continue to be because it makes clear sense. We expect KlimaDAO to continue servicing the base layer infrastructure necessary for a fully interoperable DCM, and Carbonmark will build atop those foundations and ensure the overall throughput of the system is increased.
3) Core contributors to Carbonmark’s infrastructure have heavy skin in the game to KlimaDAO’s success (including the majority of Klima’s actual founders). Our upside from the continued growth of the KlimaDAO protocol is what drives us forward to bring in new carbon supply, improve Carbonmark tooling, and build partnerships with demand-side players.
I'd also like to clarify a key point that was made by @Archimedes
“The biggest retirements and offsets that occurred in the history of the DAO came from personal connections to larger orgs, none of which came during the time of Carbonmark or from the team that currently works on it. These were all largely done in 2021 and early 2022.”
Number one, I was intimately involved with all of those deals and am still on the Carbonmark team. Number two, without any reasonable Web2 interface for corporates to connect to, of course the only large retirements that could have been made would be made by Web3 protocols at the tail end of the bull market. All of the low hanging fruit from that segment of the market were taken by mid 2022, and therefore the sales strategy was altered as per the feedback we began to receive re. integration partners (and from countless carbon market participants that we’ve spoken to over the last two years).
On the integration side, we can leverage the programmatic nature of tokenized carbon while abstracting away the Web3 pieces through a fiat-enabled partners (e.g. Provide Services). This is precisely where we’re seeing exciting partnerships develop now and where we believe the advantages of tokenized carbon shine. As I spoke about at Token2049, the next wave of adoption is only going to occur when fiat onramping/offramping and wallet abstraction are further developed (across the entire blockchain space) and this is a core objective within Carbonmark’s development over the next few months.
We have an opportunity to chart a promising path forward for the DAO by focusing our efforts on the commercialization of Carbonmark, increasing access to the DCM and KlimaDAO’s infrastructure stack, and having the organizational structure necessary to succeed in the market. Stagnation and straw man arguments are the exact opposite of what we need right now.
In summation, I trust that the community will recognize who is working tirelessly to drive innovation forward in this organization and vote in the best interests of that endeavor.
Can somebody comment on the core team external funding? Has that ended now and the whole core team is funded by DAO?
Dionysus thank you for addressing these points.
On the merits of the separation: KlimaDAO is aiming to disrupt a high margin, low volume incumbent industry with a high volume, low margin business model.
That model relies on demand for carbon credit retirement, and the biggest consumers of carbon credits are outside of the web3 bubble. Furthermore, most web3 projects are not prioritizing sustainability initiatives given the difficult conditions and need to preserve runway.
So we must seek out end-users who are not yet onboarded on-chain, which requires providing a clean, clear and user-friendly experience, more akin to Goldfinch's new UX or friend.tech rather than assuming users have a wallet with funds onboarded already. Automated integrations via Provide's SAP integration and the Carbonmark API also represent key levers for attracting new demand.
On the specifics of the proposal, my concern with tranched funding is that it perpetuates the tenuous short term funding asks that have created uncertainty for existing KlimaDAO contributors and limited our ability to attract and retain top talent (especially engineers).
That said, I am in favor of some formal mechanism to ensure that Carbonmark's product development accrues value to KlimaDAO.
This has been one of the biggest disappointments in the development of the ReFi/Digital Carbon ecosystem: very few players are proudly standing alongside and building products that support KlimaDAO's pioneering infrastructure, instead extracting value from the pools we provide liquidity for or building around it by avoiding the retirement aggregator.
As Dionysus said, all of the initial contributors to the new Carbonmark organization will be KLIMA holders, and therefore values-aligned, but some formal mechanism in the new Carbonmark organization would ensure that even if those contributors move on, the new organization would still be aligned with KlimaDAO's long term success.
I think a revised version of this proposal, KIP-45a, could incorporate the feedback provided so far and chart a clearer path forward for the new Carbonmark organization. In particular:
- Lay out the planned roadmap for Carbonmark (though it will be much the same as that outlined in the previous funding ask for Product & Engineering)
- Clarify the source of funds, estimated budget breakdown, etc. that 0xy as shared in his responses to comments since the original proposal
- Specify that a mechanism must be included in the founding docs/bylaws of the new Carbonmark organization to align with and accrue value to KlimaDAO based on the success of Carbonmark's products.
As for the size of the ask, personally I don't find it excessive at the reduced burn rate, and 18 months is already on the edge of a viable runway for a new organization just starting out (especially in the current funding environment).
There is a lot of work to be done integrating new credit supply into Carbonmark from ICR, Coorest and others in the pipeline pending governance approval.
This important work will both benefit KlimaDAO by providing more throughput in the retirement aggregator and any liquidity pools launched to support these new credits, as well as Carbonmark by providing users with a broader range of high integrity credits. There is also potentially an opportunity to integrate forward credits from the Solid World pools into Carbonmark, which will entail additional engineering work.