• General
  • Request for Comment: Toucan NCT Bonds

Very interesting commentary. A few thoughts:

  1. NCT is the first liquid nature-based carbon token. As @greevesie suggest: delaying bonding delays climate action ... something we should all be against.
  2. Some (including IBuyShitCoins in the first post) are suggesting the Toucan team captured this value. It has been made clear this was not the Toucan team, but instead liquidity partners that will ensure liquidity for the long-term of the ecosystem (we've seen the value not captured aggressively dumped in recent days).
  3. I have trouble understanding what alternative route could've been taken? For reasons discussed, KlimaDAO could not have been involved due to challenges bringing this through governance.
  4. Toucan has done a nice job communicating their plans for a governance structure to help determine the future of the funds used in the mass rebalancing. Resolving the exact details will take time, but going back to point #1 climate action should not wait.

As mentioned above, we are working with the community to align on what to do with the value secured in the mass-rebalancing action, and invite everyone to submit formal RFCs here: https://governance.toucan.earth/c/mass-rebalancing/2

You can also add comments on our proposed governance process here: https://governance.toucan.earth/t/rfc-governance-process/16

We are definitely not asking the Klima community to look the other way; on the contrary, we are hearing you loud and clear, and are open to any alternative courses of action you might suggest.

greevesie I have no spite towards the Toucan folks, but I fundamentally cannot support taking the same assets back into our treasury at a higher price. At least until a formal agreement is put in place to return value, which I am surprised was not included with this proposal frankly.

    sirthus We invite you to put forward a formal RFC on our Governance Forum, with your suggested course of action.
    The reason why no agreement was included is that we are giving the community time to discuss our proposal and put forward their own.
    We are aiming to announce a final decision on the allocation of the funds on 11/3. You can see our suggested governance process here: https://governance.toucan.earth/t/rfc-governance-process/16.

      sirthus I personally think that Toucan could have just distributed NCT tokens among BCT holders in proportion to the size of BCT holdings at the time of the arbitrage. After all, it was BCT holders who were affected by the arbitrage, so they should be the ones to benefit if the goal of the arb is to rescue value and then return to the status quo pre-arb. The fact that Klima--who holds most of BCT supply--would get the majority of NCT is also part of that.

      But then again, I might be wrong. It's just my personal thoughts, after all.

      Thank you all for your thoughts and considerations. We appreciate everyone's feedback and opinion on the matter and want to make sure that everyone's heard and concerns are adressed.

      As @ela mentioned we have been very open and transparent with the community to ensure that everyone gets all the information that we have as to why the rebalancing was necessary, how it unfolded and what will happen with the funds. The whole team has been working hard the last weeks to introduce our new government process and intensify our commitment to communicate closely with the community and our partners along every step. You should all head over to the Toucan forum and participate 🙂

      The same level of care went into preparing and launching NCT and we wouldn't be posting this RFC if we weren't convinced of the opportunities NCT bonds will have for the Klima and Toucan partnership:

      Toucan and Klima have together successfully created a global floor for the Voluntary Carbon Market with BCT. Now is the time to raise the floor and bring in the quality that the planet needs to regenerate the biosphere and build the regenerative economy our planet needs.

      NCT was designed to create the highest level of quality possible in the VCM and introducing NCT bonds will send healthy ripply effects across the whole market, create fresh demand for buyers, set new incentives for the ecosystem and bring synergy effects to Klima by increasing the utility of it's carbon stack and further diversify the Klima treasury.

      We hope that you can see all our efforts to make things right and move forward together, so we can all be part of this and accelerate climate action together. 🌲

      IBuyShitCoins

      Toucan chose to launch liquidity itself without the help of Klima. Why are we needed to bond liquidity? We would have to build up substantial KLIMA-NCT liquidity before any volume would travel through the pool. If Klima was made aware of the new standards it would've been fair to allow Klima to claim ~ 90% of the arb using our treasury (since we held ~ 90% of the BCT supply). Then Klima could've used that newly minted NCT to form a KLIMA-NCT pool. But now Toucan already has an NCT-USDC pool, which breaks Klima's goal of being the central carbon trading pair of the on chain market.

      I just want to clarify this mis-understanding. We asked Klima for help to bootstrap liquidity for and NCT pool, as KlimaDAO did with Moss, but unfortunately the treasury hasn't been able to do that this time. This left us in a position where we needed to bootstrap the pool ourself, with liquidity providers who believe in our long term vision at Toucan. However this left us in a position where we didn't have full control of what NCT would be paired with.

      We did push hard to be able to bootstrap an NCT / Klima pool, and that is still something that we are committed push for because we want to help Klima fullfill its vision.

      Lastly we have been in direct communication with Klima policy and core through all conversations regarding which pools we can bootstrap and re-requested assistance in bootstrapping a pool multiple times. So to be clear it's not that we didn't want Klima's help nor did we 'chose' to do so without speaking to policy.

      We have done the best with the resources we have in order to bootstrap the first high quality tokenised carbon pool with deep liquidity without any help from anybody.

      Lastly thank you for sharing your view on this, and what you would need to see in order to vote on this. I understand your point of view, and appreciate you sharing it. We are committed to getting the rescued value back to those who deserve it.

        ela I'm going to vote no and look forward to revisiting this proposal after the final decision on 11/3. Until then, it seems like it would be premature to move forward on this one. We are value aligned so I think this can be figured out. Moving forward with the submitted proposal at this time without first fixing/addressing some of the underlying issues/disagreements would needlessly divide the community. A 'No' vote now and having Toucan resubmit after the resolution of the allocation of funds seems like the most sensible path.

          blankslate I agree. Evaluating this proposal is really not possible until final decisions are made on March 11th. I think any formal KIP should wait until after that point so all stakeholders can make a fully informed vote.

          I agree with the reasoning in the reply by @IBuyShitCoins .

          I will be voting No, and I will happily vote Yes in the future after resolution of loose ends with the current NCT supply.

          1. I do not agree that KlimaDAO should be buying back value extracted from it.
          2. The decision to extract the tco2s necessary to mint the first NCTs was highly centralized, and it doesn't sit well with me that the decision to rightfuly reimburse KlimaDAO this value is arbitrarily and conveniently made to be the first decision pushed off to the Toucan community.

            I was going to leave well enough alone but this is just brazen

            ela

            In regards to your points:
            The value that was secured was never priced into BCT in the first place, and members of the Toucan core have advised against depositing nature-based carbon credits into the BCT Pool at/before launch.

            Neither you nor I nor the Toucan team determines what is "priced" into BCT and what is not, the market does, based on the information available to it, otherwise, you can stop listing BCT on any swaps and exchanges and just list it as a direct to consumer/B2B product only sold by you. It's one thing to say the team with inside/proprietary information on redemption and access believes the market price does not accurately reflect the true value of the assets underneath, it's another thing altogether to simultaneously pretend this asymmetric information effect on price exist and pretend that BCT does not lose value from selective redemption by taking advantage of the asymmetric information. Toucan's "rescue operation" justification hinges on the very fact that the market would react to the release of this information to a greater public, yet continues to pretend it would have no impact on the price of BCT or recoverable value to BCT holders. This is a point I must stress because it's increasingly clear that some members of the Toucan team and its advisors simply do not respect market mechanisms or believe the purpose of these mechanisms is to be manipulated. This lack of respect for the demand side is more damaging than any positive "motivation" you may believe you hold.

            To answer your question about the board, the funds are now in a 4/5 Multisig that consists of:
            Klima DAO, BICOWG 1, Toucan Protocol, Moss, Regen Network

            If that is the ultimate governing bottom line, what you're directly saying is that Klima would have at most a 20% say, and actually less because other signees were coordinated participants in the "rescue operation", is that correct?

            In regards to a single standard, we are referring to TCO2s, the semi-fungible carbon tokens that back BCT and NCT; not BCT or NCT or any trading pairs (as a large advantage of on-chain carbon is that it can easily and verifiably be retired by anyone, not only traded or held).
            Having one single carbon token standard while still preserving the attributes and complexity of carbon credits addresses many issues with the existing carbon markets, like fragmentation of credits in different registries, while at the same time still allowing a healthy carbon trading system.

            This is your vision, not the market's decision. If you see robust initial enthusiasm for your framework, then experience a sudden decline in the enthusiasm, I would first look toward yourself and the products you make before blaming other market participants. As for the fragmentation in the off-chain VCM, this exists precisely because of the problems Toucan is beginning to replicate on-chain - opaque and unilateral decision making, unsatisfactory criteria and standards for credits, exclusionary committees with insufficient outreach to key stakeholders other than "we would not certify you." To be clear, the market fragments because needs are not being met, not because there's no one person telling everyone else to join or become the enemy of the people - many off-chain registries have tried that and continues to try that (Nori is but the most recent example) with decidedly unsatisfactory results for backers and the carbon market alike.

            GoingJohnGalt

            Its time to acknowledge that it's been two weeks, we now have a fully functioning nature-based token - an incredible ReFi feat, offering immense possibilities - and it's time to move on and keep building.

            It's interesting that your old messages in Toucan about getting help bridging hydro credits from #bridge-support in Toucan's discord have disappeared, but I digress. The point here is that it is not Klima that's the bottleneck, but Toucan's decision on what to do with the rescued value. Perhaps peer pressure would be better applied towards pushing that to a speedy and transparent resolution instead of doubling down on Klima holders.

            @greevesie
            See comment above - the bottleneck is not at Klima, but rather at Toucan. It's been half a month since their "rescue operation", yet the resolution of the rescued value is still up in the air. Also, to be perfectly clear, bonding NCT or not will not affect "climate action" in the short term as all of those credits were issued for projects already up and running. It does delay sending a signal to future projects, but that is certainly much less damaging than forcing a double-pay action on the majority of the on-chain demand by writ of a small group of people advancing their own goals(whether that's self-ascribed noble or for the greater good or not) that could cripple on-chain demand for a crypto-generation.

            @a13x

            As @ela mentioned we have been very open and transparent with the community to ensure that everyone gets all the information that we have as to why the rebalancing was necessary, how it unfolded and what will happen with the funds. The whole team has been working hard the last weeks to introduce our new government process and intensify our commitment to communicate closely with the community and our partners along every step.

            The release of information after you performed the operation is not being "open and transparent", it's a patch to a gaping problem you opened with your behind-the-curtains operation. While I appreciate opening a governing process, you have built no additional confidence in your team's ability to respond to feedback via that newly opened channel with many members of your team's hamfisted way of trying to force this initiative through via deflection (this is for the greater good! Do it now or you're harming the planet!) and without addressing the concerns voiced here head-on.

            NCT was designed to create the highest level of quality possible in the VCM and introducing NCT bonds will send healthy ripply effects across the whole market, create fresh demand for buyers, set new incentives for the ecosystem and bring synergy effects to Klima by increasing the utility of it's carbon stack and further diversify the Klima treasury.

            No, it was not, and I raised concerns in your discord, which someone from your team promptly redirected away from the main channel traffic of attention in a sub-thread in the name of "not spamming" your general channel (any visitors can judge for themselves the frequency and volume of what would constitute spam) and then promptly ignored after it was apparently the traffic redirection was successful. By no means do I insist on my way is the right way, but even the official response to the NCT pool being just another fast track to the lowest common denominator and the denominator wasn't set very high was that this was 1) this is probably the result but the sacrifice we need to make for liquidity and 2) keep on talking up NCT as some sort of highest level of quality when it's actually will end up as the lowest level of quality of nature-based credits (aside from the occasional developed country forestry projects which aren't registered with the major registries) available by design.

            James

            So to be clear it's not that we didn't want Klima's help nor did we 'chose' to do so without speaking to policy.

            To be clear, it is something you 'chose' to do, even though you spoke to policy because you believed the Klima policy team's firm stance of transparent communication to the Klima community would impact NCT price beyond the point at which you can recover, and you believed Toucan and its Twitter Spaces friends community of stakeholders would be the better holder and distributor of the latent BCT value than arbitragers and BCT holders, who would split the value in some proportion after the release of information.

            We have done the best with the resources we have in order to bootstrap the first high quality tokenised carbon pool with deep liquidity without any help from anybody.

            This is something I've heard over and over again from the Toucan team since the effect of the operation went public. "We had no help so we had to do it." Do you realize it sounds exactly like "we have no money, but you do and we would know better what to do with your beautiful property over there, and we think we're excellent judges of who's deserving or not, so we just took the stuff you were going to spend on useless crap anyways"? I'm just wondering if there's a bit of self-awareness with anyone on the team at this point? There have been many, many alternatives proposed to you by this point, some of which were addressed in your own governance post in the form of "it's too complicated", and "it'd waste our resources on non-core functions", you know, as opposed to the "rescue operation", which is a core function? The only difference between the two is the former has results you don't see as benefiting you, and the latter has results you see as directly affecting you, not whether the operations themselves are "core" to you. I also wanted to make that perfectly clear.

              Speaking as a community member: While we do need to move on with building the on chain carbon market, our foundation has to be rock solid. Community governance has been cited as a reason why Klima was not involved in the BCT -> NCT balancing (alerting other actors while the voting and discussion occurs in public). What we're seeing now is the cost of that action possibly being greater than what was to be avoided.

              Also, not naming names, but some members of the Toucan team needs to practice better social media sensibility by not throwing subtle shade at Klima on Twitter literally 1-2 days before posting this. I mean, come on.

              I dont think we should be making decisions about NCT before the Toucan decides what they around doing with the arbed value form BCT. Does make sense to start buying an coin that is unpopular before that issue is resolved.

              As a long term Klima staker and early BCT buyer this proposal has broken any trust I have for Toucan (and brought back memories of the Klima launch with Toucan ultimately messed up by distributing BCT to rough actors). This proposal feels like an attempt by Toucan to extract value from Klima after the community's longstanding support (for crypto). Aside from effectively stealing (for now) the upside of Klima's BCT to NCT conversion Toucan has decided to create an NCT-USD liquidity pool (thus attacking Klima's raison d'etre and putting the symbiotic relationship between both protocols into question). To add insult to injury we are now being asked to be exit liquidity for Toucan's arb.

              In sum - Toucan's behavior has been extremely distasteful and, while I wish the individuals involved the best, Toucan can fk themselves if they think this is a reasonable proposal.

              Friends, let’s keep this civil and in good faith (as I believe the Klima team have maintained all throughout). Agree with the above; this proposal seems out of sequence, and steps need to be taken to restore a sense of trust and faith in the partnership.

              I think many of us are in a bit of mourning about the partnership. Toucan’s execution of the rescue and the subsequent distancing and shade that has been cast on Klima (and allowed to persist within their forums) combined with the seemingly cold cards-to-chest poker-face business-as-usual vibe that has emerged has been a little disheartening. Still, Klima will be fine either way. My hope is that Toucan doesn’t delay too much longer in deciding who they want to be, and what they want to be known for in the ReFi space. I believe that a genuine spirit of abundance might yet somehow emerge, and that in years to come we will look back at this moment and laugh in good cheer.

              Yes, let's maintain civility. Klima and Toucan have had success together.

              I do think it's reasonable to revisit this after a decision has been made regarding the value arbed from the BCT pool. I will be voting against until we have a clear picture of exactly how that is handled.