• Proposals
  • KIP-49: Liquidity Rebalancing - Redeem a Portion of KLIMA/USDC

Summary
Redeem a portion of the KLIMA/USDC liquidity pool to direct KLIMA liquidity to other markets and fund strategic partnerships that create long-term value for KlimaDAO.

Motivation
In the early days, KlimaDAO required a robust KLIMA/USDC pool to facilitate a smooth onboarding process for new users. However, the volumes have leveled off, utilization has decreased, and there is far more liquidity on-chain than there needs to be to facilitate an efficient market. It's time to adapt our strategy to maximize utility and value creation.

Increasing liquidity on other markets like centralized exchanges will significantly reduce the barriers to entry for new participants, thereby accelerating the adoption of KLIMA and contributing to our mission of carbon offsetting.
The USDC redeemed will be used for forward purchases and other initiatives that directly contribute to KlimaDAO's value proposition.

There are a few things to consider here:

Increased Accessibility: Many potential users find centralized exchanges (CEXs) to be more user-friendly than DEXs, especially those who are new to the crypto space.
Market Depth: A deeper market on CEXs will make KLIMA more efficient to trade for new users. There is a large user base that trades without self-custody wallets or interacting with decentralized finance, but still want access to the Digital Carbon Market. A deeper $KLIMA market on CEXs is a key signal to larger users. Conversely, a shallower market on chain will cause buy and sell pressure to have more impact on price.
Onboarding Efficiency: Easier onboarding through CEXs will likely lead to increased demand for KLIMA, which in turn will drive up its value and utility.

Implementation
Redeem KLIMA and USDC from the KLIMA/USDC pool leaving $500k TVL in KLIMA/USDC , far in excess of a 20% utilization target when we are realizing average daily trading volumes of $10k/day. With $500k left in the LP and $10k daily utilization the KLIMA/USDC pool is still overfunded relative to market volumes at an estimated 2% utilization rate. When utilization increases, liquidity can easily be re-added to facilitate larger volumes.

The assets will be allocated as follows:
882,352 KLIMA: To be used for bolstering liquidity on other markets.
$750,000 USDC: To be used for strategic partnerships and other value-accretive initiatives.

Beginning & ending KLIMA/USDC values found here.

Framework

Redeem Assets: The team will redeem the specified assets from the KLIMA/USDC pool.
CEX Liquidity: The redeemed KLIMA will be strategically allocated to various centralized exchanges to bolster liquidity.
Strategic Partnerships: The redeemed USDC will be allocated to initiatives that have been vetted for their potential to create long-term value for KlimaDAO.
Future Liquidity: USDC redeemed from this KIP can be used for forward purchases and liquidity provisions for new markets.

Proposal
Redeem KLIMA and USDC from the KLIMA/USDC pool, leaving a target of $500,000 remaining total liquidity.

Utilize the redeemed assets as outlined above.

Polling Period
The forum poll begins now and will end on October 23rd 2023. If the RFC receives sufficient support, it will advance to KIP for community approval.

Resources
Sushiswap KLIMA/USDC Pool
KLIMA/USDC Utilization Metrics

Rebalance KLIMA/USDC?

This poll has ended.

may I ask which CEX is it?
GATE.io ?
Are other exchanges being considered?

    endwar the Gate.io listing has actually been doing the majority of volume lately for the KLIMA token

    it’s undecided which other centralized exchanges we may want to list on at this time. From my POV, it’s opportunity dependent

    Ofc - there are moral hazards to working with the wrong CEX. We should align what the financial accounting and business reputation standards should be for what CEXes are eligible.

    I do think there's equally good things that could come from working with a good CEX though too. Would love to see particular CEXes take an additional step forward in the carbon ecosystem as part of the liquidity incentives we'd give them

    Particularly in committing resources to offer fiat offramps for producers / sellers of digital carbon. For some users and localities - this is a genuine must have for participating. Good way to use this program to incubate DCM growth if we can swing it and I think would help us discern good from great usage of this redemption.

    I think the primary goal here was to incentivize CEXes on trading - but its important to still think about the other roles and goals receiving the token is meant to incentivize.

    I'm in favor of rebalancing KLIMA/USDC liquidity given the very low utilization at the current level of liquidity.

    Agree with Optima's assessment that deploying treasury capital to support CEX liquidity should only be done opportunistically, but having the KLIMA on hand to take advantage of opportunities like launching new KLIMA-carbon liquidity pools or bolstering CEX liquidity rather than sitting underutilized in KLIMA/USDC makes sense to me

    Have you considered moving to concentrated liquidity on Polygon POS?
    You'll need far less capital for the same efficiency.
    Gamma is probably the best. Manages the Uniswap v3 pool for you.
    https://docs.gamma.xyz/gamma/

    CEXs don't really offer much potential for promotion. It all depends if users are signed up to them. Uniswap is huge and their v3 pools cab see very high yields (because of the capital efficiency) which is a good promo in of itself.

    Another player on Polygon offering concentrated liquidity is KyberSwap.
    https://docs.kyberswap.com/liquidity-solutions/kyberswap-elastic

    There's a lot of liquidity out in defi. By having high performing pools you will get on all sorts of analysis tools and apps.

    Strategic Partnerships: The redeemed USDC will be allocated to initiatives that have been vetted for their potential to create long-term value for KlimaDAO.

    This sounds very open ended. Why not put the USDC with the rest of the DAO's funds, and create separate KIP when there is a specific use that the DAO can vote on.

      climber It is open ended, for sure. Rather than codify and pass the specific use of the USDC inside this KIP, these are more-so potential uses.

      Any USDC deployment or future opportunity will be passed via a subsequent KIP where there is a specific use that the DAO can vote on.

      Por favor, alguien me puede decir si tiene el staking de entrada y salida bloqueado o soy yo sola...no puedo pasar a conectar otra billetera tampoco . gracias

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