Summary
This proposal establishes KlimaDAO as a curator of environmental asset pools by introducing Klima Pools. Establishing and governing its own pools will enhance the DAO's asset management capabilities and reduce risks associated with relying on third-parties for the structuring and acquisition of environmental commodities.
Context
Since launch, KlimaDAO has relied on third parties to create the carbon pools that the treasury holds as reserve assets. In particular, bridging partners like Toucan or Moss both facilitate creation of the tokenized representation of the carbon credits themselves, as well as pooling of those assets into baskets of similar projects suitable for treatment as environmental commodities rather than individual project-and-vintage credits.
However, without appropriate governance mechanisms to implement changes to these pools over time in a predictable and systematic manner, KlimaDAO has limited ability to respond to changing market conditions that may affect the carbon pools it holds as treasury assets.
With the acquisition of the BCT pool, KlimaDAO has made its first step into pool curation, with a clear mechanism now available via KlimaDAO governance and the associated DAO multisig to modify the BCT eligibility criteria and other aspects of its functionality.
In response to the evolving demands of carbon markets and the need for robust and flexible infrastructure, Klima Pools will serve as targeted vehicles for stakeholders interested in various environmental projects. This initiative represents a strategic expansion of KlimaDAO's offerings, enabling the DAO to cater to a wider range of environmental objectives and compliance requirements while removing any custodian risk or smart contract risk of third parties controlling the assets held by the KlimaDAO treasury.
Implementation
Pool Logic and Gating Criteria:
Klima Pools will only accept eligible carbon tokens. Gating criteria will feature:
- Eligibility Check: Only tokens from whitelisted issuers (e.g. Toucan, ICR, etc.), and their associated smart contracts, will be accepted.
- Adaptability: Klima Pools will be designed to adapt to changing market demands and regulatory criteria, allowing for updates to pool criteria and the rebalancing of pool compositions as necessary.
- Gating Attributes: Specific attributes will be required for any carbon token to be deposited into Klima Pools, including but not limited to:
- A minimum first project issuance period and/or vintage.
- Specific methodologies, with eligibility extending across registries, provided they meet all other criteria and have been accepted via KlimaDAO governance for inclusion in the ecosystem.
- Geographic location, such as country or region.
- Prior to launch of each pool, a clear definition of inclusion criteria for eligible tonnes will be provided in the corresponding governance proposal, and subsequently published in the KlimaDAO documentation (https://docs.klimadao.finance), with the flexibility to incorporate additional methodologies through governance votes as market and regulatory landscapes evolve.
Initial pool criteria will be announced by the protocol team, prior to any pool construction, and is amendable via governance.
Fee Structure:
Klima Pools will implement a fee structure to support the sustainability of the pools and contribute to the DAO's revenue, including:
- A deposit fee for adding eligible carbon projects to the pools.
- A transaction fee on swaps for KLIMA/CARBON liquidity pools.
- A selective redemption fee, with the initial implementation calculated as:
(1+federal funds rate)selected redemption vintage − oldest pool vintage-1
To understand what this means in practice, see the calculator here. To fiddle with the parameters, just make a copy and see how a changing interest rate would affect redemption fees.
*NOTE: the pool smart contract will need access to the current Federal Funds Rate. This will be either taken from an existing Oracle source, or a new Oracle network will be created, for example via Pyth, Chainlink, or a similar service provider.
Any changes to this fee structure or the selective redemption fee algorithm may be made by the protocol team, and would be clearly communicated prior to any changes being made.
Platform Integration:
The KlimaDAO web application will facilitate deposit and redemption of carbon tonnes, with a user-friendly interface to ensure easy access and participation in Klima Pools. As always, the KlimaDAO application code and smart contracts will all be open source, so ecosystem partners are of course welcome to integrate this pooling functionality into their own applications.
Launch Procedure
- KlimaDAO contributors will prepare the necessary infrastructure, including smart contracts, liquidity management, and specific pool criteria to support the functionality of each Klima Pool.
- Prior to deployment of a specific new Klima Pool, a governance proposal will be posted including the nature of the pool, eligibility criteria, fee levels, and other pool-specific details, as well as a proposed initial liquidity allocation.
- Upon deployment, eligible carbon tonnes will be deposited into the pools, with a portion of the resulting tokens used to seed liquidity pools, ensuring market accessibility and liquidity.
- The https://app.klimadao.finance/ frontend will be updated accordingly, allowing users to deposit, redeem, retire, and swap.
Conclusion
By creating a flexible and robust structure for the pooling of diverse environmental assets, KlimaDAO enhances its asset management potential and minimizes reliance on difficult-to-govern third-party pooling mechanisms. This proposal invites the KlimaDAO community to indicate support for the launch of future Klima Pools, furthering the DAO's impact on global carbon markets and reinforcing its role as a public governance mechanism for environmental commodities.