Title: C3 Alliance & veGovernance
Author: GolanTrevize
Contributors: Brian33, MarcusAurelius, Khyezr, SyZygy

Summary

• Support the launch of C3 as an ally of KlimaDAO, supporting each other to develop the new crypto carbon economy with KlimaDAO as its decentralized bank and reserve currency.

• Approve the longest vote locking of KlimaDAO’s vested C3 tokens to maximize governance rights and delegate C3 voting on behalf of KlimaDAO to the Policy team with appropriate consultation of the community until a proper voting mechanism is implemented.

Motivation

As the KlimaDAO protocol evolves, it is currently progressing through the Integrations (Sprout) phase with a KLIMA supply of 1-10MM. In this stage, the KlimaDAO Roadmap highlights the importance of “new bridge protocols [to] bring novel classes of carbon assets on chain.” In particular, it emphasizes that “new carbon assets [should be] bridged on chain by a diverse group of protocols. Klima establishes its position of leadership in the climate blockchain space.”

This implies three prerogatives to adhere to KlimaDAO’s Roadmap and ingredients for its success:

1. Support new carbon bridges that increase ReFi liquidity & volume on-chain and diversity & quality of tokenized carbon tonnes locked in KlimaDAO’s treasury;

2. Encourage growth and experimentation of ReFi mechanisms and composable carbon-based building blocks, especially those that further the establishment of KLIMA as a base carbon trading pair and expand its utility; and

3. Accept governance rights in the carbon bridges KlimaDAO supports to assist their development and more broadly voice its community’s interests in the climate blockchain space.

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The new C3 (aka Crypto Carbon Company) carbon bridge is scheduled to launch in March and has requested an alliance with KlimaDAO in its recent RfC.

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This KIP-15 recommends a KlimaDAO alliance with C3, plus the acceptance and effective utilization of its C3 governance token grant to KlimaDAO, in satisfaction of each of the above mentioned three Roadmap objectives, as described below.

I.i.) C3 is partnered with Aither, the largest carbon brokerage in Europe, with an annual revenue of EUR €1.1BN. Aither will collaborate to utilize C3’s offset tool as their main source of retirement, plus sourcing carbon tonnage on-chain. Importantly, Aither’s involvement portends the attraction on-chain of alternate demand sources from its legacy clientele to complement that of KlimaDAO’s, mitigating crypto carbon supply-demand circularity. Moreover, Aither’s Verra API access will allow anyone with a qualifying project permissionlessly to bring offsets on-chain and avoid the need to manually review projects, further streamlining the onboarding of carbon credit supply on-chain.

I.ii.) C3 will introduce more registries beyond Verra underlying its carbon tokens’ certification, as provided by Toucan and Moss today, such as Gold Standard and possibly the American Carbon Registry too.

I.iii.) The criteria for UBO and NBO were purposefully aligned with CBL Market’s GEO and N-GEO contracts, which facilitates familiarity among traditional carbon credit buyers to come on-chain. These represent a distinct value-add diversification and improvement in quality starting with vintages of 2014, as compared with BCT and NCT with vintages beginning 2008 and 2012 respectively, but less than MCO2 starting with 2016 REDD+ limited geographically to the Amazon basin.

II.i.) For the first time beyond DeFi and of special benefit to KlimaDAO’s roadmap, C3 will be introducing token incentives to ReFi, which includes incentivizing UBO/KLIMA, NBO/KLIMA, & USDC/KLIMA SLPs and wsKLIMA single sided staking. Additionally, C3 indicated in its RfC Forum commentary that it intends to replace incentives for C3/FRAX to C3/KLIMA in the future, after its initial post-launch volatility is stabilized. All these incentives further motivate the horizontal development model of KLIMA as the fundamental carbon currency and liquidity pair in ReFi.

II.ii.) Apart from KLIMA specific C3 incentives, C3 emissions will heavily reward utilization and supply-demand growth of its ecosystem (75% of C3 distribution), including for actions such as bridging and offsetting, that accelerate the wider on-chain carbon-economy.

III.i.) C3 token distribution reserves the largest grant for KlimaDAO, as “thanks for igniting the new wave of ReFi” at 10%, vesting over 3 years. This together with Moss’s 10% allocation to KlimaDAO (5% grant + 5% MCO2/KLIMA LMI) sets a new market rate value for incentivization and alignment of a carbon bridge’s strategic partnership with KlimaDAO.

III.ii) C3 is introducing the dynamic vote escrow (“ve”) tokenomics model popularized by the Curve Finance protocol. This means that to gain full governance rights in C3, holders would need to maximally vote lock their C3 tokens. This can be a comparative advantage governance value-add for KlimaDAO, given its very long-term goals’ time horizon.

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Counterpoint

One hypothetical drawback of this KIP would be a potential perceived loss of neutrality by KlimaDAO among carbon bridges. On one hand, this is mitigated by KlimaDAO defining its relationship with C3 as an “alliance” of equals, rather than a hierarchical “branch” like Redacted Cartel’s relationship with OlympusDAO. On the other hand, as the different carbon bridges all launch DAO and governance tokens, it is inevitable that the different bridges will reward their users in bona fide Web3 fashion, with KlimaDAO naturally being the largest among them.

So while KlimaDAO will continue to fairly assess each new carbon bridge in the interests of its community and ReFi at large, it will be incumbent on the bridging market actors to determine the value-add of closer alignment and strategic partnership with KlimaDAO and award KlimaDAO their DAO/governance tokens accordingly. This in turn will drive the flywheel of value discovery for KlimaDAO’s governance role in ReFi and in turn potentially accrue a ReFi meta-governance premium to KLIMA.

Proposal

KlimaDAO hereby accepts endorsing C3 as an allied ReFi protocol as well as their proffered token grant and supportive efforts, and likewise returning KlimaDAO’s support for C3’s endeavors. As such, together KlimaDAO and C3 will collaborate in close synergy toward our shared mission to accelerate and democratize climate action by creating a robust on-chain market for carbon offsets.

In case of the former, specifically KlimaDAO welcomes from C3:

  • 10% of total C3 governance token supply, vested linearly on a weekly basis over 3 years;

  • plus efforts to provide –

-> additional support in bootstrapping on-chain carbon liquidity;

-> an external on-chain carbon bootstrapping mechanism outside of KlimaDAO; and

-> increased utility to the KLIMA token by making it the main pair for all current and future carbon tokens.

In case of the latter, specifically KlimaDAO offers C3:

  • support of the KlimaDAO community and its Community contributors for C3 to launch and grow;

  • assistance from the KlimaDAO Marketing & Creative contributors in marketing and outreach to appropriately promote C3; and

  • regular communication with the KlimaDAO Policy & Partnerships teams to better facilitate C3’s goals and alignment with KlimaDAO.

C3 Governance Participation

In order for the treasury’s allocation of C3 tokens to exercise governance power, it must be locked in the “vote escrow” contract as veC3 – similar to Curve’s veCRV model. Since KlimaDAO’s allocation of C3 will be vested linearly on a weekly basis, the DAO must establish a plan for locking into veC3 and participating in C3 governance.

In addition to collaborating with C3 as outlined above, if this proposal is approved, KlimaDAO’s Policy team, in coordination with KlimaDAO contributors from Core, Council, and Partnerships, will be temporarily delegated to participate in C3’s governance process and all votes, with informal ongoing consultation of the community. Accordingly, the concerned KlimaDAO contributors with ad hoc community input will fully utilize the treasury’s allocation of C3 tokens to vote in good faith for C3 governance proposals and gauges that contribute to the long-term success of the on-chain carbon market and KlimaDAO.

To maximize the governance impact of the treasury’s C3 token allocation, we also propose to grant the Policy team permission to perpetually lock as many C3 tokens held by the treasury as necessary to max out the multiplier on KLIMA-containing gauges. Once all gauges are at max multiplier, any remaining C3 will be held in the treasury until allocated in a future KIP.

In a future KIP, we will propose a mechanism to decentralize control over the treasury’s C3 governance power. In the meantime, the Policy team will more substantively consult with the KlimaDAO community on any significant or potentially controversial C3 governance proposals.

To be clear, this proposal does NOT include enabling bonds of any C3 assets. Bonding for C3 assets will be proposed in a later KIP, should this proposal pass favorably. It is expected that before this subsequent KIP will be put forward, C3 will have launched successfully and demonstrated demand for their assets in the initial days following launch.

Polling Period

The polling process begins now and will end at 03:00 UTC on March 3, 2022. Assuming in favor, this vote will go to Snapshot.

Poll

KIP-15: C3 Alliance & veGovernance

    I endorse it, all!, first proposal
    I'm just afraid of possible "Toucan" scenario, not in the same way, but them to take advantage of Klima Dao, that's my only concern here! Please Klima, take all necessary steps to secure Klima Dao and protect Your investors!

      _NN_ toucan situation seems unfortunate, I think by passing these proposals we hopefully set precedent for future partners at around 10% allocation. and avoid the situation again going forward.

      I voted against. I don't want my investment into Klima go to bootstrapping another carbon bridge. I welcome diversification to minimise risks and will vote yes to neutrally onboard C3 when they've actually proven themselves. This proposal doesn't favour Klima. It's actually the other way around. We're investing in a (so far) unproven startup and there are serious risks involved.

        flippi from my understanding C3 will donate 10% of the supply of C3 tokens to Klima, and this vote is about deciding what we should do about that asset that we have been donated to us. Thus, not yet a question about what to do with the funds in our current treasury.

        That said I believe C3 to be a very promising project and would support further collaboration e.g. through creating liquidity pools based on their carbon offset tokens.

        flippi Klima needs another carbon bridge to so that it can increase treasury diversity. Also, traditionally there are many different types of carbon credits, the ReFi space will also need this to support adoption and to incentivize innovation.

        Fantastic proposal and very for it. This is a necessary step toward the expansion and legitimization of ReFi. I'm excited for the opportunities that C3 will bring to the space.

        _NN_ this is why we think it's so important for KlimaDAO to play an active role in C3's decentralized governance process: we can exert influence on C3's decisions for the benefit of KlimaDAO and the broader ReFi ecosystem by voting with the treasury's veC3.

        I only see upside in Klima having a voice in the governance of various bridges. I am glad to see C3 follow the positive example of Moss in allocating a good share of governance tokens to the ReFi liquidity engine. Hopefully this inspires Flow and Toucan to follow suit.

        flippi

        Hi Flippi.

        We do not want to ask KlimaDAO of anything. We agree that KlimaDAO should not spend resources on us. I will quote on the RFC what we asked from KlimaDAO:

        "What we require from KlimaDAO:
        Nothing. No initial liquidity, no initial partnerships, no initial bonding. We simply want to be viewed as a friendly ally to the Klima Ecosystem. Our goals are the same: to accelerate climate action and drive demand for carbon credits."

        Thank you.

        flippi I realize the KIP-15 proposal was long, but there appears to be a misunderstanding. Klima is not (so far) "investing" in C3, and as such, there are zero risks involved, except to the (rather) limited time & effort we will spend assisting C3's launch and development.

        Again, you can see late in the proposal that: "To be clear, this proposal does NOT include enabling bonds of any C3 assets. Bonding for C3 assets will be proposed in a later KIP, should this proposal pass favorably. It is expected that before this subsequent KIP will be put forward, C3 will have launched successfully and demonstrated demand for their assets in the initial days following launch."

        Therefore, we even stipulate that bonding will be considered once C3 has initially proven themself, as you wish.

        All in all, C3's RfC is generously favorable to KlimaDAO. As for your point about "neutrally onboard[ing] C3", it would be helpful for you to refer to the "Counterpoint" section of the proposal, where this is specifically qualified & mitigated as well.

        Should you still have any qualms, please stop by our Policy informal chat tomorrow Tuesday at 5pm UTC to talk more about KIP-15 🌳,🌳

        _NN_
        What is the "Toucan Scenario" you're referring to?

        GolanTrevize I am all in favour of this proposal. We need to expand and secure the number of bridges on-chain as soon as possible. C3's cryptoeconomics are really cool and designed to become radically permissionless. I really hope we see exponential growth in on-chain carbon demand and supply as the project comes into its own.

        A shout out to C3 for showing Klima that they understand the value of Klima and know we can make each other successful in the future! Let's ship this!

        Keep in mind, this does not ask that Klima deploy any capital! We have been given 10% of C3's governance tokens and simply have to determine if we will deploy them in C3's protocol to direct more emissions to Klima-containing gauges and allows Klima to engage in the governance of C3 protocol.

        Klima must put NOTHING up for this other than time/energy.

        Ship it, bay bee!

        flippi

        I see this as all positives on Klima side with no risk of downside. Worst case C3 is unsuccessful and we have some worthless tokens in our treasury. It would be different if this was proposing C3 token bonding or C3 carbon token bonding right out the gate. It will be interesting to watch how the C3 emissions can bootstrap their own carbon token liquidity without needing Klima seeding/bonding liquidity early on.

        I think the ve emission based C3 token is going to bring more activity in the space, something we desperately need. Without the bonding churn from Klima right now ReFi has very little activity, so I'm game for anything that encourages that.

        19 days later
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