Summary:
Deepen KLIMA/USDC LP by exercising some of the DAO's community allocation of pKLIMA and pairing it with USDC attained from disbanding BCT/USDC LP (KIP-13).
Motivation:
The community allocation of pKLIMA is an untapped strategic reserve that can fulfill key DAO initiatives requiring KLIMA, such as seeding new liquidity pools or bolstering existing pools. pKLIMA always needs to be paired with 1 BCT to mint 1 KLIMA, and is a versatile policy tool we are now in a position to utilize after disbanding 25% of BCT/USDC per KIP-13. As of writing, disbanding 25% of BCT/USDC will yield 1,301,297 BCT and 4,981,588 USDC that the DAO can strategically allocate to further the adoption of KLIMA.
As a reserve currency, KLIMA value and utility is maximized when transactions are routed through KLIMA. As discussed in KIP-8, the DAO looks to develop KLIMA horizontally, becoming the keystone asset at the crossroads of the on-chain carbon economy. In order to do this, KlimaDAO requires deep liquidity in its KLIMA/USDC pool as this pool forms the first leg of any relay from USD to carbon asset, through KLIMA.
With a $1.8mn pool (3.4% of total liquidity), Klima/USDC currently accounts for roughly 45% of total KLIMA volume. Below is the KLIMA/USDC (Orange) vs KLIMA/BCT (Blue) volume.
More trades route through KLIMA/USDC as we continue to bolster the LP through bonding. For users looking to purchase KLIMA, this provides a significant reduction in slippage as the user avoids having to experience slippage twice when hopping through USDC-BCT-KLIMA. Further, as we continue to onboard additional carbon assets, depth of the KLIMA/BCT pool will benefit only users looking to trade BCT. On the other hand, depth in the KLIMA/USDC pool will benefit users looking to trade any carbon asset that KLIMA is paired with, which is a key element of KLIMA’s horizontal development. We now have an opportunity to take a small portion of the disbanded BCT/USDC to quicken this horizontal development.
The Policy team has also considered the alternative approach of acquiring the required KLIMA using USDC via inverse bonds. Inverse bonding is a tool enabled following the passing of KIP-12 which allows Policy the ability to offer treasury assets in exchange for outstanding KLIMA. Acquiring the KLIMA needed via inverse bonds would span over days, and cost the DAO the full market price per Klima plus premium from the inverse bond offered. Redeeming pKLIMA strategically allows the DAO to mint at the intrinsic value of 1 BCT and build out the KLIMA/USDC LP immediately when KIP-16 is passed. While the immediate redemption of pKlima will increase supply, Policy will correspondingly reduce future supply from bonding to account for this increase.
Example:
Proposal:
Facilitate the horizontal development of KLIMA by pairing 100,000 BCT with 100,000 pKLIMA from the DAO’s wallet to redeem 100,000 KLIMA, to pool with ~$2,000,000 USDC, strategically deepening our Klima/USDC LP from $1.8mn to $5.8mn.
Polling Period:
The informal forum poll begins now and will end March 5th 18:00 UTC. Assuming in favor, this vote will go to Snapshot.