KlimaDAO Forum

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.

This kip has almost no discussion anywhere. I'm baffled that it's made it to snapshot and that there are already so many yes votes. I searched for optima on discord and realized that I would need to fiddle through every message sent to find discussion on this kip. Heading over to the policy-forum discord channel I was able to find some recent discussion. What did I miss? Where does it start?

Search KIP or even just 16 in the announcements channel on discord yields no results.

https://discord.com/channels/841390338324824096/900965990148485130/949841943553249381 is the only discord reference I could find to announce this things presence. That was 2 days ago.

This KIP has only been a proposal for 4 days, only announced for half that time. I could not even find an attached discussion thread in general. Do we really believe that stakeholders had a chance to even know this thing existed before it was pushed to snapshot?

How could any one vote now with an informed decision in a complicated environment such as this?

You did not tell any one before putting it up for vote. The only ones who knew were those likely to vote 'for'. This snapshot vote does not meet any standard for fair.

Where did the pKlima in the DAO wallet come from?
Why are we adding liquidity with such guaranteed impermanent loss occurring?

Why is the lifting of this restriction not discussed any where?

Doesn't this kip just redeem pKlima? Then doesn't it just add it to the liquidity pool so that quantity bonders can suck it's value out while lowering Klima price to 1:1 with BCT?

Who gets the most benefit from this KIP? The bonders who will use that liquidity to lower price and increase their klima quantity. Who are the best bonders? Developers who can build bonding bots that always get the best discount and redeem and stake perfectly. Who proposed the kip? A user with a Klimate Tribe tag on discord. A community of DAO volunteers who are mostly developers.

If that last sentence stings, I'm sorry. I don't mean to make accusations just a point. The point is there is no way to tell how this KIP will move value. This KIP greatly benefits the bonding bots that are significantly affecting price.

More liquidity is allowing quantity bonders to gain more quantity. Quantity bonders will continue to bond at a discount causing significant impermanent loss to the liquidity added. The value of all assets used including pKlima is just routed to quantity bonders through the liquidity pool. Quantity bonders will then gain even more market share, paid for by irredeemable pKlima, well on their way to perform a 51% attack on governance placing the Klima DAO in an irrecoverable position where KIPs to lower the benefits of bonding cannot pass and quantity bonders continue to decrease price while the treasury spends itself in entirety defending 1:1. At some point the quantity bonders vote to disband and get the treasury having decreased all others market share to insignificance.

I strongly suggest voting no. Do not add more liquidity until price action stabilizes. You would not add your own with such guaranteed impermanent loss.

Edit: DAO pKlima is unrestricted.