Good to have a vote, but these are demanding times and need all the weapons we have (luckily we need financial weapons only ) to keep afloat and continue our mission. I vote in favor.
KIP-17: Delegate Retirement Aggregator Inclusions
GolanTrevize I definitely see your point but I think the strategic value you're trying to maintain is moot in this case and more generally I think we should seek to provide value to our users first and foremost; namely, orgs that need to source and retire quality credits.
The issue here isn't the validity of NCT as an asset, it's the contention from which NCT was created. Fair enough, we're working with Toucan to remedy that but I don't feel this situation is a solid basis from which to derive general policy.
When it comes to governing the nature of our treasury, I think the true dividing line is the issue of material risk. As in potential financial risk, not potential business negotiation risk.
In this case, there is a difference between bonding for NCT which does generate real risk to the treasury, since it's dilutive (paid for with Klima) versus receiving NCT as a fee (non-dilutive) for a function that has an incremental cost of basically 0 (and is already implemented).
I think it's clear that receiving non-dilutive fees to the Treasury is not a financial risk.
As to the strategic negotiation risk; I think you're ultimately just trying to make a case that the stick is better than the carrot here, which is an issue of strategy and not of Treasury policy.
I truly believe that we'll ultimately be stronger for always keeping our end user in mind and building the best product we can for them, which in this specific case means creating the best retirement aggregator.
Tl;dr I'll be voting For this proposal so that our teams are empowered to build for our users.
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GolanTrevize Can you clarify the reason the potential KI partner turned us down? Also, can you give some of the counter-arguments members of the core team gave in response to your objections? (without naming names of course) And lastly, since KI is a product, instead of trying to force customers to buy a product that they may not want (in this case bct) why not let them tell us what carbon product they would like to retire and then use that information to inform what our treasury should bond in future? BCT seems important now but if I had to guess in 5 years time there will be some other standardized carbon token that will replace it and we won't even care about BCT.
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I understand that Golan has played a tremendous role in numerous partnerships within the DAO, especially related to KI. That said, I would like to respectfully disagree with your stand put forth. I'd like to preface my reply with me being aware that I'm writing as a contributor in the policy team of the DAO, but for what it's worth, I try to remain as objective as possible, particularly with the mindset that I could be an ordinary member of the community and how this outcome might impact me as a stakeholder of the protocol in the future.
As many have said in this forum, I am also of the opinion that integrating any carbon asset deemed viable (with due diligence from partnership and policy) to the retirement aggregator is not dilutive and thus poses no material risk to the Klima treasury.
In fact, I contend that opening up the retirement aggregator to all viable carbon assets and not reserving the integration to only community-and-treasury-approved reserve assets could actually be more beneficial to the DAO.
This is because given how nascent the ReFi space is at the moment, there is room for our retirement aggregator to dominate as the "DEX" for carbon offsetting on-chain. Users of our retirement aggregator would be subconsciously and continuously marketed on the value of Klima just by using it even when they are retiring carbon assets that are yet approved as treasury reserve assets. And by users, I mean existing Klimates or potential Klimates. This dominance is valuable to Klima in my view and if we were to restrict the integration of the aggregator according to your counter-proposal, I fear that it also means leaving this space for competitors to come onboard and dominate.
Another concern raised is that such integration would cause Klima to be the sole demand for NCT or other similar carbon assets in the future that lack external demand. As we are deriving non-dilutive revenue of 1% of all retirements on our aggregator, this could be potentially a valuable metric for the DAO when assessing and deciding to accept a particular carbon asset as a new reserve asset. For example, if NCT starts to make up a large chunk of this non-dilutive revenue, that could signal that NCT has finally picked up steam and has external demand. In contrast, should the DAO view that these non-dilutive revenues become less valuable for the treasury to hold, we could propose to dispose of them for more viable assets to be included in the treasury.
For these points above, I feel that the original proposal is sound and will be voting For it.
@GolanTrevize has some very interesting points but I think that voting no would really limit our development and we could become an "on-chain corporate" that needs 2 weeks for every decision and I don't think that's something we want.
Also, as others mentioned, we could see new competitors that are much more flexible and it can hurt us more (+ we can lose our first mover advantage).
I'll be voting yes.
I write as a Klima holder. Thanks @GolanTrevize for the valuable control, I appreciate it as usually I tend to do these things and get the heat
I'll try to summarize pros and cons:
Pros
- KI users will have more choice, which will allow them to stay with Klima as an asset - this is important for increasing the demand for Klima and keeping the end users with Klima. It will also be detrimental for converting more integrators as KI intermediaries because their end clients would potentially find increased value in Klima
- There will be an opportunity to test out demand for other assets before starting bonds - good as real-life due diligence on Klima's side
- The treasury will become more diversified over time with assets that Klima's price may not allow us to otherwise get. Let's forget about NCT for a second, but this could be used also with Dovu and others, who can generate high quality credits and drive demand, but are not necessarily Verra/GS. We should aim to channel all demand (both Klima generated and external) to flow via the Klima token as a replacement for vanilla carbon. Using other assets will also allow KI users to not pay potential "single project" extraction fees that some bridges will have.
- The value of the treasury can "hopefully" increase without the dilution of issuing new Klima
Cons
- For the reasons that Golan mentioned, I would like Klima to not lock the new assets in the treasury like we do via bonding, but be able to sell them in LPs and use the money to prop up our treasury book value or even buy back Klima to support the price (we all know why this is crucial for getting new carbon and users).
- This opens up the question how large the liquidity will be for those assets since Klima will not be involved in setting up these LPs - this should be one important evaluation criteria imo
- It is clear that Klima is considered the buyer of last resort for many/all carbon assets on-chain and, as Golan pointed out, we should not give up this benefit without getting something back. I wouldn't want to continue the practice that some bridges have that they get the flow fees and Klima ends up with the price risk and generates all the demand. Some bridges do this smart and generate their own demand as well. This is, in my view, the best way to collaborate, where Klima is part of co-marketing with the bridge's own clients for the purpose of them using KI instead of the carbon assets directly. Moss is a great example for that.
Preliminary conclusion
Overall, I'd be for this proposal, but with a twist
- I'd propose that any carbon that Klima receives is not locked in the treasury, but used for the current needs of the DAO, which could mean it stays in the treasury, but could also be sold in non Klima sponsored pools.
- To link inclusion of such assets with concrete co-marketing which specifically enables and promotes the use of KI and also part of any LP fee income that Klima Infinity would generate in non Klima owned pools (or something along those lines).
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Sirob fair point - this KIP does not specify what is to be done with the fees accumulated, only that they should be allowed to provide non-dilutive backing for KLIMA as reserve assets.
In future we could decide to allocate these fees to a more strategic purpose such as selling into non-KlimaDAO-sponsored pools. The way this KIP is framed, such an allocation would require a future KIP.
As for linking inclusion of such assets to co-marketing from the partner, this definitely falls within the purview of the Partnerships team's existing remit to negotiate with partners. Not sure how the LP fees would be sorted out logistically, but could be negotiated as a "kick back" for driving traffic to the partner's asset.
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Tough call... GolanTrevize's strategic positioning against Toucan, or a syzygy's khyezr's vision of becoming a one stop shop for all on-chain carbon. Also the good point by Golan that Klima may benefit from de-risking away from BCT and should funnel demand towards it for retirements--especially as Toucan no longer allows selective retirement without the fee.
I think allowing retirements of NCT are not the same as bonding them into treasury. It could create a stream of income that could be deployed in a variety of ways. Thus Klima is benefiting from the NCT retirement demand as is Toucan, but we have no obligation on how to handle NCT once it is in the treasury. It could also be swapped for NBO/UBO.
Focusing on the "best" user experience, by allowing free market retirement of their carbon credit of choice is likely the more meaningful value in this case. There may still be room for Klima to showcase specific carbon credits as "preferred partners" (eg. for C3 or any other partners who share governance tokens). It could drive a lot of retirement demand for SMBs who may not care either way as long as there is general price parity between the options.
Klima must stand for "the base layer of ReFi" and if you can't get whatever you want on it, it may win the battle but open the war to more universal on-chain retirement technology coming in.
I think there is definitely room for Klima strategy to consider "preferred partners" showcased in the marketing and UX for credits which we believe in more (and who believe in us more). We are in the end ourselves a "free market participant" in the carbon world.
Securing the fundamental value of our treasury is of utmost importance.
As is becoming the Web3 carbon UX of choice.
Finally in this case I think ensuring companies have the functionality they want (to allow the market to direct us on where innovation should go) is an important product consideration to Syzygy's and Khyezy's point. But considering a "preferred partners" in our marketing and UX can bring some of the "teeth" to support Golan's focus to ensure Klima is well positioned within the competitive dynamics.
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d3s4i I just want to point out that Toucan has said that they aren't going to charge the selective retirement fee for people using Klima Infinity to retire
MarcusAurelius Yes, agree. That was the reason why I raised the point about the treasury, because my impression is that once something is included in this account, the room for maneuver is limited without complex KIPs etc. So I think these assets should be held in a different account which is much more flexible in terms of what the DAO can do with it without sacrificing the goal that Klima needs to be backed by good quality carbon.
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bananab3 here's what I answered to jg53 in Discord, which overlaps with your second question:
"TLDR: mainly appeasement of Toucan to resolve the BCT->NCT extraction.
Contributors (incl. Core) had agreed to keep carbon assets in the aggregator same as those in the treasury, until meetings last week with Toucan, BICOWG, & Regen related to the BCT->NCT return of value. So, something changed at that point. I guess it was some combo of implicit/explicit pressure/threat. P.S. to underline this, Toucan has made it so NCT is ready to be integrated in our retirement aggregator, but not yet BCT.
Think about it: C3’s UBO/NBO will likely be accepted for bonding in KlimaDAO soon after their launch. What then would be the only carbon asset excluded from our treasury benefiting from KIP-17? NCT.
And Toucan is also the only bridge that has been unable to generate demand external to Klima. Aside from MCO2 that has proven corporate demand, C3 and Flow have made inroads among corporate buyers as well. Conversely, NCT has had nil volume, regularly trading only $1-2k per day. That’s the same reason why KlimaDAO owns 85-90% of BCT supply.
The success or failure of KlimaDAO imo will largely hinge on whether we can bring demand on-chain for assets in our treasury.
What signal does it send to consumers that they should retire an offset rejected from our treasury, in this case NCT? Either they will suspect we don’t trust our community’s judgment (wrong), or we don’t want to be the first to buy (mostly right). This will only be made more obvious a conflict of interest if we are telling partners to only buy assets in our treasury. That’s certainly a position I don’t want to be in. And retail may not even know our treasury composition and offset with NCT anyway, presuming our endorsement.
So, the end result will be leaking limited demand to NCT that’s not in our treasury, diluting our treasury value and value-add for Toucan governance allocation (btw, Toucan apparently has been fundraising since December – why hasn’t KlimaDAO been invited to participate?).
There is no downside to the offset consumer in aligning the retirement function to our treasury and much more benefit to KlimaDAO. For nature-based solutions, users can retire MCO2 or soon NBO (and maybe GNT after). And when Toucan satisfies our community, why not NCT in the future. But not before"
d3s4i to be candid, I could care less about Toucan. Their oligarchic approach to governance; their adversarial approach to partnership; and their inability to generate organic demand indicate to me a dim future in ReFi.
What I care about is as soon as possible reinforcing the credibility of our treasury and by correlation KLIMA's premium to achieve our mission, which right now is deficient. As I wrote above, the best way in my perspective to do that is to catalyze non-KlimaDAO demand for the assets in our treasury, for which the retirement aggregator will be a great funneling tool. Olympus's market cap is trading roughly at backing, whereas Klima is trading at a 40% discount. Imo the main reason is the depth of market demand for Olympus's treasury assets and in contrast the still circular shallowness of ours. Unfortunately, it seems with the weight of support from other contributors and namely Core (apparently prompted in part by some smoke-filled room realpolitik with Toucan), KlimaDAO is optimizing for superfluous "convenience" of transactional offset users rather than the best interests of KLIMA holders who have taken huge financial risk/impact to date admirably to support KlimaDAO and the most important of our stakeholders (in my view).
As Khyezr noted, I am not hesitating to draw on the full extent of my personal doxxed and anon network to bring value to KlimaDAO, especially by way of Partnerships. My perspective here expressed is framed by partners' feedback, whom we need to build ReFi and have KlimaDAO succeed. By including non-treasury assets in the retirement aggregator, it is like we are pouring out priceless finite water supplies (i.e. demand) onto the desert sands crucial for our survival while crossing the valley of PMF death. I know first-hand how hard it's been to drum up demand, like advancing the trenches, and it is really a shame that some of it will be wasted and leave Klimates even more shouldering the load/holding the bag.
It would have been much better that we stuck to our original plan (until last week) of launching the retirement aggregator with only assets in our treasury, and then when ReFi is more mature and KlimaDAO's value more secure, we open it up to promising non-treasury assets.
Sirob unfortunately, your first "pro" bullet point isn't standing up of late. Large protocol/institutional may very well skip holding KLIMA for the time being and retire on our offset function straight from USDC. The unicorn I referenced in my first message and more recently a multi-billion dollar blockchain is seemingly leaning toward that as well (which of course we are trying to persuade otherwise). We need to build the case for KLIMA, and the reality is, we have to support the closure of the market cap-treasury discount as a starting point.
As for your other points, I agree that if the opposition to KIP-17 stays in the minority as it is is now, those non-treasury approved assets (mainly will be NCT for the foreseeable future) should be routed to the DAO wallet (in which we have less than $700k atm) and used for working capital/strategic initiatives, also since they are not approved by the community for backing KLIMA.
Lastly, at a minimum, I would like to see a premium service fee applied to non-treasury assets, anywhere from 2-5% to channel demand to our treasury assets above the standard 1%.
Sirob P.S. it's an honor to provide the dissenting opinion. It what's makes democracy and our DAO more resilient and innovative. As Einstein reportedly said, "what's right isn't always popular, and what's popular isn't always right"
Finally, in case it's not obvious, I will support and rally behind what the DAO decides for KIP-17, like in any robust organization, whether decentralized or not. I hope no one takes the wrong way my candor, since we're all here striving for the best for all Klimates, KlimaDAO, ReFi, and the climate at large <3
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GolanTrevize I should have clarified that I meant people who already own Klima. We have to convince them to do so in the first place, which is a different set of arguments anyway. But even if someone chooses to directly offset via USDC, at least it will be better to do it via our aggregator, since otherwise we are not getting a dime out of this transaction. By allowing this, we would hopefully be the user's interface, even if the majority of the "backend work" happens outside Klima's ecosystem. Keeping the customer relationship is very important at this stage I believe.
Sirob Nice work, bro. Always appreciate your insights.
There's been some good discussion here, and I'd like to unpack some of my own thoughts on this tool.
This specific function of providing an interface to retire and offset on-chain carbon has been in the works for a long time. I recall being on a call with multiple contributors from both Klima and Toucan back in November of 2021 as we discussed ways forward and the importance of driving outside demand for BCT. As such, it has gone through a few iterations already internally. Ultimately the carbon we bring on chain is meant to be purchased and retired(spent) to claim them against emissions.
TLDR: If there's a bridge that has proven that its tech brings carbon on chain in a verifiable manner, I don't see why any of their pool tokens wouldn't be an option to select. We just have to verify that there is liquidity and where that liquidity is so our tool can swap accordingly.
The way I have approached this project has always been from the perspective that providing an easy to use, universal experience for users to offset their footprint in the proper way outlined by a bridge. We are all here building a brand new space without standards, and the opportunity to both innovate and show both what we can do and the potential ease at which these transactions can occur is honestly astounding to me. The literal cutting edge of an industry.
This started as a simple retirement helper tool for Toucan based carbon. Moss and MCO2 came in and that shifted the perspective to making this a one stop shop for on chain carbon retirements. Then came Goddess and C3. Each of these bridges has either different retirement flows (Toucan is fully on Polygon while MCO2 requires bridging back to L1 for example) or method calls. Building out some helper contracts that are bridge specific and linking them all up into one master aggregator just makes sense for a unified experience.
On top of this, by working towards this model we can make it super easy for other protocols to plug in to our tool, allowing them to be climate neutral or positive natively since this master aggregator will retire the prescribed way depending on the carbon token you supply. That's honestly one of the larger parts that I'm excited about.
For me this tool has always been about increasing ease and accessibility for the entire on-chain carbon market. I truly believe that Klima is both a force to provide demand for carbon and facilitate the simplest market possible.
Simple you say? How is retiring complicated?
Let's take a BCT retirement for example. Say you have some sKLIMA you want to utilize since you've been staked.
- Unstake your Klima at the Klima dapp
- Swap your Klima into BCT on SushiSwap
- Redeem your BCT on Toucan
- Retire the specific TCO2 on Toucan
That's a lot of moving and navigating around for one transaction. With our aggregator it becomes
- Approve the aggregator for sKLIMA (if this is your first time)
- Fill in the total amount to retire and any desired detail info for the retirement
- Hit Retire
Of course Klima is an integral component of that market, and as such native support for retiring with KLIMA, sKLIMA, or wsKLIMA is there (as in you don't have to unwrap or unstake, it does that for you). I personally always saw any fee associated with this tool as an actual convenience fee. A user can have a quicker and simpler UX for a small fee by utilizing either our frontend dapp or integrating directly with the contract.
This is a base piece of infrastructure for the on-chain carbon market to leverage. I'd personally like to keep it friendly and simple for everyone to use.
I think two different discussions are being mixed here to be honest. One regards the possibility, in theory, that our retirement aggregator includes tokens that are not in our treasury (which I agree). But this does not lead to the automatically conclusion that every carbon token out there should be included in the aggregator without a specific KIP. Maybe some particularities (liquidity, methodologies, incentives) lead to a conclusion for one token but not for another one. The post say policy team will vet each asset, so I see no reason to not make a specific KIP for each one after the conclusion of the due diligence. There are only 3 out there rn that are not in our treasury, and each KIP only takes a few days. Not that I don't trust the team, you guys are the best, but if there is no urgency I don't see why a KIP and a voting system should be suppressed. So I changed my mind and will vote no.
The community at large should have a vetting mechanism to choose which carbon assets they want to accept, not just the select bunch of the policy team.
Posing the problem as being a problem with the KIP process is a mere way to circumvent the idea that a simpler, more expedite process could be used that would still allow the community some regards on the assets that will be picked for retirement.
And for that I vote no, I don't have much KLIMA for this vote, but still I'd like the thought of "this is trying to move control away from the democratic process of the DAO (for convenience as some have pointed)" to be represented.