• Proposals

  • KIP-18: pKLIMA Redemption Framework + Redeem and Utilize 25% BCT/USDC LP

Dunnsy the DAO pKLIMA allocation is quite massive (480m, so we're allocating less than 1% of the total). You're correct that it's a "strategic reserve" - but right now we have no other intended uses for it beyond bolstering liquidity, so we might as well put some small amount of it to work (or at least have the option to do so).

We're very hesitant to pull any KLIMA/Carbon liquidity, since carbon asset liquidity is our primary public good as a DAO. The BCT/USDC pool is a special case because it's redundant with the USDC=>KLIMA=>BCT route.

      This is a no-brainer. Its a small amount of inflation for the benefit of having deeper liquidity.

      I'm also in favor of further empowering the policy team with the tools they need to be nimble.

      MarcusAurelius and Crucible. Those points make a lot of sense. I didn’t realize that there was that much DAO pklima. So this isn’t really much of an impact in that respect.

      With regards to Klima/carbon pairs, ultimately we want liquidity to match the demand for each market to maximize efficiency. I like the idea of withdrawing liquidity when volume is low, and adding to it via bonds when it is high. Agree that it is a touchy subject, where we don’t want to be seen as not supporting liquidity for carbon.

      I’ll flip my vote, as I am certainly in favour of this KIP (would be proposing 100% of BCT/USDC myself kek)

        Increasing liquidity is naturally good. Help me understand the table please: when the (up to) 1m KLIMA is minted, we'll go from ca 4mn to 5mn issued. The USDC/BCT pool disbanding goes into treasury apart from 100k BCT and ca 1.7mn USDC. The USDC goes into the KLIMA/USDC pool. What happens with the 100k BCT? How do we prevent the 25% (based on 1mn) dilution in issued KLIMA?
        Thanks

          Sirob Yeah, so the 100k BCT technically goes back in the treasury, but can't be counted towards our reserves or runway as it has already been paired with the pKLIMA. So we'll go from 4mn to 4.1mn circulating KLIMA after this liquidity exercise, and the rest of the mints will be measured out over future weeks.

          We plan on balancing dilution primarily by reducing future KLIMA/USDC bond capacity. The 1mn pKLIMA will be redeemed over the span of many months, so we can allay future mints to counteract this inflation we pull forward and put to use today.

              optima This is a trade off decision. I don't have a particularly strong opinion, but would be interested to understand the pros and cons of:

              1. Current proposal: dilute everyone by the newly minted KLIMA, but keep the USDC from the LP for costs etc
                and
              2. Use the freed up USDC to buy BCT or MOSS and pair in the treasury to limit the dilution

              Thanks for your thoughts.

                  Sirob Definitely swimming in a sea of trade-offs.

                  With pKLIMA minting & USDC used for LP, mainly
                  Pros:

                  • Capital efficient - treasury obtains KLIMA at 1BCT ea.
                  • KLIMA not staked, no APY loss for stakers
                  • Key liquidity rail bolstered

                  Cons:

                  • Reduction of KLIMA premium in BCT (dilution)

                  Great point with USDC as potential dilution moderation. USDC can definitely be used to moderate the dilution from pKLIMA mints, if we were to purchase BCT or MOSS OTC.

                  We will have the $1,467,902 after this liquidity exercise - so BCT/MOSS OTC buys are certainly on the table and would be great for reserves. It's mainly a question of timing and opportunity cost imo. USDC buying BCT or moss would be good for reserves, runway, and other QOL metrics - but we can also perform these acts any time. So main cons are losing the stockpile of liquid capital, and the opportunity cost of potentially using that USDC for liquidity or exchange listings.

                    Why not disband the entire bct/usdc pool instead of another 25%? If the goal is for klima to become the de-facto currency for purchasing carbon offsets on-chain, I don’t see any reason to hold usdc liquidity pools of carbon offsets. Better yet, why not revise this proposal to give the DAO better control of the liquidity pools of carbon offsets that the protocol controls? This way, we don’t have to keep repeating the same conversation. For the unlock of pKLIMA, I think this part is worth discussing over each time.

                      FOR this proposal. The more klima/bct and klima/usdc liquidity we can build vs bct/usdc liquidity the better. We can capture carbon arb trades twice this way and this activity is more neutral to klima's price than the current liquidity setup. I agree with @FluctusLux that completely disbanding the bct-usdc pool should be done eventually, but I also respect the policy team wanting to take these activities slow to avoid causing a market panic. 2 rounds of 25% removal is a great start, lets see how the market responds.

                      As far as greater policy control.... that might be a good post to put up in the discord or forum and see how people respond. I would be for more autonomy.

                        FluctusLux Yeah, 100% agree we have excess capital in BCT/USDC and that the pool doesn't align with our long-term vision of KLIMA as currency.

                        Disbanding any of our liquidity pools, our public infrastructure, is delicate... BCT/USDC is an exception to the rule, imo.
                        It's a pretty stark case in favor of disbanding BCT/USDC today, but I certainly wouldn't want to set a precedent that we're comfortable chopping up our public infrastructure so decisively.

                        Any KLIMA/CARBON pair is going to be diamond handed by Policy for eternity, so those pools won't be disbanded in the future. So yeah, I agree there's a great pool of capital to redirect in BCT/USDC - but we want to be measured when making any major shifts in our liquidity composition.

                          IBuyShitCoins @FluctusLux
                          I think maintaining a rather modest pool of BCT/USDC is important for Klima Infinity partners who are looking to meet their short-term offsetting goals by buying and offsetting BCT directly using USDC. If we remove this pool entirely, they will be forced to go with USDC>KLIMA>BCT with higher fees instead.

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