I an in favour of bonding for both the pair and the MCO2 token
Request for Comment - KLIMA X MOSS collaboration
Clearly with the above, more educated, people asking appropriate questions that needs answers. I feel this proposal unripe to move to the following step of being a KIP.
An AMA would be the first logical step, followed by answers to the questions asked in above messages.
Because of my lack of knowledge in the carbon markets, I will leave it to those with expertise to expose the pros and cons of integrating MCO2 to the KLIMA treasury.
However, if we’re talking purely from market mechanics, I would like this proposal to be revised and consider the liquidity for MCO2-USDC as well. Like what @0xFelix mentioned, not having a dedicated liquidity pool for MCO2-USDC will just create this routing:
MCO2 -> KLIMA -> BCT -> USDC
Which to me, is a big red flag. Integrating Any other carbon asset to KLIMA’s treasury automatically creates a liquid market for that carbon ton, which is ripe for arbitrage opportunities (we’ve seen this happen when BCT first opened up). Moss needs to rethink this proposal from a purely market dynamic perspective and include an initial allocation for MCO2-USDC as well
SBax_Regen Hi Sarah! Currently Moss is a vertical platform. Moss is also developing carbon credits together with land owners. Moss is also able to provide different financial resources to allow them to increase their impact on conservation and social investments.
lancecord Sequestration credits are very rare. Carbon capture machines don't really scale (yet) and neither does reforestation. The ubiquitous type of credit is avoided deforestation, having represented more than 50% of the global carbon credit market in 2020 according to Ecosystem marketplace. @Moss
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Sirob Check out the proposal for your answer here: "Klima's most valuable proposition over time is the intrinsic value. Would you agree to stimulate demand for Klima among your end clients as an alternative to selling MCO2 directly to them?"
Our proposal at Moss (I'm the CEO):
"Furthermore, to facilitate this joint partnership, the MOSS team will bond 15k tons and collaborate to jointly market this effort in catalyzing the DeFi carbon offset market. This collaboration includes the following pledges from MOSS:
Should KLIMA-MCO2 bonds be of interest, we will provide $500,000 worth of MCO2 tokens to Polygon to pair with $500,000 of KLMA from the DAO to form a liquidity pool. This will be shared between us and the Klima protocol.
MOSS pledges to engage in joint-marketing efforts with KlimaDAO to accelerate the development of DeFi carbon markets. Part of this effort includes providing KlimaDAO with $30,000 in funding for marketing efforts."
@Sirob @SBax_Regen @Dionysus I am the Moss CEO and we are all for a AMA session, and truly believe in the immense benefit of building a community and decentralization. As we all know, the planet is running out of time, and we must join forces to go as fast as possible on the mission to reduce emissions drastically.
SBax_Regen June 2020
SBax_Regen Ecoregistry, for example
RainbowWarrior The process for bridging BCT and minting Klima is not that different from MCO2. Or do we really believe that carbon projects know how to use blockchain? I'd bet every single BCT outstanding was generated by companies or people that have extensive blockchain experience (including @Moss ) and made money just as Moss did. Buying low and selling high. This arbitrage is largely over now, so the driver for future generation of assets for Klimadao must come from verticalized or integrated players, like Moss - That are working on the digital generation of NBS assets. And the tokens don't compete, they complement each other, they are different animals: BCT is any Verra credit from 2009 onwards, MCO2 is a curated pool of REDD projects in the Amazon forest, a lot more scarce by definition.
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SBax_Regen @Moss is financing the projects by acting as an offtaker (Moss is the private player that sent the most money to Amazon projects via the acquisition and offtaking of credits, US$ 26 mn - a truly tiny number that shows the potential for financing of conservation) , and developing projects in partnership with traditional offchain developers.
Having a verticalized SUPPLIER of credits would be of immense value addition to KlimaDAO, IMO.
Currently the DAO depends on arbitrage players that buy low from carbon projects and bridge to BCT to sell at higher prices - and that arb is gone as BCT prices are below project levels now.
Furthermore, @Moss has figured out the downstream part - selling credits for offsetting to individuals, and, more importantly, gigantic companies like Gol Airlines (world's 5th largest Boeing fleet). It's a complementary way to Klima's carbon credit blackhole and withdrawal of credits from circulation via speculation - Moss actually has millions of credits that were retired due to companies offsetting. I cannot think of another company that has had our success at reaching downstream offsetting - and this offsetting complements perfectly Klima's "speculative blackhole"
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Moss https://www.mckinsey.com/business-functions/sustainability/our-insights/putting-carbon-markets-to-work-on-the-path-to-net-zero
McKinsey report estimates that 65-85% of future offsets will come from NBS. Brazil has 50% of the world's carbon. Thus, by partnering with @Moss , Klima would secure offsets in the future from the most important source globally. As it is structured currently, Klima risks not being able to secure credits and relies on ephemeral arbitrage opportunities between lower project level prices and BCT to bring supply onboard - furthermore, most of this supply comes from credits other than REDD
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ladaime You make an interesting point here about basically monopolizing potential high quality supply and saying: ok, so far various players have arbed VERs into BCT (which is obviously true) and we want to do it structurally by locking the value chain from start to finish (once you get into project dev yourselves). My guess is that this notion (while completely rational) does not sit well with some folks here. Doing the same with BCT (as we saw with the HFC credits) was perceived quite badly by the crowd here.
Let me give you an example from the UK with another VC backed consumer facing climate tech called Ecologi. They are a normal company that also buys credits wholesale and sells B2B and B2C, however, they do it at a fixed margin of ca 15%, which everybody knows - all of their metrics (incl revenues, costs etc) are public for anyone to see (which is a first I believe). This level of radical transparency (which nobody has required from a private VC backed entity) is perceived very well on the market by both their customers and other partners.
I believe the nature of DAOs kind of requires a similar level of transparency in addition to a mass open forum discussion and voting. This is not an easy task.
My point is that as we know, the voluntary market has been (and still largely is) obscure and there have been many cases where a project dev takes like 95% of the margin from a forestry project and only 5% goes to the land owners / farmers (this does not refer to Moss as I have no insights into their economics). This happens precisely because there is low competition on the market and relatively few players with experience. It is one thing to increase the price of carbon by removing supply at higher prices, but if the ultimate "cost of carbon" is not helped by this because the end price increase just expands the middleman's margin, that would be considered a failure and will not enable higher-priced carbon tech.
Please do not put words in my mouth ;-).
Nowhere did I say anything about monopolizing supply. To try that would be silly, as the voluntary market is 250mn ton currently, growing potentially to 1bn in a few years. We do however want to digitalize the process to drastically reduce current costs for asset generation - which are absurdly and unnecessarily high because of an outdated, manual, analogue fact checking and due diligence process.
We believe in the DIGITAL generation of assets. That's how we are gonna remove the "middlemen" and empower the micro or small property owners to conserve and pay them for protecting the forest. Our experience in Brazil, with a team of multi decade experience in the carbon and environmental space, is key to understand the sharing of economics with the small players. For example, the current system of paying 500k USD to incumbent authorized auditors and developers for a 3-4 year certification process is obviously taking money away from the land owners and concentrating the benefits of carbon asset generation to large holders.
Once we are able to digitalize and generate assets via a decentralized system - instead of having to audit and certify them via abusive centralized registries - supply should boom, and a large share of development economics will stay with the land owners.
Moss intends to create a network and digitalize the assets for NO COST. The company will make money by creating NFTs and other tokenization services, as one player in a multiplayer decentralized service system, with transparent fees as you suggest.
Our fee is currently ZERO. We have bought credits cheap in the beginning of 2020, took (significant) balance sheet risk and are selling them dear(er) now. Simple as that.
It's certainly not a recurring model, and we aim to build this decentralized certification system with DAOs such as Klima. That's our end goal, that's our core value. Have we made money? Of course we have. This doesn't mean we support the current incumbent system that forces prohibitively expensive certification processes on land owners, and our engagement with Klima and similar DEX/DAO efforts are in the way of reducing these costs in a permanent way.
We want the guy who owns 2 hectares (2 football fields) of Amazon forest to upload their land data and get back the money from any conservation performed in the past year automatically, without having to pay hefty fees.
Now, in Brazil, the developer figure is the same as the land owner, it's not as separate as you suggest or as people living in developed markets would think. And developers, especially in the Amazon forest, take A LOT OF risk. Brazil is a wild wild west in terms of rule of law, especially the northern region. Brazil, by holding the highest reserve of carbon in the world, is by default the low cost generator. High risk, high return. Developing NBS in Brazil will ALWAYS generate high profits (as implicit costs are 2-3 USD per ton), and making a profit is OK (right?).
We want to create as high incentives for property owners to avoid deforestation as possible. We WANT PEOPLE TO PROFIT FROM SAVING THE AMAZON OR ANY FORESTS, AS MUCH AS POSSIBLE.
Currently, a person can buy forested land in the Amazon for 100 usd per he, slash and burn, and resell for 500 usd. If we create a "green gold rush" and decrease the yield for carbon generation by increasing land value, we'll save the Amazon. That is to say, once land is at USD 600 because everyone in the world is buying land in the Amazon to generate carbon offsets, the Amazon will be saved. It's as simple as that, people (from time immemorial) follow financial incentives. Fixing margins for players sounds to me like a centralized, socialist, romantic view of how the world works. We need to be pragmatic. Has Klima worked because of the significant high APRs and arb between legacy credits and BCT, OR because people want to combat climate change? Probably both, but the first incentive has probably been stronger than the second.
I am for this collaboration.
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I don't want to infer anything, but you said earlier: "As it is structured currently, Klima risks not being able to secure credits... ", which to me sounded a bit like, if you don't get our credits from us, you will not be able to secure them as they are scarce and we are the largest holder. Sorry if I misunderstood
I do agree with a lot of what you say by the way, don't get me wrong. I think digitalizing the slow, outdated and expensive validation and registration process will be a great step forward to bring things like Klima closer to the original source. Hopefully one day it can become to PDevs what the agro futures market is to farmers.
I would disagree with the notion that working on a fixed margin is somehow romantic or bad, it just shows that you can have a clearly incentivized entity with known economics and value added which does not unnecessary make a service or product more expensive. Carbon margins should go down significantly in future when competition increases.
Your last sentence seems to be the crux here: The arbs and people wanting to combat climate change have vastly different incentives and the risk is fully taken by the latter so let's not be romantic here
Merry Christmas by the way to you, your team and everyone else here.