• General
  • Request for Comment - KLIMA X MOSS collaboration

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.

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"

    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

    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.

      Sirob Dear @Sirob

      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.

        ladaime

        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.

        Euclid creating a liquid market on Polygon could drive most of the trading volume there. And if we force people to buy via Klima/MC02 pair we force buyers through 3 of our pools effectively (usdc -> bct -> klima -> MC02). The only negative to this is I don't think we can make our klima/MC02 pool the dominant volume for MC02 if buys have to undergo 3x slippage to buy...... I think I'd rather build a MC02/USDC pool and strive to make it the dominant trading pool. Lightly incentivize naked MC02 and mco2/usdc liq though to ensure our primary focus is still on BCT.

        Overall In Favor of Klima/MCO2 and naked MCO2 bonds, as long as majority of bonding emissions remain focused on BCT.

        I look a look at their Coinbase listing. They seem to have a lot going for them. I'm not certain how to verify what they have on there, but having raised seed funding and going for Series A is good along with their other successes. I'd love to see this happen!

        ladaime I am certainly a layman so the thoughts that I consider are basic; Klima is a black hole for carbon, Moss looks like a trading platform for carbon - I do not understand why Moss would want to put their tokens into a black hole that cannot be traded. Forgive me if I have missed the point

          Definitely in favor for bond and liquidity option. Love the diversification of treasury.

          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 am referring to the fact that anyone can buy credits off chain and tokenize them by bringing them over the Toucan bridge, and minting Klima.

          With the Moss model:

          • only moss can tokenize the credits
          • they are credits that moss has selected and tokenized and they then sell to people, or moss themselves turn them into MCO2s

          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.

          Opinion stated as fact. Arbitrage is increases as the price premium premium on chain increases. Unless you now think that the price of Klima isn't going to rise again. As the price of Klima rises, so does BCT and the arbitrage continues. The price at time of writing is $7.20 so please don't make sweeping statements that are untrue and pursue your own agenda.

          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.

          The moss token competes directly with the NBCT token which will be minted using the same decentralised methodology of bridging, where anyone can buy it offchain, bridge it and tokenize it.

          We need a unified on-chain carbon market with deep liquidity, not many competing commodities which fragment liquidity.

            Yes - good quality credits in a strategic market for carbon. Good partner to grow with.

            Spike

            If someone finds a niche where they can make a profit by doing that, isn't that a good thing? Does it really matter if they're profiting by being a middleman if the carbon price goes up, and decarbonisation projects happen which wouldn't have happened otherwise?

            Price will need to up even more in order to enables previously unviable projects, if people are sitting in the middle taking a slice of the pie as they always have. This is not necessary in the case of KLIMA DAO. There is no need, or justification presented that explains why Moss sitting between the projects and the Klima treasury is necessary.

            This is not an efficient market, and more efficient markets consume more, that means direct connection between project and treasury. If the project can't bridge and bond themselves fine... then tom, dick or harry can do it, there's no need to have a company in the middle, what's the point?

            This sets a precedent whereby Klimdao will then start taking more retailer tokens into the treasury and this is a completely different path than what we have walked thus far IMO.

            Spike My understanding is that the journey from "I have a great idea for a decarbonisation project" to "Here are your BCT tokens for this year" is a multi-year process requiring a lot of specialist knowledge and interactions with several different organisations. If Moss have a way to streamline that process for qualifying projects, doesn't that mean they're enabling projects to go ahead which otherwise might have stalled or not started in the first place?

            As far as I understand Moss buys already existing carbon credits and tokenizes them, and sells them. They don't develop projects. Please correct me if I'm wrong about that.

            Spike I thought the plan was always to have multiple "pools" of tokenised carbon offsets - e.g. nature-based, direct air capture, etc. Are you saying that Klima should only ever be backed by BCT? Also, doesn't bonding the base carbon tokens for Klima have the effect of converting less liquid, heterogeneous carbon tokens into a more liquid, homogenous asset (i.e. Klima)? Or, have I misunderstood the point you were trying to make?

            There are more pools coming on Toucan protocol, including the NBCT pool, and we will now have 2 NBCT pools instead of one with shallower liquidity. The MCO2 won't be compatible with the Toucan protocol, and any inter pool compatibility protocols that are developed under this approach. A better solution would be to put MCO2 token into the Toucan NBCT pool and put it into Klima that way IMO.

              RainbowWarrior The moss token competes directly with the NBCT token which will be minted using the same decentralised methodology of bridging, where anyone can buy it offchain, bridge it and tokenize it.

              From what I've seen, there's no public information regarding nBCT (nature-based BCT). Toucan hasn't released any details officially announcing a pool, and hasn't disclosed things like methodology accepted, year, and other requirements. We also don't know when this token will be released.

              I'm still learning about the carbon markets, but from what I understand, nBCT are for general nature-based carbon credits, and MOSS focuses on REDD credits specifically in Brazil, which in theory would have a higher premium. The size of the LP pools we create are largely based on demand, so if MOSS doesn't facilitate huge volume, we simply retain that pool and shift emissions to where we think is best.

              I would like to see from the MOSS team:
              1) Progressive decentralization: A timeline on when users could tokenize their carbon credits.
              2) More concrete proof of the carbon credits, visible to the community. Toucan has developed a system where anyone can verify the carbon credits are (though a little arduous as its very early on in the ecosystem). I've seen that there is a verification system, but if we can see the Verra credits themselves, I'd be much more comfortable in it.
              3) Further incentives for the KLIMA protocol to take in MOSS and/or KLIMA/MOSS LP. From the discord discussions as well as here, it seems that the community believes the MOSS is gaining the better side of the deal here. From moss's side, they are providing:

              • A commitment to bond 15k MOSS for KLIMA (Can we also get a commitment on how long this will be staked?)
              • 500k MOSS to pair with 500k KLIMA, shared between KLIMA and MOSS
              • 30k for marketing.

              I would propose that the LP that MOSS holds should also be bonded as well, so that the entire LP is in the treasury. Facilitating liquidity is the most important of out of the 3 commitments, and I'd rather that be the focus rather then the other 2.