A dynamic AKR to reflect the dynamic nature of the on-chain carbon market is logical.
KIP-23: New Framework for Supply Expansion
CryptoKnight absolutely, and honestly in an ideal world we would have had the time to do extensive modeling and analyze the data in more depth before proposing this new framework, but as I've explained above, market conditions forced our hand to do a major reduction sooner rather than later. Given the community's concerns raised around KIP-14 about reducing AKR outside the bounds of the KIP-3 framework, we felt we had to put forward a new reward rate framework to replace the overly-simplistic KIP-3 framework at the same time as this significant reduction.
As a reminder, if you want to be a carbon backed CURRENCY, you need 2 things... a large supply and high liquidity. So far, we're missing on both ends. We're currently at less than 6M supply. With current rate reductions it'll take 20-30 years to reach a reasonable supply to be considered a currency. We don't have that much time. A new tech will be out in 3-5 years and this DAO will be obsolete.
The answer can't always be, let's reduce the AKR and increase our runway. Runway won't matter if we become obsolete. We've got to do something to attract new interest and new buyers. We've got about 6 more months to become relevant, otherwise we will have missed our window of opportunity.
I know it's hard to attract new interest in this market, I get it, but a higher interest rate certainly helps. I'll be honest, once this gets below 100% APY then I'll probably leave. Why? Because I like my chances with other cryptos. And I think there are others that feel the same way. I think many will jump ship for XRP, FLR, or others, in hopes for a 4x as opposed to this constantly falling APY.
In short, figure out better ways to stay relevant. Constantly dropping the APY doesn't provide relevancy.
(I'm not trying to beat down this project, I'm a holder and supporter. Just providing honest feedback).
I think it's more or less the adopted framework model of OIP-93 where the APR is adjusted with lower and upper bound ranges. I fully support this approach for protocols long-term sustainability
With such a drastic reduction you are likely alienating a large part of the Klima community who are genuinely here to support the project but are also trying to break even on their initial investment. The policy team needs to balance the health of the project with the impact that this will have on the existing Klima holders and attracting new ones. As many of stated above there is likely going to be an exodus if AKR reduces too much as many of us here also see it as an investment of our capital and savings. The planet is important but if Klima keeps sucking our investment down the drain I don't see how it can be relevant. There needs to be balance here to keep people invested giving them a 1-3 year timeline of where their investment is going. Yes Klima is looking at a 10+ year horizon for building a carbon currency but IMHO you need to focus on yh 1-3 year horizon to keep Klima holders bought in.
Car54 A large supply is certainly needed but what we are saying is that the supply expansion would need to be commensurate with the tons coming on chain. So long as the on chain market grows so does klima. The current supply is 5-6 m and the number of carbons tonnes with verra are hundreds of millions so the potential to grow supply to a large amount still remains. The case for relevancy is whether or not klima can become the main market facilitator for the on chain market not how high its APY is.
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spidershad0w Yes Klima is looking at a 10+ year horizon for building a carbon currency but IMHO you need to focus on yh 1-3 year horizon to keep Klima holders bought in.
As a team, we are aligned on that to be completely honest with you. We won't be able to see the 10th year if we don't get ourselves to the 3rd / 5th / 7 year. And this is why we have this dynamic AKR framework to chart a new path in supply expansion as opposed to our initial framework (KIP-3) that monotonically decreases AKR. The challenge right now really is the number of on-chain credits available to justify us increasing/maintaining AKR. This is why we're proposing a reduction for now to give time for the on-chain carbon market to pick up (not saying that we wait passively by the way as our partnerships/marketing/core are working ceaselessly to create opportunities for greater adoption) And when the carbon market picks up (e.g. we see growth in bridging on-chain) we could then increase AKR and bond capacity to capture that growth.
spidershad0w The policy team needs to balance the health of the project with the impact that this will have on the existing Klima holders and attracting new ones.
IMO all that you stated in the above are important rather than balancing one with the other. Rather than maintaining a high AKR in a bearish market, attracting new believers in a project is about working towards solid fundamentals and letting those fundamentals speak for themselves.
Car54 The issue here is that there'll be no carbon credits to bond with at the current AKR. In other words, the # of carbon credits coming on-chain is lower than the # of $KLIMA that is being minted everyday (by bonding). AKR dictates the minting rate of $KLIMA.
At the current AKR, considering the same rate of carbon credits coming on-chain, we'll probably run out of carbon credits to bond in 6 months or so. What do we do if there are no more carbon credits to bond?
This is situation is unlike OHMs, as there is a massive supply of DAI, LUSD, ETH and several other "blockchain native" assets to bond as Olympus pleases. So OHM's changes to its APY is a strategy. But KLIMAs reduction is a necessity, at present. If this is not done, then in a few months, there's a risk of nothing left on-chain to bond with.
Once we run out of carbon credits to bond with, then a treasury supporting a long runway is of no use. We'll just deplete the treasury paying rewards and treasury won't go up due to zero bonding and it all collapses.
This proposal gives sufficient time for the #ReFi ecosystem to grow... We lower the AKR, reduce bonding capacity, take fewer carbon credits into treasury, allow for more carbon bridges to develop, allow time for more adoption & partnerships, see more investment flow into facilitating the flow of offchain to on-chain carbon credits, see the on-chain volume increase..... and then bring up the AKR
khyezr is there a timeline by when you expect on-chain carbon to become healthy enough for a AKR raise? so when the 90 day moving average reaches 0.35% then we decide? How did you come up with 0.35%?
Voted in favor, finally akr is going down more. Why not even go down more for a specific period to compensate for the way to long time that the AKR was to high?
Shame that still so many people don't understand that the rebases don't make your capital grow else they would all vote yes...
why is the AKR stated as, "Reduce AKR to 300%, or a 5-day reward rate of 1.9%, per the framework.?
According to my calculations, if rebases occurred 3 times per day, the two rates are not equivalent. For example, if 15 rebases would be 5 days at 3 per day, the rebase amount would be about .0012575 or 1.2575% and would equate to a 1.9% reward. It would though yield a AKR of 396%.
Just curious. Is it the lessor or greater of the two proposed rewards?
Crypto4theWin The rebases are not every 8 hours on polygon. They have been averaging around 7 hours so the number of rebases per 5 days is slightly higher at around 17
I will be against this one!
spidershad0w In general on-chain carbon market is expected to grow in the coming years but realistically I think it's impossible for us to state a reasonable timeline when we expect it to pick up in the short term, simply because the space is so nascent. Yes, this framework is structured such that we are conservative on the upside and reactive on the downside to ensure long-term sustainability. The reality is that 6 months worth of carbon market activity isn't sufficient data and we definitely need more of it as we build so that we can refine our framework. This is why the numbers in the proposal are stated as initial conditions.
KingArthur33 Thanks. I will rework my numbers.
MarcusAurelius locked the discussion.