Summary

Adjust AKR to 20% to reflect the current sluggish state of the on-chain carbon market and conserve the KlimaDAO treasury resources in its pursuit for driving adoption and growth of ReFi.

Motivation

In evaluating the state of the on-chain carbon market and the community approved KIP-23: New Framework for Supply Expansion, the lack of new tokenized carbon offsets coming online translates to 0.013% in 90-day moving average growth rate. This is lower than the initial (GL) condition of 0.10% as stipulated in the framework while KLIMA is expanding at higher orders of magnitude.

Meanwhile, our USDC inverse bonds experiment in the last few weeks has performed as expected in absorbing sell pressure of KLIMA. However, at current AKR, the rate of KLIMA expansion is higher than the capacities allocated for inverse bonds. During 4 weeks of inverse bonds experiment, the protocol burned 124,022 KLIMA and minted 285,070 KLIMA in rewards, which translates to 40,262 new KLIMA in circulation on average weekly. Although inverse bonds accomplished its intended objective, this comes at a huge price obviously and is overly taxing the treasury resources.

After the conclusion of the current inverse bonds experiment, the Policy Team proposes to reduce AKR to 20% or a reward rate of 0.0115% at 81% staked. This would increase our runway to about 2080 days. At this reward rate, the protocol will be minting about 20,340 weekly. This benefits KlimaDAO primarily in 2 ways:

  • This is more capital efficient for the protocol than the current state and would bring KLIMA expansion rate closer to reflect the current growth of the on-chain carbon market. Without deploying further capital via inverse bonds, we will then be able to reserve precious treasury resources for future strategic efforts.
  • It is also more beneficial to KLIMA holders as this dramatically slows down the rate of CC/KLIMA from being eroded away too quickly.

While it might be ideal for some protocols to turn expansion off completely and go into hibernation, we strive to remain competitive to drive adoption without overly taxing the protocol.

It is crucial to note that this AKR adjustment does not mean that we are abandoning our mission of being a carbon-backed cryptocurrency, nor does it mean that the downward changes are permanent. Rather, the ability to conserve our energy and careful management in directing resources toward strategic priorities are vital in driving adoption and growth.

Proposal

Upon conclusion of the current USDC inverse bond experiment, reduce AKR to 20% or a reward rate of 0.0115 at 81% staked, as aligned to the lower growth condition (GL) of 0.10% and per the framework laid out in community approved KIP-23.

Polling Period

The informal forum poll begins now and will end on August 5th 18:00 UTC. Assuming in favor, this vote will go to Snapshot.

Vote

This poll has ended.

    You guys are doing exactly the same thing again, dropping AKR and price will drop at least 50% so the whole inverse bonds experiment was for nothing. I personally would like to
    say when you drop it to 20% do another inverse bond so price does not decline like every other time when you lowered AKR. But like 90% will be pro dropping AKR because somehow klima holders like to see there portfolio go down even more.

      I agree with OP, we should minimize LP dilution

      I'm glad to see KlimaDAO continue to build during this bear period. I think reducing the reward rate further to extend the runway and provide breathing room to the protocol is a wise decision.

      Importantly, I'm sure the policy team would react to reverse this decision if market conditions improve over the coming weeks. The key is for the team to be agile, gather information, and make wise decisions which provide the resource runway necessary to build out the on chain carbon market.

      khyezr seems the right thing to do. Who cares about having more KLIMA if their value gets depleted? The situation is what it is.

      Rene I hear you, but in reducing the AKR closer to the rate of on-chain carbon growth, we are attempting to preserve the value of KLIMA. The opposite would be inflating its value away while on-chain carbon growth is close to 0. The intention of inverse bonds is to demonstrate that the protocol is prepared to stand behind the backing value of KLIMA even during challenging periods. It is by no means a value driver. In the meantime, our contributors across various departments are working hard in improving and shipping new products to drive adoption. This is key and thus crucial that the treasury resources is carefully managed.

      Rene I feel the same way but the reality is we bought into a model that required the treasury to grow at a rate that can support the AKY, no growth in Treasury means reduced AKY, there is no other way except for - bust the treasury and then our tokens are worth nothing

      Now the astounding drop in AKR will match the astounding drop in price. Fantastic track record for early promises and talking points of not drastically dropping the AKR. Which no doubt, kept people in and believing during the price plummets, when they really should have sold, oh well. I hope you guys have a solid plan to turn this around other than build build build, inverse bond for a price uptick of one dollar and a few cents. You wouldn't want a lot of people feeling burned a long time.

      This makes absolute sense at the current time; the commitment to running a steady ship is appreciated and I trust the KlimaDAO policy team to have the agility to do the best thing for the protocol as things evolve in the future.

      khyezr

      The team needs to look at other income revenue streams and monetary controls other than adjusting the AKR...It really turns off investors and makes the holders think they made a poor investment choice.

      Rene i hear you but staking rewards are set in place to offset dilution that's caused by bonding. Since bonding capacity is at a halt, it makes sense to bring staking rewards down to preserve the treasury. It also will help reduce inflation.

      Policy team ensuring the long term health of the protocol. I support this 100%

      I think 20% AKR needs to be coupled with periodic KLIMA burns. You can look at HECTOR.finance as a model.

      Just by the lack of interest for people to vote or even reply to this proposal shows how bad things are with Klima. At least the band will keep playing as our investment sinks

      I would like to hear about a business plan that can build this project . Just asking to cut the return to investors isn’t fixing the issue. If the team dont have a plan for building things up then cutting the rate just moves us closer to the next cut. I believe in this project but maybe the current team doesn’t have the business skills to make it work.

      20 days later
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