Klima DAO

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 formal forum poll begins now and will end on August 9th 18:00 UTC.