Introducing KLIMA, an algorithmic carbon-backed currency
May 25, 2021
The problem
In our market economy, the invisible hand works to create prosperity and individual self-interest prevails. The freedom to produce and consume as we see fit generates value for the economy; value that allows the whole of society to prosper.
We generally consider that the market itself is rational, and assume that it values things in a perfect way. We ignore the paradoxes in front of us everyday. Water, a necessity for life is essentially free across (much of) the world; diamonds have no real utility for us, yet in the free market they are priced exorbitantly, excluding all but the world’s richest.
According to the market, Amazon is the world’s most valuable company. But the Amazon Rainforest has no market value until its vegetation is cleared for farming, and its trees are stripped of their greenery and extracted as logs.
In the past, the market price of a good was determined by the socially necessary labour inputs required to create it. In recent times we have moved to a system where subjectivity and speculation are key driving forces behind prices.
For many, the ‘marketplace’ is no longer a place where two people physically exchange goods or services. It is where we buy securities, that we will never touch, that we often do not understand, in order to grow personal wealth.
Value has become totally detached from the ‘market’.
So much so, that when a good or service destroys value, sometimes immeasurably, there is no penalty imposed by the market.
Carbon dioxide is a greenhouse gas that inhibits our planet’s ability to let heat escape when it gets too stuffy down here. Carbon dioxide’s effect on our global climate is already leading to change in our planet’s most vulnerable ecosystems: it is bleaching coral reefs; melting the permafrost beneath arctic tundra; leading to the desertification of the tropics. There’s no punishment by the market for emitting carbon dioxide.
What we truly value, is not being valued by the market.
The solution
Climate change is the number one issue of our generation.
Carbon dioxide knows no borders, nor do the impacts of global warming. The only way to tackle global warming is by mobilising action at the global scale. The market is the best solution we have at our disposal to achieve decarbonisation of our existing economic activity, and to retrospectively capture and store the carbon we have already emitted, at the scale required.
Markets are dynamic and more than a place of exchange, they are a manifestation of our culture and our time. So through organisation and co-ordination we have the power to modify them to reflect what we need and want. If we want the market price to be a fair price of what we value, then we need to move the goalposts and force it to work to the parameters we define. A perfect market should price in carbon.
To properly value carbon, we need to fully integrate the carbon market with the market, and we need to reward participation for those who participate in the carbon market with value or influence, or both.
Web3 is the perfect place to integrate these markets, it is a place where there is sufficient liquidity to have impact at scale, where smart contracts can securely and transparently govern transactions, and where contributions can be fairly incentivised.
Klima DAO
Klima DAO gives Web3 builders and users the opportunity to participate in the carbon market through the KLIMA token. KLIMA tokens are fungible, are backed by at least 1 Verified Carbon Unit* in the Klima DAO treasury, and holders of KLIMA will have the ability to vote on Klima DAO policy.
The role of the DAO is therefore to be the DEcentral bank governing the monetary policy of this new form of money. Over time, we will build an economy around KLIMA by driving adoption and unlocking growth of the crypto-carbon economy.
By developing Klima DAO as a transparent and opensource infrastructure, participation from Web3 developers, carbon projects, and climate experts will be welcomed, to both build this new economy and be rewarded for their contributions.
Join our Discord and be an early contributor.
Blog reference.
*KLIMA will initially be launched with a 2:1 ratio — meaning 2 tonnes of carbon will be required in the treasury to mint 1 KLIMA. This is because today’s carbon supply is imperfect, and it’s not always easy to know if 1 carbon credit really represents the mitigation of 1tCO2e. Initially, we will overcompensate. In the long-term as certainty around the quality of carbon supply improves, KLIMA holders will have the opportunity to vote on decreasing this ratio.