Published Mon Aug 09 2021
Klima DAO will demonstrate how a new monetary system — powered by decentralised governance and smart contracts — can be built that explicitly prices in carbon and generates value creation opportunities for its users. The economies of the 21st Century have to figure out how to reward and build on pro-climate activity and investment, not penalise it.
This is our contribution.
Olympus DAO was built to address the problem that there is no truly independently valued digital currency. Ultimately, to build a sound economy, the perfect currency should hold the same purchasing power today as in the future; Olympus DAO could viably create a trustless world reserve currency.
The Klima DAO ecosystem is modeled on Olympus DAO. Iterating on their work presents the best framework for us to achieve our objectives. We are grateful for their vision and execution, the example they have set, and advice they have offered us. In the case Klima DAO demonstrates its value add to DeFi and society at large, we hope there are opportunities to interface with the Olympus DAO ecosystem to mutually strengthen what we are building.
Klima DAO Ecosystem
Klima DAO argues that we should go a step further, and that the perfect currency should be inline with the vision set out by Olympus, but also be regenerative for our planet by pricing in the cost of carbon. Centuries of not pricing in the cost of carbon have meant that we are in a dangerous position ecologically, moving the dial on climate action is now our ultimate priority.
Rather than locking DAI as Olympus did initially, Klima DAO will lock carbon credits from verified carbon removal and mitigation projects into its treasury. Initially, two key tokens will interact with the Klima DAO ecosystem:
Holders of KLIMA and BCTs will have the opportunity to receive discounts on KLIMA or maintain their market share through the following mechanisms:
The below image maps out the Klima DAO ecosystem in its initial network state; BCTs and KLIMA can be deployed through bonds or staking to maximise exposure. BCTs that make it to the treasury will be locked, and will underpin new supply of KLIMA (initially at a 1:1 ratio).
Theory into practice
Iterating on Olympus DAO means a couple of critical things for our ecosystem.
Firstly, this design means that increased economic activity within the ecosystem increases the amount of BCTs (and TCTs in the future) that make their way into the treasury. This increases the supply (at a 1:1 ratio) of KLIMA issued to market participants. Because BCTs are based on carbon credits (at a 1:1 ratio), the supply of KLIMA is underpinned by investment into the climate. The design of Olympus DAO is the best ecosystem we have seen that can be iterated upon to incentivise the ongoing removal of carbon from the open market through the development of a new currency.
Secondly the intrinsic value of KLIMA will be based on the type of carbon credits that have been locked in the treasury (just as Olympus was initially based on DAI). Initially, the type of carbon credits (represented by BCTs) within the treasury will be relatively homogeneous, representing carbon credits at the lower end of the price spectrum. Building on lower cost credits is intentional as it will form a relatively low-cost base for the ecosystem’s intrinsic value that will appreciate over time. A lower intrinsic value at the start will also give our early community the opportunity to increase their holdings early doors.
Starting with lower cost credits will also enable Klima DAO to achieve one of its key ambitions relatively quickly: it will suck up the least impactful, lower-cost carbon credits on the market to create affordable initial supply for Klimates, and remove that supply for corporates who are feeling the pressure to offset for good PR, but don’t want to pay very much for it and don’t really care about the true impact of the credits they purchase. In practice, removing this supply will mean that corporates will very soon have to move up the food chain and purchase higher-impact, and higher-cost carbon credits.
Note that once lower quality credits are removed from the market, Klima DAO intends to significantly diversify the supply of different Tokenised Carbon Tonnes (TCTs) that are in the treasury. This will maximise the positive carbon impact of the treasury, increase intrinsic value of KLIMA and also incentivise new market participants on the supply side.
In this blog series we are diving deeper into the infrastructure of the Klima DAO ecosystem. The next entry will discuss how Klima DAO is bringing BCTs (and TCTs) from the voluntary carbon markets into the ecosystem.
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For updates on testnet and token distribution, please visit our Discord.
To get to know Klima DAO and the KLIMA token, please review our docs.