KlimaDAO will demonstrate how a new economic system—powered by decentralised governance and smart contracts—can be built that explicitly values carbon and generates 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.
OlympusDAO 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; OlympusDAO could viably create a trustless world reserve currency.
The KlimaDAO ecosystem is modeled on OlympusDAO. 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 KlimaDAO demonstrates its quid pluris to DeFi and society at large, we hope there are opportunities to interface with the OlympusDAO ecosystem to mutually strengthen what we are building.
KlimaDAO 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, KlimaDAO will lock tokenized carbon credits from verified carbon removal and mitigation projects into its treasury. Initially, two key tokens will interact with the KlimaDAO ecosystem:
Base Carbon Tonnes (BCTs): represent the initial supply of carbon within the ecosystem. Each BCT represents 1 tonne of carbon dioxide mitigated or removed.
KLIMA: the native token of the KlimaDAO ecosystem, supply of KLIMA is underpinned by a 1:1 ratio of BCTs locked in the treasury.
Holders of KLIMA and BCTs will have the opportunity to receive discounts on KLIMA or maintain their market share through the following mechanisms:
Bonding: market participants can bond their KLIMA with another asset (i.e. BCTs) to secure more KLIMA at a discounted rate in future.
Staking: market participants can stake their KLIMA tokens for fixed periods to receive additional KLIMA as a reward.
The below image maps out the KlimaDAO 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 OlympusDAO 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 OlympusDAO 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. 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 KlimaDAO 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, all for the benefit of the planet.
Note that once lower quality credits are removed from the market, KlimaDAO 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 KlimaDAO ecosystem. The next entry will discuss how KlimaDAO is bringing BCTs (and TCTs) from the voluntary carbon markets into the ecosystem.
The information provided in this Medium Post pertaining to KlimaDAO (“KlimaDAO”), its crypto-assets, business assets, strategy, and operations, is for general informational purposes only and is not a formal offer to sell or a solicitation of an offer to buy any securities, options, futures, or other derivatives related to securities in any jurisdiction and its content is not prescribed by securities laws. Information contained in this Medium Post should not be relied upon as advice to buy or sell or hold such securities or as an offer to sell such securities. This Medium Post does not take into account nor does it provide any tax, legal or investment advice or opinion regarding the specific investment objectives or financial situation of any person. KlimaDAO and its agents, advisors, directors, officers, employees and shareholders make no representation or warranties, expressed or implied, as to the accuracy of such information and KlimaDAO expressly disclaims any and all liability that may be based on such information or errors or omissions thereof. KlimaDAO reserves the right to amend or replace the information contained herein, in part or entirely, at any time, and undertakes no obligation to provide the recipient with access to the amended information or to notify the recipient thereof. The information contained in this Medium Post supersedes any prior Medium Post or conversation concerning the same, similar or related information. Any information, representations or statements not contained herein shall not be relied upon for any purpose. Neither KlimaDAO nor any of its representatives shall have any liability whatsoever, under contract, tort, trust or otherwise, to you or any person resulting from the use of the information in this Medium Post by you or any of your representatives or for omissions from the information in this Medium Post. Additionally, the Company undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed in this Medium Post.