On the path to progressive decentralization
To facilitate global decarbonization there is a need for a large, transparent, verifiable, and robust Voluntary Carbon Market (TSVCM). Public governance—as uniquely enabled by Web3 principles—is our best shot at delivering this high-integrity market infrastructure for the benefit of our planet.
KlimaDAO is a decentralized autonomous organization (DAO) that is working to create a more fair and efficient Voluntary Carbon Market (VCM). The DAO's primary objective is to maximize the volume of digital carbon and other ecological benefit assets that pass through its protocol-owned liquidity pools, marketplace, and Retirement Aggregator.
To achieve this objective, KlimaDAO believes that it is important to be credibly neutral. This means that the DAO's mechanisms should be designed in a way that does not discriminate for or against any specific people or outcomes. The mechanisms should be open source and publicly verifiable, such that a large and diverse group of people can easily discern from the mechanism design that it is, in fact, fair.
As mandated by KIP-19, the Decentralization Working Group (DWG) was established by KlimaDAO to explore what decentralization actually means for the DAO, as well as how—and to what extent—the DAO should pursue it. We recognize that there is a need to continuously review the state of decentralization to ensure the project appropriately balances security, openness, and community ownership. The DWG's interim report, which was released in March 2023, is a vital step on this path and culminates in a set of prioritized, no-regret recommendations focused on increasing decentralization. The majority of these recommendations are focused on improving the internal processes and governance mechanisms within the DAO.
The DWG believes these changes to be pragmatic and realistic, but work is required from contributors and the community to implement the recommended changes. The report should serve as the foundation of a program that implements incremental, well-justified, and community-supported changes to deliver world-class, credibly neutral products that scale climate action, built by a mission-driven and community-owned organization.
Visit the KlimaDAO Forum post where the DWG report is linked and feedback can be left
Below we summarize each section of the report as follows:
KlimaDAO overview and current state assessment
Design principles
Recommendations
Next steps
KlimaDAO overview and current state assessment
The earliest iteration of KlimaDAO was itself analogous to a decentralized working group, bringing together a number of individuals affiliated with competing organizations working within the “crypto carbon” landscape. The DAO's initial goal was to create a more efficient way to trade carbon credits. KlimaDAO's protocol-owned liquidity pools (POLs) allow users to buy and sell carbon credits with low fees and high liquidity.
Since its launch, KlimaDAO has released products and infrastructure that facilitate the entire value chain of the Digital Carbon Market—including liquidity pools, carbon retirement infrastructure, the Carbonmark marketplace, and the Carbon Dashboard. This infrastructure is governed via a decentralized governance mechanism.
KlimaDAO has been successful in achieving its initial goals. The DAO's liquidity pools have attracted significant liquidity—near $6 million at the time of writing, making these the largest sources of digital carbon liquidity in the world – and its digital carbon infrastructure has facilitated the trade of over $4 billion in carbon credit volume, with over 500,000 tonnes of carbon retired on-chain.
As part of its report, the DWG conducted a current state assessment. The DWG evaluated the decentralization of KlimaDAO along the dimensions of
governance;
organization;
economics; and
technology
The DWG found that KlimaDAO is on a good path toward increased decentralization but that, naturally, there is still room for improvement. The DAO's governance system is an area of the DAO that can be considered well decentralized today, whereas there could arguably be more transparency and accountability over daily operations. The DWG perceives that a larger and more diverse community would increase the degree of decentralization through its governance process. The DAO’s technology stack is open-source and decentralized, and is built with interoperability in mind.
Design principles
The DWG has developed a set of design principles that can inform thinking around the pathway to decentralization and support the DAO in defining what decentralization means for the project.
These principles are based on the following considerations:
Security: Decentralization should be pursued in a manner that does not expose the DAO’s assets, data, or technology to excessive risk.
Transparency: The DAO's mechanisms should be open source and publicly verifiable.
Credibly neutral governance: The DAO's mechanisms should be designed in a way that does not discriminate for or against any specific people or outcomes.
Accountability: The DAO's decision-making on its financial position should be transparent and accountable to the community.
Collaboration: The DAO’s structure should facilitate collaboration with traditional (non-Web3) organizations and VCM industry bodies, encompassing internal processes, legal structure, and jurisdictional considerations.
Recommendations
The DWG has made a number of recommendations that would increase decentralization, which focus on improving the internal processes and governance mechanisms within the DAO. The recommendations include:
Improve the organization’s transparency and accountability by creating a code of ethics, formalizing role membership, and increasing community engagement through formalized and inclusive feedback processes and working in public.
Progressively decentralize governance and decision-making by empowering $KLIMA token holders to influence day-to-day operational as well as higher-level strategic decisions, in a way that does not skew toward large token holders.
Next steps – what you can do to drive KlimaDAO’s progressive decentralization
The DWG's recommendations form the foundation for a roadmap toward increased decentralization. The DAO will need to work with the community to implement these recommendations—the near-term initiatives can be implemented immediately, while other initiatives can be further evaluated.
The DWG calls on Klimates to:
Read the full report, available here
Feedback into the the DWG’s process publicly via the KlimaDAO Forum
The DWG’s process, and the implementation of its recommendations, will help KlimaDAO achieve its primary objective of maximizing the growth of the Digital Carbon Market.
At KlimaDAO we believe that the crypto–climate intersection is a generational opportunity to make an impact and establish a sustainable future through the provision of transparent, neutral, and public resources. We will continue on our path toward decentralization to make this future into reality.
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