pKLIMA: Aligning incentives for long-term success.
What makes pKLIMA different from normal KLIMA? How will this affect the market dynamics of KlimaDAO?
In summary, the vesting mechanics of pKLIMA will ensure that stakeholders, partners, core-members, and community contributors are all focused on the same goal: growing our carbon-backed treasury for long-term success.
Please note: pKLIMA is a non-transferable token; third-parties cannot transfer or exchange pKLIMA to you.
A fair launch: aKLIMA and KLIMA
In the IDO, early community members were given the opportunity to receive an NFT designed for the protocol by artist Sven Eberwein. Holders of these NFTs will be airdropped 50 or 100 KLIMA tokens at launch, depending on which NFT they secured.
On September 14th, LBP participants had the opportunity to get an allocation of aKLIMA (or alphaKLIMA) by participating in the event on copperlaunch.com. Holders of aKLIMA tokens will be able to bridge them to Polygon at launch via a bridge and exchange them 1:1 for KLIMA.
For early community members and holders at launch, the Base Carbon Tonne (BCT) required to back the KLIMA tokens will be automatically delivered to the treasury on their behalf.
The IDO and LBP are critical mechanisms for ensuring that KlimaDAO can launch successfully. They enable the protocol to bootstrap USDC and carbon tonne liquidity to seed our swap pools for BCT and KLIMA. They also allow for the initial distribution of tokens to be distributed as fairly as possible across early participants in the community.
Aligning long-term incentives: pKLIMA
KlimaDAO has also distributed a number of pKLIMA to people who can help this protocol become a success in the long-term.
pKLIMA is not the same as KLIMA; there are no underlying BCTs locked in the treasury to underpin the distributed pKLIMA supply. Nor is pKLIMA the same as aKLIMA; a BCT will not automatically be delivered to the treasury on behalf of pKLIMA holders when they are redeemed. To redeem pKLIMA, holders will be responsible for delivering BCTs to the treasury themselves.
Additionally, pKLIMA is vested based on supply. pKLIMA can only be redeemed incrementally as the total supply of KLIMA grows. Different stakeholder groups will be vested against different supply constraints (outlined below).
The distribution of pKLIMA, and the supply-based vesting, has been modeled on OlympusDAO’s pOHM.
There are a number of benefits for utilising this mechanism:
- Supply-based vesting means that large volumes of pKLIMA cannot be quickly redeemed and sold into the market at any given time, instead pKLIMA holders will incrementally be able to convert to KLIMA as supply grows.
- This approach aligns the incentives between advisors, partners, the community and the DAO itself, as the only way pKLIMA holders can fully vest and secure their KLIMA allocation is if the protocol has long-term growth and success.
- For holders, it only makes sense to redeem pKLIMA when KLIMA is above intrinsic value (i.e. above the value of 1 BCT); the greater the spread between KLIMA and BCT, the greater the incentive to redeem pKLIMA. Hence, little growth reduces the incentive to redeem pKLIMA, and reduces the risk of a sell-off during times of contraction.
- The ongoing process of redeeming pKLIMA will lead to an increasing supply of carbon locked in the treasury, and will ensure ongoing demand for BCTs. Ongoing demand for BCTs will enable KlimaDAO to continue to draw carbon tonnes from the legacy market into DeFi and force the floor price of carbon (and the intrinsic value of KLIMA) upward.
The team, advisors, and partners who receive pKLIMA are constrained by a supply share factor. The supply share factor indicates the rate at which pKLIMA can be redeemed. For example, the Team supply share is vested at 7.8%, meaning when the protocol has a supply of 1 million KLIMA, 78,000 pKLIMA can be redeemed by the team.
The supply share factors are also disaggregated down to the individual level, meaning that any individual can only redeem based on their supply share factor within a given group. In the case of the above example, if a Team member held 165 million of the 330 million allocation, they could redeem 39,000 pKLIMA when the protocol has a supply of 1 million KLIMA. This removes the risk of individuals within the various groups competing against one another and redeeming an allocation at a given period in time at the expense of others within their group.
Cumulatively, all of the stakeholder groups can never own more than 15.8% of total KLIMA supply.
- Team: 330m pKLIMA, and 7.8% supply share
- Project Stakeholders: 70m pKLIMA, and 3.5% supply share
- Advisors: 50m pKLIMA, and 1% supply share
- OlympusDAO: 70m pKLIMA, and 3.5% supply share
- Klima DAO community: 480m pKLIMA (no supply share)
The community allocation has no supply conditions attached to its vesting schedule, this is because the DAO will make use of this pKLIMA how and when the community decides through the protocol’s governance mechanism.
Because pKLIMA holders can only redeem their allocation by committing a BCT to the treasury, the protocol will have locked in billions of dollars worth of investment into regenerative projects across the globe when the supply is fully vested. pKLIMA holders will only be fully vested when this protocol achieves its objectives: when our carbon-backed currency has achieved widespread adoption across the DeFi world, and beyond…
Today as a global society we emit 36,000,000,000 tonnes of CO2 per year, and this number continues to climb. Immediate action, coordination and innovation is needed — this is our solution, and our path to success.
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