RFC Governance Process

Title: Governance Process
Status: Proposed
Author: Robdog
Contributor(s): Johnx25bd, Raphaël
Created: 09.02.2022

Summary

In this request for comments, we propose a governance process in which the community develops and submits proposals in the form of RFCs on this forum, where community support is established. RFCs with community support and then submitted for evaluation by a group consisting of the key stakeholders who deposited those nature-based TCO2s and were involved in their rescue. These stakeholders control a multisig account and will determine the final allocation. We aim to determine the governance process over the coming 10 days, and invite the community to help us strike the best balance between our aspiration to create a neutral process, with constraints including time, human resources and legal.

Background

Mass balance and secured funds

When the Base Carbon Tonne (BCT) was launched, there were a large number of nature-based carbon credits deposited into the pool. Toucan is launching its new pool, Nature Carbon Tonne (NCT), exclusively for nature-based credits, and this pool will trade at a significant premium to BCT. As such, an opportunity emerged for actors to redeem these nature-based TCO2 tokens, deposit them in NCT and sell them on the market, thus actualizing a significant profit.

Prompted by actors in the market acting on this opportunity, Toucan coordinated a rescue of the remaining nature-based TCO2s from the BCT pool. These TCO2s will be deposited in the NCT pool, and the resulting NCT is planned to be used to supply liquidity on the NCT automated market maker. The LP tokens and any excess NCT received will be moved to a multisig controlled by five stakeholders.

The number of nature-based TCO2s secured amounts to 1,294,581, which results in between 2.3-2.7m$ of excess value, based on 5.86-6.20$ average cost basis and the current NCT price of 8$ (the cost basis is being finalized and we intend to calculate excess value based on the market price of NCT). Toucan has committed to let the community decide how to allocate all of the excess value.

The Multisig is 4/5 and consists of:

  • Klima DAO
    • Representing a significant depositor of nature-based TCO2s and the biggest BCT holder
  • BICOWG
    • Representing the ecosystem and the planet as a neutral participant
  • Toucan Protocol
    • Representing the coordinator of the process and rescued funds
  • Moss
    • Representing a major depositor of nature-based TCO2s and a significant stakeholder in NCT
  • Regen Network
    • Representing a major depositor of nature-based TCO2s and a significant stakeholder in NCT

Origin of nature-based credits

The 2012+ nature-based TCO2s that were secured, were primarily deposited by Klima DAO, Moss, Regen Network and it’s community, with the following division based on available data:

Klima DAO: 463,825 (24.2%)
Regen Network: 271,794 (14.2%)
Moss: 600,595 (31.3%)
Others: 583,520 (30.4%)

Tough questions

The question now becomes, how do we govern and distribute these funds? This is no easy task, due to the many stakeholders that have an interest in this decision, including:

  • BCT holders, including the Klima DAO community
  • Depositors of nature-based TCO2s in the BCT pool, especially the group that held onto the BCT tokens
  • The rescuing actor (Toucan and liquidity partners), that invested significant resources to rescue the funds
  • The planet, that we really should be optimizing for but cannot easily have a seat at the table

To make matters more complicated, Toucan does not currently have an established governance token or governance process that we could rely on, and there are only a handful of relevant examples of similar situations to reference. We need to strike a balance between community involvement, representing the relevant stakeholders, creating a fair and transparent governance process, whilst not wasting too many resources to create, manage and execute this activity. With this in mind, we have drafted a suggestion for how the funds can be governed that we would like your feedback on.

Suggested governance process

This RFC suggests a governance process that looks as follows:

  1. Community members can ideate on Discord, Twitter or Telegram to develop ideas and proposals for what the secured funds can be used for
  2. Ideation culminate as RFCs on the Toucan governance forum, there the ideas receive feedback, are iterated on and community support is established through polling
  3. A submission form is opened by Toucan, where the final RFCs are sent in
  4. The submitted proposals are evaluated by the multisig signers. The multisig comes to consensus on the allocation, which may include splitting the funds between multiple proposals. Some multisig signers (Klima and Regen) may put their decision to on-chain token vote.

Suggested timelines

9/2: Launch the governance forum and begin accepting and discussing RFCs

20/2: Final selection of a governance process

2/3: Final date to submit RFCs to the form for consideration

2/3 - 11/3: Deliberation by the multisig, drafting a final decision

11/3: Final decision announced on the allocation of the funds

We feel the above suggestion creates a good balance between both a light-weight governance system, that will allow the community to be the major driver of shaping proposals to be evaluated, and incorporates the most relevant stakeholders that all have a voice both in forming the proposals and the final decision.

Guiding principles for the multisig

This RFC proposes the decision by the multisig signers should be guided by the following key principles:

  • The decision should be aligned with the planet
  • The decision should further the sustainable function of the on-chain carbon market
  • The decision should compensate those actors whose actions have been with the best interest of the planet and on-chain carbon market in mind

Considered alternatives

We have considered multiple alternatives to the suggested approach, and want to make it very clear this is an RFC with the objective of receiving community feedback so we can explore this decision together. This section is not meant to discredit these alternative approaches, but rather explain why we opted not to based the RFC on these alternatives.

Option 1 : Create a custom governance token and airdrop it to relevant stakeholders

Pros:

  • We can design a custom airdrop and leave the decision to the selected airdrop participants so the vote is public

Cons:

  • We need to design the airdrop in the first place, which is in itself a significant governance challenge. Does Toucan design this airdrop?
  • Significant technical and legal complexity that will come from setting this up, basically a full governance stack just for the distribution of these funds. This would be a major distraction for Toucan and also delay the process a fair bit. Toucan is a compliant real-world organization, we have to be compliant, which takes time

Option 2 : Decision based on consensus vote on a forum (Discord/governance forum)

Pros:

  • Extremely light-weight
  • Allows a very broad community participation in the drafting of RFCs and the voting procedure

Cons:

  • Significant risk of fraud due to a lack of sybil resistance combined with strong financial incentives to defraud the process
  • Broad community vote might not accurately reflect the stakeholders that perhaps should be the decisionmaker

Conclusion

We propose a governance process, that strikes a balance between feasibility of timely implementation, with involvement of relevant stakeholders as well as broad community participation. But this is just our view. We want to hear what you think, how do you feel about this suggestion? How can we tweak the RFC to make it better? Or do you want to propose a completely different governance mechanism all-together? We are excited for your feedback and look forward to ideating on this together and create the best outcome for the planet and the ecosystem.

  • I am in support of the proposed governance process
  • I am in support if certain modifications are made
  • I am opposed to the proposed governance process

0 voters

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