RFC - KlimaDAO Proposed NCT Value Allocation

Title: RFC - KlimaDAO Proposed NCT Value Allocation

Status: Proposed

Author: Dionysus

Contributors: MarcusAurelius, Sy Zygy, GolanTrevize

Summary

In this RFC, we propose an allocation of the funds secured by the BCT-NCT mass-balance exercise. This allocation is driven by the following thesis: those that bridged nature-based tonnes into the BCT pool did so because they believe total BCT value is an aggregate of its constituent carbon tonnes.

KlimaDAO’s reasoning was precisely this, and our purchase of nature-based offsets to seed initial liquidity was done to ensure a diversity of offsets in BCT, as it was seen as an index with a wide array of offsets. Furthermore, having a diversity of offsets in the seed pool provided additional marketing benefits, as we showcased projects taking place around the world and utilizing various technology types.

We thus propose returning the majority of value secured by the mass-balance exercise to those who bridged the nature-based tonnes. In addition, our proposal includes a bounty for Toucan for coordinating the mass-balance exercise as well as a portion for keeping within the existing USDC-NCT liquidity pool.

Importantly, this RFC is being submitted after an earlier version was presented to the KlimaDAO community which included three different allocation strategies. This document therefore represents the output of that earlier document based on the feedback from the community and the allocation strategy voting outcome.

Background - Klima’s Context

Klima ran a Liquidity Bootstrapping Pool (LBP) in order to raise capital for purchasing carbon offsets off-chain in order to seed initial liquidity in our KLIMA-BCT and BCT-USDC pools. These offsets included 518,825 nature-based tonnes, 463,825 of which are vintage 2012 +, and thus qualify for Toucan’s NCT pool. These bridged tonnes are listed in this spreadsheet.

The current value of NCT-compatible tonnes which Klima seeded initial KLIMA-BCT and BCT-USDC liquidity with stands at $3,770,897 (considering an NCT price of $8.13).

Origin of nature-based credits converted to NCT

Per Toucan’s initial RFC, the 2012+ nature-based TCO2s that were secured were primarily deposited by Klima DAO, Moss, Regen Network and its community, with the following division:

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

KlimaDAO suggests that the rescued NCT value (i.e., NCT tokens) be delivered back to the original bridging addresses utilized by the entities above as per the division of funds listed below.

Qualifying nature-based tonnes bridged by ‘Others’ should be returned based on the bridging data available to Toucan.

If feasible, we propose that for the full allocation of NCTs be made back to bridging entities, they should have had to hold the BCTs for > 90 days. Otherwise, their allocation should be reduced proportional to the BCTs they immediately sold to the market and/or bonded for Klima. In the case of these BCTs being bonded for Klima, KlimaDAO should receive those equivalent NCTs. Note that Klima’s BCTs were transferred to our deployer address after bridging.

Klima bridging address: 0xAf529400FF068AFbdc907c699B9184a4381481B0

Klima deployer address: 0x693aD12DbA5F6E07dE86FaA21098B691F60A1BEa

Suggested division of funds

80% - Nature-based TCO2 depositors

10% - Long-term carbon burning liquidity

10% - Toucan rescue bounty

Depositors:

This category refers to all individuals/entities which bridged qualifying nature-based tonnes over and deposited them into the BCT pool. Note that whether or not these actors held their BCT is not taken into account due to the complexities that would bring to the operation of returning NCTs. In all likelihood, KlimaDAO is likely at a loss here given that the majority (i.e., > 80%) of BCTs were bonded into our treasury (and thus ‘purchased’ through the emissions of Klima). Nonetheless, expediency is preferred over a logistically challenging return.

Long-term carbon burning liquidity:

Refers to 10% of the NCTs of BCT origin being kept within existing NCT liquidity pools seeded by Toucan.

Toucan rescue bounty:

Given Toucan’s actions in securing these NCT-compatible TCO2s from the available BCT supply, they are entitled to a 10% rescue bounty to utilize as they please. KlimaDAO’s understanding is that this will be kept for liquidity (though we appreciate clarification from Toucan on this).

Initial On-Chain Analysis of Eligible Bridgers

In order to provide the community with a starting point for analyzing how much of the rescued value should be allocated to each depositor of NCT-eligible TCO2, we conducted an analysis of on-chain data powered by KlimaDAO’s public Bridged Carbon Subgraph.

Methodology

  1. Identify all TCO2s that fit within the published pool requirements for NCT by methodology and vintage (see NCT Methodology and TCO2 Addresses tab in spreadsheet).
  2. Filter all TCO2 bridging events down to those NCT-eligible TCO2s which were bridged prior to initiation of Toucan’s mass rebalancing action (using January 25, 2022 as the cutoff).
  3. Aggregate by bridging address, totaling the amount bridged prior to the cutoff, as well as the date of first bridging.
  4. Compare with BCT SushiSwap pool activity for the bridging wallet to determine if the bridging wallet swapped directly (overly simplistic assumption since BCT could have been first transferred to another wallet, then swapped).

Distribution to KlimaDAO

As stated in section Origin of nature-based credits converted to NCT, KlimaDAO proposed that rescued NCT value be returned, as NCT tokens, to the original bridging addresses.

Despite the bridging analysis potentially returning a smaller share of the rescued value to KlimaDAO, we still support it because of the shorter timescale for analysis and expediency in moving this process forward. Furthermore, this was the allocation option most preferred by the KlimaDAO community.

Conclusion

In order to move forward productively and mend the relationship between two of the largest players in the ReFi space, we feel it is important for value extracted from the BCT pool to be returned to the actors who originally bridged NCT-compatible carbon offsets into the DeFI space. KlimaDAO has offered a simple and elegant solution for executing this and appreciates the feedback from our - and Toucan’s - communities in leading us to this solution.

NOTE: prior to publicizing the first iteration of this RFC on the KlimaDAO forums, KlimaDAO reviewed proposed allocation methodologies with @Rez, a Klimate and Toucan community member who has been publishing regular analysis of on-chain carbon data since launch. While by no means perfect nor complete, he agreed they are a reasonable starting point for further discussion and more detailed follow-up analysis.

  • Move forward with KlimaDAO’s proposed allocation methodology for returning NCT value to bridgers (this will require ~2 weeks of analysis to determine the final bridge entity set).
  • Continue discussions and find an alternative allocation strategy.

0 voters

5 Likes

Which one of these quotes is the proposed course of action? They seem contradictory.

I vote for the first quote. If the party traded their BCT or bonded them for KLIMA the party should not get any refunded tokens. That is because the party already took an action to relinguish their interest. So no more right to claim refund because no more BCT in their possession.

Ya I can see how that reads a bit confusing but you can read it as ‘initially analysis wasn’t taken into account’ and then we go on to specify the type of analysis that should occur with supporting materials.

Thank you @Dionysus and everyone in the ReFi community who have provided the input and analysis which have lea to this very comprehensive and considerate proposal.

Thank you :pray:t3:

The methodologies you’ve provided appear reasonable and thorough. The resources are also incredibly helpful and serve to expedite the allocation of these funds to the community.


The leadership team at Toucan met and reviewed this proposal. We would like to do the following in response:

  1. Expedite the decision making process for the distribution of funds
  2. Meet with multi-sig holders to determine final allocation of funds
  3. Submit a slight modification on your proposal with the considerations listed below
  4. Request to bond NCT immediately following the redistribution of secured funds to parties agreed by the multi-sig

Considerations to your proposal

  1. Can we take care of long-term BCT holders as well as those who bridged nature-based TCO2s?
  2. Can we marginally increase liquidity as a public good?
  3. Can we allocate value to the biggest stakeholder—our planet—by burning a percentage of value secured?

Suggested allocation of funds

We would like to propose these considerations be taken in the form of a modified allocation with the following:

70% - nature-based TCO2 depositors
20% - liquidity as a carbon-negative public good*
10% - to Toucan for liquidity

*All fees from this liquidity would be used to retire/burn NCT in perpetuity.


To clarify your question @Dionysus, Toucan will use the 10% rescue bounty as liquidity.

If in tandem KlimaDAO were eager to reward long-term BCT holders alongside depositors of nature-based TCO2s, I’m hopeful the rest of the mulit-sig would agree.

Desired outcomes
If the multi-sig holders were to agree to distribute funds based upon our modified proposal, it would:

  1. Serve the needs of the Klima DAO community
  2. Contribute to stability of the on-chain market
  3. Take care of the earth

We look forward to discussing this with you and the other parties on the multi-sig shortly. Feel free to contact me if you have any questions or concerns.

1 Like

I think the problem comes down to rewarding long-term BCT holders being a potentially unreasonable time investment since figuring out exactly who those parties are is a non-trivial task. A lot of BCT is tied up in contracts where ownership gets muddled. This is outlined quite nicely by Dionysus in the Klima RFC that informed this post.

That being said - as the Klima RFC outlines, while long-term holders being rewarded would skew heavily in Klima’s favor, they would rather move on.

I feel that the community as a whole would like to move on from this question, and the proposal seems to be something that generally satisfies almost all parties involved. Having this question definitively resolved in the near future has value all of its own. It brings clarity back to the ReFi kingdom.

If Toucan wishes to redirect half of its own allocated portion into long-term liquidity, this seems like a question concerning Toucan’s interests, therefore doesn’t seem to need additional discussion other than internally.

Generally, this proposal seems to bring a relatively unambiguous path to a definitive end, which is great.

4 Likes

Thanks @Rez. I agree, moving quickly is probably highest priority at this point, so we did edit the post above to reflect that.

Changes:

  • all 10% of Toucan bounty will go towards liquidity
  • we propose to increase the amount of carbon-negative public good liquidity from 10% to 20% to make sure planet earth is strongly represented in this proposal with continuous NCT burn
  • propose 70% for nature-based TCO2 depositors and remove long-term BCT holders as a receiving group due to the difficulty of properly allocating that bucket to individual accounts

Multisig signees are meeting today to discuss this proposal and we hope to resolve this ASAP :slight_smile:

1 Like

I support the proposed plan. This topic has been a wound in the ReFi community that needs to be allowed to heal.

I also think it would be good if Toucan’s 10% fee went to liquidity as per their original intent for the arbed value.

1 Like

I support the original proposed plan by Dionysus

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I support the proposed plan by Dionysus

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I support the proposed plan by Dionysus

Sounds good! Looking forward to getting this resolved and moving forward. Personally I’m really grateful for the way Toucan and KlimaDAO have handled this. Happy that the high-value offsets didn’t just sit there for others to exploit.

1 Like

Agree with Klima’s proposed allocation, makes the most sense

1 Like

I support the proposed plan by Dionysus.

1 Like