Klima DAO: Dissonance

11 Things That Make You Go Hmmm

The great Grant Williams likes to muse about “Things That Make You Go Hmmm”. I will kindly borrow this.

Hmmm #1: Community

Maybe one thing that people have found confusing is too much going on or too little and Klima risks losing momentum. Not sure.

Hmmm #2: Roadmap

As it often happens with startups, it takes time to see what it will turn out to be. Many on Discord were asking what the goals are and the plans to get there because naturally, with the strong early traction came a lot of chaos.

Hmmm #3: Traction

Let’s assume for a moment that things are going fine with Klima. This would imply that there is a >0% chance of successful execution of the roadmap and of Klima playing a continued role in ReFi even if it doesn’t achieve its vision to be the central vehicle for combating climate change.

  • In 3 months, Klima absorbed 14.3mn carbon credits = between 2.5%–4% of the entire available global supply. Klima managed to convince 50-60k people to spend between $80–$100mn on carbon credits. To put the supply shock in perspective, these 14.3mn tons would be the equivalent of the gold owned by Switzerland as % of the total global gold reserves.
  • Klima helped 2x and in some cases 3x the average prices of carbon credits. This is a 20 year old market that had been going nowhere till 2021.
  • The average annual market trading volume since 2007 was ca $420m. Klima owned market pools traded ca. $3bn in carbon credits (BCT) on-chain: a 7x increase.
  • Klima currently inflates by ca 28,000% per year. Crazy huh. If no single penny went into the treasury from now on, it could sustain this inflation rewards rate for further 4 months.
  • Klima owns ca $80–$100mn sized liquidity trading pools (the largest on the market) and has earned ca $10mn since mid October.
  • There hasn’t been any early backer (“insider”?) selling since Nov 26 2021 (meaning pKlima to Klima conversion). The first week of trading saw ca 45% of total issued pKlima so far (59,501). This also coincided with the price peaks of >$3,000. The rest was issued in the next month. I haven’t done the exact calcs, but let’s say early pKlima holders sold around $2,800 on average and the remainder around $1,500. This means ca $120mn–$130mn total trading, which represents ca 6% of the total traded volume till Nov 26 of $2.1bn. It doesn’t sound outrageous I guess.
  • The DAO has ca $2.7mn (at current prices) to spend on development, which increases daily via the bonding operations.
  • Klima announced its first new reserve asset — MCO2, a nature-based carbon pool by Moss, which provides diversification. Another pool by Flow Carbon is under public commentary. Nature-based carbon credits are perceived among the highest quality credits on the market and command prices of $10–15 per ton.
  • The market value of treasury assets remains well over $100mn.

“The first type is, it’s a brand new market, but it’s growing really fast and it kind of comes out of nowhere and surprises people. And honestly, that’s actually the rarest market. And that would be things like cryptocurrencies…”

Klima came out of nowhere and disrupted the voluntary market. There is hardly any narrative combining crypto and carbon out there without mentioning it.

“…the second type … you have a market that looks extremely crowded. And so you think there’s tons of activity and it’s game over, but in reality, it’s still the really early days either because the product isn’t quite there yet, or the infrastructure …”

Voluntary markets are old & oligopolistic: standards, registries, project developers. Infrastructure layer is old tech, expensive, slow. Too many players within a currently tiny market. Huge margins for the top. This will get disrupted. Bezos said: “Your margin is my opportunity.”

“The third type of non-obvious market is one where there is an opening from a sales or distribution or channel perspective…”

GreenTechs and Klima are enabling massive surge in demand from completely new buyers, in turn enabling new business models and sales channels for high tech carbon credit supply that folks like Lowercarbon and BEV are funding.

Hmmm #5: Pledges By Corporations And Social Pressure

Even with all the caveats, >20% of the top 2,000 largest global companies have committed to becoming “net zero”. Why would companies voluntarily increase their costs? A McKinsey study found that (citing selectively):

  • The growth rate for food products clearly labeled as sustainable is increasing fourfold compared to the market average. Moreover, during the pandemic, sustainable companies proved more resilient during the market crisis.
  • Half of the respondents said that they are willing to pay an extra buck for sustainable products.
  • The consumers’ main areas of interest are reducing greenhouse gas emissions and conserving raw materials.

Hmmm #6: Crypto Eats Carbon Markets

Klima delivers greater value at a lower cost. It disrupts an old and stale industry with huge margins. At the same time, Klima helps to significantly expand the market for everyone.

Hmmm #7: Competitors

Klima’s current competitors are most likely the old school project developers that are funding projects and intermediaries selling credits to end customers. Their core assets are not things like modern software, community or technology, its regulations, illiquidity and processes, which are old, opaque, slow, expensive and ineffective.

Hmmm #8: Team

The core team and early contributors managed to create an organization that became a dominant force less than 2 months after launch by single-handedly increasing the price of voluntary carbon credits by 2–3x. It wasn’t simply about raising money and buying up supply on the market. Anyone could have done that before if it was that easy or trivial. A whole lot of different ideas all needed to click for this to have the effect it did: Defi, DAOs, Olympus, carbon market structure, timing, climate change movement, market liquidity, purpose, initial backers, team, vision and obviously execution.

Hmmm #9: Disruption Creates A New Market

Klima’s innovation allows people to easily learn and effectively participate in the fight vs. climate change. It is creating completely new use cases within crypto and beyond by leveraging a unique DAO model.

Hmmm #10: A Successful Platform / Ecosystem And Network Effects

Klima’s ecosystem allows the economic value of its users to exceed the value that the DAO is creating, i.e. enabling large network effects.

Hmmm #11: Products

I deliberately left this as the last point because Klima is known and popular for its vision and traction and not for its products as of yet. It is also not super easy to quickly grasp what “products” Klima actually offers.

  • Governance value which would only become more important in future years as the DAO grows and hopefully becomes more powerful. You can lock in a meaningful stake in the early days to have a say in what the potentially largest carbon funding vehicle in the world does.
  • Exposure to a diversified treasury: not only BCT, but also MCO2 and other pools, which you later have a claim on with your Klima.
  • Exposure to a potential increase in the RFV (intrinsic value of the treasury) as a result of the ongoing DAO efforts, including direct revenues from trading fees and future cashflow generating assets, directly held by Klima.
  • Stake and use the APY to your advantage while you wait for the above to materialize.

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Boris

Boris

Climate, crypto, macro and tech M&A