KIP-29: Build UBO and NBO liquidity

Summary

Fully dissolve the BCT/USDC pool, and with the use of pKLIMA from the liquidity bolstering budget allocated in KIP-18 to bolster the liquidity of the UBO/KLIMA and NBO/KLIMA pairs.

Motivation

Since the initial proposal to disband a portion of the BCT/USDC pool in KIP-18, the Policy Team has made clear its intention to eventually fully dissolve the treasury’s BCT/USDC LP holdings to bring all of the treasury’s protocol-owned-liquidity in line with the horizontal scaling strategy outlined in KIP-8, consolidating the KLIMA token’s position as the key pair for tokenized carbon assets.

In a similar vein, KlimaDAO aims to have deep liquidity rails for all the verified carbon assets held by the treasury, and at present there is a deficiency in the depth of UBO and NBO liquidity pools. Given the limited supply of credits in the UBO and NBO pools, we should bolster the liquidity for those pools as the current slippage may deter people from using those assets. This will improve the viability of these pools for larger retirements, increasing the diversity of credits the DAO can offer to Klima Infinity partners.

While the removal of the BCT/USDC liquidity pool represents a large proportion of our total liquidity, given that we aim to consolidate around the KLIMA/USDC pool and that it has a 7 day average utilisation of only 1%, the reduction in total liquidity is not an issue. In the event that utilisation does increase, the Policy Team is committed to bolstering the pool with treasury reserves of USDC and KLIMA minted from the liquidity bolstering budget.

At the time of writing, the BCT/USDC pool has 3,689,000 USDC and 2,325,000 BCT. The treasury has 74,886 UBO and 5,071 NBO.

Proposal

The Policy Team proposes:

• Disbanding all BCT-USDC LP tokens held by the treasury

• Allocating ½ of the UBO in the treasury (about 37,443 tonnes) and pairing it with ~19,223 KLIMA, and ½ of the NBO (about 2,535 tonnes) with ~1770 KLIMA to top up the current liquidity pools for these assets with protocol-owned liquidity.

The remaining BCT and all of the USDC would be deposited into the treasury as reserves.