KIP-1: Introduce BCT Bonds

KIP-1: Introduce BCT Bonds

Summary: Introduce BCT bonds as a more efficient way of accumulating BCT for the Treasury, increasing demand for BCT, a core goal for the protocol.

Background: KlimaDAO has seen unprecedented demand since launch, attracting over 30,000 discord members and 13,000 KLIMA holders in a matter of days. Our plan was to launch with liquidity bonds only, bootstrapping the liquidity to sufficient levels before introducing BCT bonds. Since then, we have amassed over 34 million dollars in liquidity, split between the BCT/USDC and KLIMA/BCT pools. We believe now is the time to introduce BCT bonds as another method of absorbing carbon tonnage into the Treasury.

Abstract: We’ve seen a massive on-boarding of BCTs on-chain. For reference, we expected 2 million to be on-boarded on day one, but we’ve seen over 6.6 million minted so far, with more coming every day.

Those who bridge BCTs on-chain have four options: Buy KLIMA for BCTs (increasing the premium of KLIMA); Sell BCTs for USDC (decreasing the BCT premium); Create KLIMA/BCT SLP, bond it into the Treasury (increasing the KLIMA premium and adding liquidity); or Create BCT/USDC SLP, bond it into the Treasury (decreasing the BCT premium and adding liquidity).

BCT bonds add an additional option for users and carbon bridgers to utilize their on-chain carbon offsets and get exposure to KLIMA without being affected by slippage.

Additionally, BCT bonds increase Treasury reserves much more efficiently compared to LP bonds. Currently, for KLIMA/BCT liquidity, only 1/20th can be used for backing (based on the Risk-Free Value formula). With BCT bonds, for every 1 BCT bonded, the Treasury receives 1 BCT for backing. This allows us to bolster the Treasury more efficiently, extend the runway, and provide a floor upon which KLIMA can build.

Motivation: Capture BCT for the Treasury via BCT bonds, increasing runway, increasing demand for BCT, and encouraging further development of carbon offsets off-chain and bridging of such offsets on-chain.

Other:

1. The policy team reserves the ability to adjust bond parameters as needed to achieve a balance between liquidity and reserve inflows to the Treasury.

2. The code is written, tested, and ready to be published.

3. Since this is a time sensitive KIP, the vote will be open for 24 hours. If approved, BCT bonds will launch at 0400 UTC on Friday October 22, 2021.