KlimaDAO
  • Welcome to KlimaDAO
  • What is KlimaDAO?
  • Why KlimaDAO Exists
  • 🌍Ecosystem
    • Digital Carbon
    • Carbon Pools
    • The Role of KlimaDAO
  • ⚙️Economics
    • Overview
    • Operational Mechanics
      • Intrinsic Value
      • Protocol Owned Liquidity (POL)
      • Fungible Carbon Credits
    • Dynamics
      • Supply Expansion
      • Supply Contraction
      • Green Ratio
    • Purpose
      • Means of Exchange
      • Store of Value
      • Unit of Account
  • 🛠️Developers
    • Overview
    • Retirement Aggregator
    • Automation
    • Bug Bounty
    • Contracts
      • DAO Wallet
      • Policy
      • Retirement
        • V2 - Diamond
          • Generalized Retirement
          • Bridge-Specific Tooling
      • Staking
      • Tokens
      • Treasury
    • Data Sources
    • Deployment Addresses
    • Guides
      • Stake KLIMA
      • Wrap sKLIMA
      • Retire Carbon
      • Retirement Aggregator V1 Contract Guide
      • Retirement UI Integration Guide
    • Integration Examples
    • Testing
  • 🔄Auto Compounder
    • Auto Compounder App Guide
    • Auto Compounder FAQ
  • 🏛️DAO
    • Governance Framework
    • Organizational Structure
  • 📚References
    • FAQ
    • History
    • Glossary
    • Links
    • Translations
    • FAQ Carbon Markets
    • About Verified Carbon Credits
    • Estimating Carbon Emissions
  • 🙋‍♀️Get Involved
    • Community Discord
    • Governance Forum
    • Contact Us
Powered by GitBook
On this page

Was this helpful?

Export as PDF
  1. Economics
  2. Operational Mechanics

Protocol Owned Liquidity (POL)

PreviousIntrinsic ValueNextFungible Carbon Credits

Last updated 1 year ago

Was this helpful?

Understanding Liquidity in Markets

Liquidity is the lifeblood of any efficient market, enabling seamless trades without significantly affecting the asset's price. Traditional carbon markets often operate over-the-counter (OTC), predominantly featuring ask prices with limited visibility on bids. This structure can lead to inefficiencies, including price opacity, large price spreads, and illiquidity. In contrast, the KLIMA token, through its integration with Automated Market Makers (AMMs), actively participates in both bidding and asking across narrow price spreads, enabling a transparent and fluid market environment.

In decentralized finance (DeFi), liquidity is facilitated differently than in traditional markets. Platforms like Uniswap and Sushiswap have pioneered the use of on-chain Liquidity Pools (LPs), which are smart contracts containing pairs of assets, such as KLIMA and USDC. The principle of X*Y = K underpins these liquidity pools, ensuring that the product of the quantities of the two assets remains constant, thereby defining the relationship between supply and demand.

KLIMA connects environmental assets with on-chain financial primitives that can scale environmental markets via liquid and transparent market infrastructure.

Enhancements with Concentrated Liquidity Uniswap's introduction of concentrated liquidity functionality marks a significant advancement in capital efficiency within AMMs. This innovation allows liquidity providers to allocate their capital to specific price ranges, maximizing capital efficiency and enabling more strategic liquidity management. This feature is particularly beneficial in optimizing the liquidity of KLIMA/CARBON pools, ensuring that capital is utilized where it's most needed, thereby reducing slippage and enhancing market stability.

KLIMA has launched a pool on , where users can optionally toggle a “green fee” that will automatically make a transaction carbon neutral.

KLIMA has also launched a concentrated liquidity pool on , augmenting the liquidity on Sushiswap and allowing for more capital efficient transactions.

KLIMA/CARBON Liquidity Pools

KLIMA has six primary KLIMA/CARBON liquidity pools, and more will be constructed as carbon continues to be tokenized.

  • ,

  • ,

  • ,

  • ,

  • , and

Along with the primary pool.

These pools are crucial for creating a liquid on-chain market for carbon assets, allowing for efficient trading and price discovery. By supporting liquidity across multiple carbon tokens, Klima not only supports a broad range of environmental projects but also enhances the resilience and depth of the market.

Conclusion

The strategic management of Protocol Owned Liquidity (POL) and the adoption of concentrated liquidity functionality represent significant advancements in Klima’'s approach to market liquidity. By owning and efficiently managing liquidity across multiple KLIMA/CARBON pools, KLIMA ensures an efficient, stable, and resilient market for carbon assets, aligning with its mission to facilitate a liquid and accessible Carbon Market.

⚙️
Sushiswap
Uniswap
KLIMA/BCT
KLIMA/NCT
KLIMA/UBO
KLIMA/NBO
KLIMA/MCO2
KLIMA/CCO2
KLIMA/USDC