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Bonding (1,1)
Bonding is the process of getting KLIMA. The protocol will provide an amount of KLIMA, and a locking period for the duration of the bond. Today, the protocol takes in:
- 1.Reserve Assets:
- BCT (Base Carbon Tonne; trades on SushiSwap)
- MCO2 (Moss Carbon Credit Token; trades on Quickswap)
- UBO (Universal Base Offset; trades on SushiSwap)
- NBO (Nature Base Offset; trades on SushiSwap)
- 2.Assets:
- KLIMA/BCT SushiSwap LP tokens
- KLIMA/USDC SushiSwap LP tokens
- KLIMA/MCO2 Quickswap LP tokens
Bonding allows you to obtain KLIMA at a lower cost basis. Because the protocol can sell at a discount to the market value (as it can mint KLIMA at IV), bonding when there is a positive discount may be advantageous compared to simply buying KLIMA on the market and staking.
The protocol provides the value of a bond based on the intrinsic value of KLIMA, and the premium charged on bonds:
This premium is dependent on 2 factors, the total debt of the system, and a external controllable variable. This ties the value of the bond to the amount of bonds outstanding. The more bonds there are (more demand), the higher the premium and the lower the discount is and vice versa.
With the bonding mechanism, not only will KlimaDAO acquire carbon assets into the treasury, it also allows the protocol to obtain assets to facilitate market operations. This assists in creating a decentralized carbon market, as well as provide passive inflows to the treasury through trading fees which accrue to the LP tokens.
Carbon Custodied (CC) refers to the tokenized carbon offsets held in the treasury reserves. For each KLIMA token circulating, there is some amount of carbon offsets in the treasury. Any excess reserves above the 1 tonne/KLIMA Intrinsic Value will eventually be used for the dilution mechanism.
Because an LP token can fluctuate in value in terms of offset tonnage as offsets are bought and sold out of the pool, we mark it down to reflect the fact that not all the carbon will be left in the pool in extreme market conditions This is formularized below:
Where K is the constant product of the LP pool.
Naked carbon tokens that represent one tonne of carbon per 1 token (BCT, MCO2, etc) contribute a carbon custodied value of 1 tonne per token, though the KLIMA token itself ends up covered by a weighted average of the price and quantity of the different carbon assets, which constitute Carbon Custodied.