- w3 the North
- Posts
- Can you fight climate change with digital currency?
Can you fight climate change with digital currency?
A deep dive into KlimaDAO
Dani Pico & Tricia Jose
April 20, 2022
Happy Wednesday, web3 friends! Can you believe we are still getting snow? Like a good Canadian, I'm usually never tired of commenting on the weather, but even I'm ready to start talking about something else. I hope you have a cozy drink with you this morning. To continue with our April theme, we are doing something a little bit different today and deep-diving into KlimaDAO, a climate change-focused community.
Quip of the Week
Speaker Series next week: Crypto x Climate
Join us next Wednesday at 6pm PT/ 9pm ET as we speak with two amazing founders building in the climate space as they share their opinions on the intersection of crypto and climate, and the challenges and opportunities ahead.
Deep Dive on KlimaDAO: fighting climate change with digital currency
First, just a quick refresher on what DAOs are (you can skip this part if you already feel familiar) DAO's are Decentralized Autonomous Organizations. What makes DAOs different is that they are owned and governed by a community of people and their governance is largely based on smart protocols. In the case of KlimaDAO, voting power is associated with ownership of $KLIMA.
Before we dive into Klima, it will be important to understand two things:
Voluntary Carbon Credits: These credits can be purchased or awarded by a central authority to compensate for or neutralize emissions. Companies most often use them to compensate for emissions they have or will produce. The money goes towards financing projects that reduce emissions or remove greenhouse gases from the atmosphere.
Supply and Demand: The relationship between the availability of something and its price in a free market. The less there is of something that is in high demand the more expensive it will be. Like toilet paper at the beginning of the pandemic.
Klima was founded to "leverage Web3 technologies to enable the coordination and mass participation within the carbon markets and fully integrate them into the emerging economic system" (from the about us page). The goal is to appreciate the value of carbon credits by creating an open market for carbon - this makes it more expensive for companies to be able to offset and puts more money into the banks of projects focused on the removal of emissions. Think of it this way, if you do something good for the environment like planting a tree, you would get a carbon offset credit. If you do something bad for the environment, one way to still meet the goal of emissions reductions is to purchase offsets. The people who do good things can sell the credit to the people who do bad things. If the price of the credit goes up, companies doing bad things are further incentivized to not do them because offsetting becomes more expensive but if they do them then they have to pay more money to companies doing good things which funds the ecosystem. This is a gross oversimplification of carbon trading.
How is this possible?
What KlimaDAO is doing is possible because of something known as the Carbon Bridge. The Carbon Bridge is honestly a little confusing. Still, all you need to know if you want to grasp the basics is it allows you to tokenize carbon credits from actual carbon registries (where companies are already engaging in the carbon trade). I put a link explaining the bridge protocol in our something to read section!
Soo..... Is it working?
It's too early to tell. In order for Klima to be successful, they need to achieve scale. But they have been successful at capturing the attention of traditional companies in the carbon offset space like Gold Standard, Climate Bridge, Offsetters Clean Technology etc. The financing of the project is built for sustainability but it requires $KLIMA their coin to become a more popular and well-accepted currency.
What we can take from this?
Regardless of whether or not you are interested in the climate space, KlimaDAO provides a fascinating framework for how web3 can interact with existing systems using the power of community fundraising through a DAO and token to come together around a collective mission.
Want to dive in more?
Something to read
Something to do
Other news we didn't get to cover today but still find fascinating
Elon Musk's $43B offer to take Twitter private is sparking debates about what would happen if Twitter was purchased and managed by a DAO
Meta plans to take nearly 50% cut of everything sold in the Metaverse and these outrageous margins are yet another reason web3 needs to shift power away from tech giants
WonderFi buys Canadian crypto exchange Coinberry for $38.5M and now owns 33% of all exchanges in Canada
If you enjoyed this read, share it with a friend! If this was forwarded to you and you want to make sure you don't miss anything, make sure to subscribe at this link.
Till next time,
w3 the North