What is KlimaDAO?

Part I: What is a DAO?

Yeah, Dao is Chinese for “way” or “path” (what you probably already knew), however, I’m talking about a slightly different kind of DAO. I’m talking about a decentralized autonomous organization.

Decentralized autonomous organization

Decentralized, because it is an entity without leadership which runs on the blockchain. Autonomous, because — thanks to the developers who brought it to life — it runs on its own by code. Changing the code requires a democratic decision and the voting rights are divided proportionately among those who own tokens of the respective DAO.

Use case: why would I need a DAO?

First, let me ask you something: do you have a vending machine in your local library? We have one. So let’s say you’re studying in our local library and you don’t feel like socializing at all. So instead of using the library’s cafeteria, you’re taking a walk to the vending machine. You put your money into the machine and the snacks come out. Nice, easy one. The vending machine works completely independently at the moment of use (and it doesn’t start a conversation). However, what if you’re studying all night and all of the cafeteria staff are already home? And the machine is empty because nobody refilled it? Yes, that’s sad.

The machine still needs humans to run it in terms of:

• checking the inventory
• reordering and refilling when running low
• collecting the money
• paying the electricity bill

Now, if a vending machine was a DAO, it could perform each of these tasks on its own (using a robot of course). Just imagine a robot filling up snacks into your favorite vending machine. Awesome! But let’s move on since you’ve completed the first part: understanding what a DAO is.

Part II: KlimaDAO

KlimaDAO is a pretty neat example of what a DAO is in my opinion (you know I have to say this: no financial advice!). Let me show you the introduction of their homepage real quick:

KlimaDAO’s goal is to accelerate the price appreciation of carbon assets. A high price for carbon forces companies and economies to adapt more quickly to the realities of climate change, and makes low-carbon technologies and carbon-removal projects more profitable.

Through the KLIMA token, we will maximize value creation for our community and create a virtuous cycle of growth. Eventually, the KLIMA token (each backed by real, verified carbon assets) will function as a truly sustainable asset and medium-of-exchange, with real planetary value.

Alright, sounds nice! — But how, you ask? Let’s start by looking at one of the various approaches to getting carbon under control. The carbon credit system.

Carbon credit system

A carbon credit is a permit that allows the company that holds it to emit a certain amount of carbon dioxide or other greenhouse gases. So basically, the amount of carbon that is emitted per year must be purchased (otherwise the emission will take place illegally).

The contagonist: carbon offset

This is where carbon offsetting comes into play. The companies can earn the carbon credits by taking countermeasures (planting forests e.g.). As a result, they may only invest in countermeasures and no longer have to pay a dime for carbon credits.

Carbon credit market

But the problem (in my opinion) is, that the companies can sell their carbon credits if they cover more carbon with the countermeasures than they produce. Now did you know that this is actually a big market?

• How fighting climate change became a billion-dollar industry
• China, India Top List Of Carbon Credit Sellers

“Offsets should not be treated as an alternative to reducing emissions, but rather as a means to offset unavoidable emissions.” (KlimaDAO in “About Carbon Offsets”)

KlimaDAOs solution approach

Attention: the following paragraphs are a bit simplified, as it is technically much more complicated — but that would go beyond the scope.

What basically happens with KlimaDAO is: the DAO buys carbon credits itself, “turns” it into carbon assets and links them to their $KLIMA token. As a result, the availability of carbon credits on the market decreases, whereby companies become incentivized to buy $KLIMA, because if they slowly (but surely) run out of opportunities to purchase carbon credits or if the market — due to the purchase of credits from KlimaDAO — becomes too expensive for them, they would either have to buy $KLIMA or switch to more environmentally friendly alternatives! And those holding $KLIMA benefit from the price increase at the same time. Let me show you the steps again:

1. KlimaDAO buys and links carbon credits to $KLIMA
2. Availability of carbon credits on the market decreases
3. Companies running out of options → buying $KLIMA or going green 💚
4. $KLIMA price increases

Future plans of KlimaDAO

In the future, some of the tokens — and thus carbon credits — are going to be burned. A coin burn is the process of sending tokens to a wallet which no one has access to; thus, taking it out of circulation and effectively “burning” it (read more about burning here).

So KlimaDAO is going to burn tokens which are — I’ll say it again — backed by real, verified carbon credits. This means, that certain countermeasures can no longer be used in the future and companies will actually be forced to use climate-friendly alternatives! Are you convinced yet?