Establish Carbon Market on Osmosis

Voting YES to this proposal indicates approval of a joint funding venture with Regen Network to establish deep liquidity of a Carbon Market on Osmosis through protocol owned liquidity and pool incentives.

Voting NO to his proposal indicates that this funding should not be allocated.

Based on feedback from validators collected by Regen, the Cosmos ecosystem is projected to cause, at most, 84,700 tons a year of carbon dioxide emissions with an estimate of 22,596.5 tons of emissions. In order to provide sufficient liquidity for any Cosmos chain or validator to choose to offset their project for multiple years it is proposed that liquidity of 211,750 NCT is established, owned between the Osmosis and Regen governance. Regen Network intend to match any protocol owned liquidity in the NCT/REGEN pool and so to meet this target Osmosis would purchase 105,875 NCT at an estimated price of $10 a credit, as well as utilizing around 1.235 Million REGEN of the 1,399,507 gifted to the Osmosis community pool as an pooling pair. The NCT/REGEN pool has been chosen as a non-incentivized pool. Due to Osmosis paying for liquidity based on fees, any fees generated by trading in this pool would result in Osmosis paying to incentivize liquidity that is not needed due to the unbonded protocol liquidity. This instead can act as a source of both tokens to seed other, incentivized pools, to increase liquidity and so stability of both NCT and REGEN across Osmosis as a whole through arbitrage. As an added benefit, based on average swap fees, around 5,400 NCT would be acquired by this community pool held liquidity per year. A portion of this can be routinely retired and cause Osmosis’ carbon neutrality to be self-sustaining. The remaining REGEN will be used to incentivize the NCT/OSMO pool to attract deeper liquidity, an arbitrage option for NCT/REGEN and a route to the Osmosis base pair for ease of trading. Around 165,000 REGEN should remain in the community pool after the previous two proposals, providing incentives of approximately $1,500 per day for 90 days. Including a 20% buffer for price volatility, this proposal asks for a community pool spend of 140,000 $OSMO and 1,399,507 $REGEN to establish the Osmosis’ community pool share of this liquidity. In order to ensure that supply and demand do not place an artificial premium on NCT, the pools will only become available on Osmosis once the ability to tokenise existing offchain carbon credits, non-custodially bridge NCT from Polygon across to the IBC and retire NCT on Regen is fully available to the average user through frontend tooling. This spend is being requested early as the cost of a Carbon Credit has recently been lower than usual and so Osmosis will be able to purchase this liquidity at a reduced rate in preparation for a coordinated launch.

Benefits to Osmosis The spend would be retained in the community pool as protocol owned liquidity and so no value should be lost from this proposal. Swap fees in this pool, at Osmosis average, would generate around $54,000 in revenue each year for the protocol. Retiring a portion of this revenue each year will ensure that Osmosis remains carbon neutral permanently. Through encouraging use of the Regen Network, the value of Osmosis protocol owned liquidity will increase to cater for projects yet to be connected via IBC.

Method These funds will be sent to a multisig address consisting of Cory Levinson (Regen Network) Johnny Wyles (Osmosis Support Lab) Nos Node (Osmosis Validator)

The $OSMO will be transferred to a corresponding multisig wallet on the Regen Network over IBC and used to purchase the NCT. The NCT and any remaining $OSMO will then be returned to the multisig address on Osmosis. 200 $OSMO will then be used to establish NCT/REGEN and a OSMO/NCT pool on Osmosis. These costs are paid into the community pool. All of the $NCT will then be paired with $REGEN in a ratio to maintain the purchase price of $NCT. The GAMM tokens for NCT/REGEN will then be returned, unbonded, to the Osmosis Community Pool, along with any remaining $OSMO tokens. Any remaining REGEN will be loaded as external incentives on the OSMO/NCT pool over a 90 day period, start time to be determined when NCT on Regen is fully live.

Discussion: https://gov.osmosis.zone/discussion/3936-proposal-osmosis-carbon-market-with-regen-network