KlimaDAO & Life Itself in Conversation: Part One

on Friday, May 20, 2022

In a previous episode, Collective Action Problems & Climate Change, Steven Diehl and Rufus Pollock discussed the utility of web3 in tackling collective action problems and climate change, using KlimaDAO as a case study. In a follow up to this conversation, Rufus and Theo from Life Itself Labs sat down with Marcus Aurelius and 0xy moron, two core members of KlimaDAO, to discuss the KlimaDAO model, its inspirations and its aims.


This conversation was sparked by our intial deep dive on KlimaDAO as a solution to climate change, which has its own podcast episode and related show notes.



The aspiration is laudable. But we want to achieve this aspiration of reducing carbon emissions and sequestering carbon in the most effective and efficient way possible. Klima does not achieve this.


If you are creating a special purpose vehicle for buying carbon offsets, there are really significant exchange fees. You are essentially converting dollars into crypto, and then converting crypto back into dollars to buy carbon offsets, and then hold them on your blockchain based on Ethereum which has quite high transaction fees. While it's not completely clear what the transaction costs are, one would have to guess that for every dollar going in, you're not able to buy even close to $1 of carbon offsets certificates. So at the basic level of what it's trying to do, it seems highly inefficient.

Indirect and overly complicated

As an individual you can go to the market and invest in things that KlimaDAO would invest in directly without going through a hypervolatile speculative asset and DAO indirection layer.

And why is the DeFi part required? Why do we need all the staking and bonding? It seems to add to the obfuscation of the underlying purpose.

Klima cannot function as a currency

A reserve currency is something a large group of people on an international scale adopt, because goods and services of their major trading partners are denominated in that currency. The whitepaper keeps referring to Klima token as a reserve currency, but in reality it cannot function as a currency.

Firstly, the insane price volatility means Klima can't function as a currency. The price of Klima peaked at around $3600, well above the intrinsic value of one ton of carbon. It has since collapsed, losing around 99% of its value over 1 year - it's now trading at around $20.

The notion that it can be a reserve currency, when nobody's denominated any kind of goods or services, seems to be an irreconcilable contradiction inherent in Klima.

Like many other crypto projects it seems to be a piece of financial engineering that at the bottom sits nothing but some appeal to narrative and the faith that “number go up” by creating artificial scarcity of a digital speculative asset; so it is not a currency.

Why not just raise money to buy carbon offsets?

Something that makes Klima exciting is this price volatility and the potential to raise a lot of money based on this price volatility. But ehy not just raise the money at the beginning and then shut down the thing and just buy carbon offsets and hold on to them?

Vulnerability to centralized control

Governance tokens are available to be purchased by any actor. What's to stop say Exxon from buying up all the governance tokens? The answer: nothing. Exxon would therefore be able to take over the management structure of KlimaDAO.

How does it plan to scale?

The total market cap is currently $35,624,946.00 of an illiquid crypto token. This is insignificantly tiny even if we believe this market cap number. There are some €53 trillion AUM in ESG funds.

One might argue that Klima is still new and it is at the beginning of it's journey. However, there is no clear narrative of how it's going to grow from being funded by the crypto bubble and being smaller than most philanthropic efforts surrounding climate change, to get to the scale that they aspire to. Rather than investing so much time, energy and money into this route, this money could have been put into simply buying carbon offsets directly.

Climate credits are a very questionable mechanism

Climate credits are effectively a form of indulgence where you pay for the right to pollute the environment by paying off the damage via some future project or activity. You're not seeking to solve the problem, but rather to mitigate it. It doesn't seek to fix the root of the problem: that we're burning fossil fuels. Buying tokens that represent tree planting in the future will not solve climate change.

People will and can exploit these mechanisms to maximize their capacity to pollute. Secondary markets for carbon credits are driven by bizarre corruption. Tesla has made a lot of money on secondary markets trading carbon credits.

Anything we can do, we can afford. Money is not the problem

Mark Carney proposed to COP26 to allocate $130 trillion to help address solutions to climate change. The money to fight climate change absolutely exists, but sufficient funds is not the issue. The problem is doing supranational coordination of solutions and allocating resources to those projects.

Unfettered capitalism is a process of commoditizing everything, privatizing the commons and destroying that which has no value and converting everything into private profit. Crypto assets are an extension of that program to an even more extreme level.

Our system will continue exploiting fossil fuels so long as the private costs to capitalists are much lower than the societal cost. Vague appeals to new mechanism designs and appeals to absolute free markets about “aligning incentives” can’t conceive of solutions outside their own capitalist logics.

Technosolutionism is a distraction and a drain on resources

Technosolutionism via the financialization of everything is a common theme within web3 rhetoric: let’s turn the abstract idea of fighting climate change into a fictitious commodity to be traded on the market.

This is a distraction from actual solutions, of which there is no financial silver bullet. It is just adding an additional layer of complexity to fighting climate change. Such a project absorbs time, money, and runs on proof of work which requires a large amount of energy. All these resources could be better allocated.

It doesn't seem to work in practice

Looks like the algo stable coin part isn't going so well.


KlimaDAO are asking an important question: how can we tackle climate change using human cooperation? But the white papers aren't addressing how this question is to be addressed.

The aspirations are beautiful. The initial manifesto resonates a lot with what doesn't work about unfettered capitalism, about an unfettered market system, about the lack of provision for public goods, and yet KlimaDAO seems to go further down that same route.

As a currency it seems problematic. As an investment it doesn’t seem to work. As a special purpose vehicle for buying carbon credits it seems highly inefficient (e.g. massive trading fees). Carbon credits are themselves problematic and are not going to be the answer to climate change.

Apendix: Visual Summary of how KlimaDAO works




Ahl, A. et al. (2019) ‘Review of blockchain-based distributed energy: Implications for institutional development’, Renewable and Sustainable Energy Reviews, 107, pp. 200–211. Available at: https://doi.org/10.1016/j.rser.2019.03.002.

Allen, H.J. (2022) ‘DeFi: Shadow Banking 2.0?’, SSRN Electronic Journal [Preprint]. Available at: https://doi.org/10.2139/ssrn.4038788.

Amenta, C., Riva Sanseverino, E. and Stagnaro, C. (2021) ‘Regulating blockchain for sustainability? The critical relationship between digital innovation, regulation, and electricity governance’, Energy Research & Social Science, 76, p. 102060. Available at: https://doi.org/10.1016/j.erss.2021.102060.

Ante, L., Steinmetz, F. and Fiedler, I. (2021) ‘Blockchain and energy: A bibliometric analysis and review’, Renewable and Sustainable Energy Reviews, 137(October 2020), p. 110597. Available at: https://doi.org/10.1016/j.rser.2020.110597.

Aramonte, S., Huang, W. and Schrimpf, A. (2021) ‘DeFi risks and the decentralisation illusion’, p. 16.

Badea, L. and Mungiu-Pupazan, M.C. (2021) ‘The Economic and Environmental Impact of Bitcoin’, IEEE Access, 9, pp. 48091–48104. Available at: https://doi.org/10.1109/ACCESS.2021.3068636.

Barbereau, T., Smethurst, R., Papageorgiou, O., Sedlmeir, J., et al. (2022) ‘Decentralised Finance’s Unregulated Governance: Minority Rule in the Digital Wild West’, Available at SSRN [Preprint]. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4001891.

Barbereau, T., Smethurst, R., Papageorgiou, O., Rieger, A., et al. (2022) ‘DeFi, Not So Decentralized: The Measured Distribution of Voting Rights’, in Proceedings of the 55th Hawaii International Conference on System Sciences. Available at: https://scholarspace.manoa.hawaii.edu/handle/10125/80074.

Benetton, M., Compiani, G. and Morse, A. (2021) ‘When Cryptomining Comes to Town: High Electricity-Use Spillovers to the Local Economy’, SSRN Electronic Journal [Preprint]. Available at: https://doi.org/10.2139/ssrn.3779720.

Bogensperger, A. et al. (2021) ‘Welche Zukunft hat die Blockchain-Technologie in der Energiewirtschaft?’ Available at: https://www.econstor.eu/handle/10419/237670.

Brilliantova, V. and Thurner, T.W. (2019) ‘Blockchain and the future of energy’, Technology in Society, 57, pp. 38–45. Available at: https://doi.org/10.1016/j.techsoc.2018.11.001.

Buth, M.C. (Annemarie), Wieczorek, A.J. (Anna) and Verbong, G.P.J. (Geert) (2019) ‘The promise of peer-to-peer trading? The potential impact of blockchain on the actor configuration in the Dutch electricity system’, Energy Research & Social Science, 53, pp. 194–205. Available at: https://doi.org/10.1016/j.erss.2019.02.021.

Campbell-Verduyn, M. (2021) ‘Conjuring a Cooler World? Blockchains, Imaginaries and the Legitimacy of Climate Governance’, Global Cooperation Research Papers, 28. Available at: https://doi.org/doi:10.14282/2198-0411-GCRP-28.

Diehl, S. (2021) ‘The Crypto Chernobyl’, 10 February. Available at: https://www.stephendiehl.com/blog/chernobyl.html (Accessed: 25 February 2022).

Dindar, B. and GĂŒl, Ö. (2021) ‘The detection of illicit cryptocurrency mining farms with innovative approaches for the prevention of electricity theft’, Energy & Environment, (April), p. 0958305X211045066. Available at: https://doi.org/10.1177/0958305x211045066.

Dorfleitner, G., Muck, F. and Scheckenbach, I. (2021) ‘Blockchain applications for climate protection: A global empirical investigation’, Renewable and Sustainable Energy Reviews, 149(June), p. 111378. Available at: https://doi.org/10.1016/j.rser.2021.111378.

Gallersdörfer, U. et al. (2020) ‘Energy Consumption of Cryptocurrencies Beyond Bitcoin’, Joule, 4(2018), pp. 2018–2021. Available at: https://doi.org/10.1016/j.joule.2020.07.013.

Gallersdörfer, U., Klaaßen, L. and Stoll, C. (2021) ‘Accounting for carbon emissions caused by cryptocurrency and token systems’. Available at: https://arxiv.org/abs/2111.06477.

Goodkind, A.L., Jones, B.A. and Berrens, R.P. (2020) ‘Cryptodamages: Monetary value estimates of the air pollution and human health impacts of cryptocurrency mining’, Energy Research and Social Science, 59(March 2019), p. 101281. Available at: https://doi.org/10.1016/j.erss.2019.101281.

Greenberg, P. and Bugden, D. (2019) ‘Energy consumption boomtowns in the United States: Community responses to a cryptocurrency boom’, Energy Research and Social Science, 50(December 2018), pp. 162–167. Available at: https://doi.org/10.1016/j.erss.2018.12.005.

Howson, P. et al. (2019) ‘Cryptocarbon: The promises and pitfalls of forest protection on a blockchain’, Geoforum, 100(February 2019), pp. 1–9. Available at: https://doi.org/10.1016/j.geoforum.2019.02.011.

Howson, P. (2019) ‘Tackling climate change with blockchain’, Nature Climate Change, 9(9), pp. 644–645. Available at: https://doi.org/10.1038/s41558-019-0567-9.

Howson, P. (2020a) ‘Building trust and equity in marine conservation and fisheries supply chain management with blockchain’, Marine Policy, 115, p. 103873. Available at: https://doi.org/10.1016/J.MARPOL.2020.103873.

Howson, P. (2020b) ‘Climate Crises and Crypto-Colonialism: Conjuring Value on the Blockchain Frontiers of the Global South’, Frontiers in Blockchain, 3(May). Available at: https://doi.org/10.3389/fbloc.2020.00022.

Howson, P. (2021) ‘Distributed degrowth technology: Challenges for blockchain beyond the green economy’, Ecological Economics, 184(June 2020), p. 107020. Available at: https://doi.org/10.1016/j.ecolecon.2021.107020.

Howson, P. and de Vries, A. (2022) ‘Preying on the poor? Opportunities and challenges for tackling the social and environmental threats of cryptocurrencies for vulnerable and low-income communities’, Energy Research and Social Science, 84(xxxx), p. 102394. Available at: https://doi.org/10.1016/j.erss.2021.102394.

Hull, J., Gupta, A. and Kloppenburg, S. (2021) ‘Interrogating the promises and perils of climate cryptogovernance: Blockchain discourses in international climate politics’, Earth System Governance, 9, p. 100117. Available at: https://doi.org/10.1016/j.esg.2021.100117.

Huston, J. (2020) ‘The Energy Consumption of Bitcoin Mining and Potential for Regulation’, George Washington Journal of Energy and Environmental Law, 11(1), pp. 32–41. Available at: https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/gwjeel11&section=6.

Jana, R.K. et al. (2021) ‘Determinants of electronic waste generation in Bitcoin network: Evidence from the machine learning approach’, Technological Forecasting and Social Change, 173. Available at: https://doi.org/10.1016/j.techfore.2021.121101.

Koomey, J. and Masanet, E. (2021) ‘Does not compute: Avoiding pitfalls assessing the Internet’s energy and carbon impacts’, Joule, 5(7), pp. 1625–1628. Available at: https://doi.org/10.1016/j.joule.2021.05.007.

KĂŒfeoğlu, S. and Özkuran, M. (2019) ‘Bitcoin mining: A global review of energy and power demand’, Energy Research and Social Science, 58, p. 101273. Available at: https://doi.org/10.1016/j.erss.2019.101273.

Li, J. et al. (2019) ‘Energy consumption of cryptocurrency mining: A study of electricity consumption in mining cryptocurrencies’, Energy, 168, pp. 160–168. Available at: https://doi.org/10.1016/j.energy.2018.11.046.

McDonald, K. (2021) ‘Ethereum Emissions: A Bottom-up Estimate’. Available at: http://arxiv.org/abs/2112.01238.

Miglani, A. et al. (2020) ‘Blockchain for Internet of Energy management: Review, solutions, and challenges’, Computer Communications, 151, pp. 395–418. Available at: https://doi.org/10.1016/j.comcom.2020.01.014.

Mollah, M.B. et al. (2021) ‘Blockchain for Future Smart Grid: A Comprehensive Survey’, IEEE Internet of Things Journal, 8(1), pp. 18–43. Available at: https://doi.org/10.1109/JIOT.2020.2993601.

Mora, C. et al. (2018) ‘Bitcoin emissions alone could push global warming above 2 C’, Nature Climate Change, 8(11), pp. 931–933.

Morrison, R., Mazey, N.C.H.L. and Wingreen, S.C. (2020) ‘The DAO Controversy: The Case for a New Species of Corporate Governance?’, Frontiers in Blockchain, 3(May). Available at: https://doi.org/10.3389/fbloc.2020.00025.

Murray, A., Rhymer, J. and Sirmon, D.G. (2021) ‘Humans and technology: Forms of conjoined agency in organizations’, Academy of Management Review, 46(3), pp. 552–571. Available at: https://doi.org/10.5465/amr.2019.0186.

Nåñez Alonso, S.L. et al. (2021) ‘Cryptocurrency mining from an economic and environmental perspective. Analysis of the most and least sustainable countries’, Energies, 14(14). Available at: https://doi.org/10.3390/en14144254.

Okorie, D.I. (2021) ‘A network analysis of electricity demand and the cryptocurrency markets’, International Journal of Finance and Economics, 26(2), pp. 3093–3108. Available at: https://doi.org/10.1002/ijfe.1952.

Peplow, M. (2019) ‘Bitcoin poses major electronic-waste problem’, Chemical & Engineering News. American Chemical Society. Available at: http://cen.acs.org/environment/sustainability/Bitcoin-poses-major-electronic-waste/97/i11.

Petri, I. et al. (2020) ‘Blockchain for energy sharing and trading in distributed prosumer communities’, Computers in Industry, 123, p. 103282. Available at: https://doi.org/10.1016/j.compind.2020.103282.

Pettifor, A. (2021) Reclaiming Central Banks, Project Syndicate. Available at: https://www.project-syndicate.org/onpoint/central-banks-favoring-private-capital-over-democratic-climate-goals-by-ann-pettifor-1-2021-09 (Accessed: 13 April 2022).

Platt, M. et al. (2021) ‘Energy Footprint of Blockchain Consensus Mechanisms Beyond Proof-of-Work’. Available at: https://arxiv.org/abs/2109.03667.

Qin, S. et al. (2020) ‘Bitcoin’s future carbon footprint’. Available at: http://arxiv.org/abs/2011.02612.

Robinson, K.S. (2020) The Ministry for the Future. Hachette UK.

Scharnowski, S. and Shi, Y. (2021) ‘Bitcoin Blackout: Proof-of-Work and the Centralization of Mining’, SSRN Electronic Journal. Available at: https://doi.org/10.2139/ssrn.3936787.

Schinckus, C. (2020) ‘The good, the bad and the ugly: An overview of the sustainability of blockchain technology’, Energy Research and Social Science, 69(May), p. 101614. Available at: https://doi.org/10.1016/j.erss.2020.101614.

Schneiders, A. and Shipworth, D. (2021) ‘Community Energy Groups: Can They Shield Consumers from the Risks of Using Blockchain for Peer-to-Peer Energy Trading?’, Energies, 14(12). Available at: https://doi.org/10.3390/en14123569.

Schulz, K. and Feist, M. (2020) ‘Leveraging Blockchain Technology for Innovative Climate Finance under the Green Climate Fund’, SSRN Electronic Journal, 7, p. 100084. Available at: https://doi.org/10.2139/ssrn.3663176.

Sedlmeir, J., Buhl, H.U., et al. (2020) ‘Ein Blick auf aktuelle Entwicklungen bei Blockchains und deren Auswirkungen auf den Energieverbrauch’, Informatik-Spektrum, 43(6), pp. 391–404. Available at: https://doi.org/10.1007/s00287-020-01321-z.

Sedlmeir, J., Ulrich, H., et al. (2020) ‘The Energy Consumption of Blockchain Technology : Beyond Myth’, Business & Information Systems Engineering, 62(6), pp. 599–608. Available at: https://doi.org/10.1007/s12599-020-00656-x.

Stoll, C., Klaaßen, L. and Gallersdörfer, U. (2019) ‘The Carbon Footprint of Bitcoin’, Joule, 3(7), pp. 1647–1661. Available at: https://doi.org/10.1016/j.joule.2019.05.012.

Teng, F. et al. (2021) ‘A comprehensive review of energy blockchain: Application scenarios and development trends’, International Journal of Energy Research, 45(12), pp. 17515–17531. Available at: https://doi.org/10.1002/er.7109.

Teufel, B., Sentic, A. and Barmet, M. (2019) ‘Blockchain energy: Blockchain in future energy systems’, Journal of Electronic Science and Technology, 17(4), p. 100011. Available at: https://doi.org/10.1016/j.jnlest.2020.100011.

Truby, J. (2018) ‘Decarbonizing Bitcoin: Law and policy choices for reducing the energy consumption of Blockchain technologies and digital currencies’, Energy Research and Social Science, 44(June), pp. 399–410. Available at: https://doi.org/10.1016/j.erss.2018.06.009.

Valdivia, A.D. and Balcell, M.P. (2022) ‘Connecting the grids: A review of blockchain governance in distributed energy transitions’, Energy Research and Social Science, 84, p. 102383. Available at: https://doi.org/10.1016/j.erss.2021.102383.

de Vries, A. (2018) ‘Bitcoin’s Growing Energy Problem’, Joule, 2(5), pp. 801–805. Available at: https://doi.org/10.1016/j.joule.2018.04.016.

de Vries, A. (2019) ‘Renewable energy will not solve bitcoin’s sustainability problem’, Joule, 3(4), pp. 893–898.

de Vries, A. (2020) ‘Bitcoin’s energy consumption is underestimated: A market dynamics approach’, Energy Research & Social Science, 70, p. 101721.

de Vries, A. and Stoll, C. (2021) ‘Bitcoin’s growing e-waste problem’, Resources, Conservation and Recycling, 175(September), p. 105901. Available at: https://doi.org/10.1016/j.resconrec.2021.105901.

Vries, A.D. (2020) ‘Bitcoin’s energy consumption is underestimated : A market dynamics approach’, Energy Research & Social Science, 70(July), p. 101721. Available at: https://doi.org/10.1016/j.erss.2020.101721.

Walch, A. (2015) ‘The bitcoin blockchain as financial market infrastructure: A consideration of operational risk’, NYUJ Legis. & Pub. Pol’y, 18, p. 837.

Walch, A. (2017) ‘Blockchain’s treacherous vocabulary: One more challenge for regulators’, Journal of Internet Law, 21(2).

Walch, A. (2019a) ‘Deconstructing ‘Decentralization’: Exploring the Core Claim of Crypto Systems’, C. Brummer (ed.), Crypto Assets: Legal and Monetary Perspectives, pp. 1–36. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3326244.

Walch, A. (2019b) ‘In code (rs) we trust: Software developers as fiduciaries in public blockchains’.

Walch, A. (2019c) ‘Software Developers as Fiduciaries in Public Blockchains’, Regulating Blockchain. Techno-Social and Legal Challenges, ed. by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos & Stefan Eich, Oxford University Press, 2019. [Preprint]. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3203198.

Wanat, E. (2021) ‘Are Crypto-Assets Green Enough? – An analysis of draft EU Regulation on markets in crypto assets from the perspective of the European Green Deal’, Osteuropa Recht, 67(2), pp. 237–250. Available at: https://doi.org/10.5771/0030-6444-2021-2-237.

Yan, L., Mirza, N. and Umar, M. (2021) ‘The cryptocurrency uncertainties and investment transitions: Evidence from high and low carbon energy funds in China’, Technological Forecasting and Social Change, p. 121326. Available at: https://doi.org/10.1016/j.techfore.2021.121326.

Yapa, C., de Alwis, C. and Liyanage, M. (2021) ‘Can Blockchain Strengthen the Energy Internet?’, Network, 1(2), pp. 95–115. Available at: https://doi.org/10.3390/network1020007.

Yildizbasi, A. (2021) ‘Blockchain and renewable energy: Integration challenges in circular economy era’, Renewable Energy, 176, pp. 183–197. Available at: https://doi.org/10.1016/j.renene.2021.05.053.

Zannini, A. (2020) Blockchain technology as the digital enabler to scale up renewable energy communities and cooperatives in Spain. PhD Thesis.

Zhu, S. et al. (2020) ‘The development of energy blockchain and its implications for China’s energy sector’, Resources Policy, 66, p. 101595. Available at: https://doi.org/10.1016/j.resourpol.2020.101595.