Protocol Overview

See how Klima 2.0 uses an on-chain carbon portfolio and dual-token system to price carbon classes, acquire and retire credits, and route incentives to voters and liquidity providers.

For the full mathematical specification of the Klima protocol, please see whitepaper.klimaprotocol.com

Protocol Mechanics

• Klima 2.0 prioritises liquidity, transparency, and coordinated participation across the carbon markets, addressing structural barriers faced in today’s OTC-dominated environment.

• To maximise user coordination and align incentives for the long-term, the Protocol distributes all value it generates as token incentives to participants who:

  • Provide liquidity: ensuring low-slippage entry and exit for carbon users; or

  • Participate in carbon pricing: determining how the Protocol values different carbon classes.

• User votes generate pricing signals, which dictate which carbon classes the Protocol acquires, at what price, and in what quantity.

• Carbon suppliers can sell carbon to the Protocol, if they are happy with the Protocol’s bid price.

• Carbon acquired by the Protocol becomes available to buyers of retirement certificates only. The Protocol does not facilitate the trade of unretired carbon credits.

• Incoming supply and retirement demand shape the Carbon Portfolio: a live, on-chain reflection of user consensus and market activity.

• In practice:

  • The Protocol acts as an always-on counterparty for carbon market participants

  • Token voters curate the Carbon Portfolio by voting on carbon classes

  • Liquidity providers ensure the Protocol can:

    • service carbon trades

    • allow governance users & carbon traders to enter / exit

• The composition of the Carbon Portfolio is visible and tradable at all times, allowing carbon market participants to respond directly to bids and offers, and giving voters the ability to refine future pricing decisions based on market dynamics and evolving valuations.

• Klima 2.0 is fully open infrastructure. Carbon market participants can interact directly with the Protocol, audit it at all times, integrate with its liquidity layer, or build new applications on top of it.

This conceptual diagram shows how each user group can interact with the Protocol: how carbon moves between suppliers and buyers, how liquidity flows, how incentives are distributed; and how the Protocol captures information to curate its Portfolio.

Tokens Overview

Klima 2.0 uses two native tokens and onchain carbon tokens to operate its pricing and acquisition mechanism.

kVCM — Portfolio & Pricing

• Floating supply (starting at 20 million), expanding and contracting as carbon is acquired or retired.

• Represents overall value of the Protocol’s carbon portfolio.

• Defines pricing for carbon classes.

• Serves as the medium of exchange for all carbon trades with the Protocol.

• Can be locked to vote on carbon class pricing and allocations.

K2 — Risk & Capacity

• Fixed supply of 100 million, distributed programmatically as incentives.

• Adjusts Protocol acquisition capacity and pricing.

• Can be locked to vote on capacity and pricing.

Carbon Tokens — Underlying Assets

• Tokenised representations of specific carbon credits.

• Grouped into carbon classes for efficient pricing and allocation.

• Acquired by the Carbon Portfolio and retired when users redeem certificates.

Shared Mechanics

• All carbon is priced in kVCM terms only.

• All trades settle in kVCM.

• Participants can enter or exit via the kVCM <> USD liquidity pool 24/7.

• Vote-locked kVCM and K2, and liquidity providers, receive incentives.

• Incentives are the sole value distribution mechanism; there is no extraction layer.

Token Distributions

kVCM Token

Initial Token Distribution - 20 million. Floating supply.

Cohort	Proportion	Quantity (M)	Note
KLIMA Holders (Fair Launch Participants)	77.5%	15.5	Via Fair Launch claim function
Latecomers migration contract (KLIMA holders)	10%	2	To enable remaining KLIMA conversion to be converted at a reduced rate
DAO / Treasury	10%	2	For liquidity & future carbon allocation needs.
01X Consulting FZE (“01X”) -	2.5%	0.5	Per contractual agreement, compensation for model development.

K2 Token

Initial Token Distribution - 100 million. Fixed supply.

Cohort	Proportion	Quantity (M)	Note
DAO / Treasury	4.5%	4.5	For kVCM/K2 LP, or held in reserve.
01X	2.5%	2.5	24 month lock providing LP in kVCM/K2
Reserve for Protocol Launch	93%	93	Minted and held in reserve for protocol launch. See table below.
Fair Launch Participants	40%	40	Allocated proportionally against accrued points. Claimable over 48 month vesting period
Ecosystem Grant Reserve	%	5	TBD
Programmatic Incentives	40%	40	Incentive Curve (See whitepaper)
pKlima Holders	3%	3	48 month vesting period
Product Development Fund	5%	5	TBD