Community Fund: CGP 35 and how can we use those funds?

Governance
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Spinning off the Community Fund discussion of the Epoch Rewards discussion (Discussion on Celo Epoch Rewards - #15 by asa).

Current situation

There is a lot of CELO that is not being used. Why? How can we use the community fund better?

Not to be confused: There is the Community Fund Epoch Reward share, which is sent to the governance contract, and the Celo Community Fund (https://celocommunityfund.org/). Those are two different things, and the Celo Community Fund from @deepak, @Patrick, and @Dee has a current allocation of ~665k CELO from the governance contract.

CGP 35: Decrease community fund share from 25% to 5%

As most of the funds are currently not being used, the utility of each additional CELO rewarded to the community fund is very low, and it comes at the cost of downscaling other epoch rewards: voter, validator rewards, and carbon offset.

Decreasing the community fund share from 25% to 5% would help to reduce that downscaling and mitigate the effects of it.

In absolute numbers this proposes to decrease the growth of the community fund from ~5.5 million to ~1 million CELO a year.

Growing the community and enabling posperity should remain one of the if not the highest priority, and I don’t see this proposal impacting this as there are still more than 6 million CELO waiting to be allocated and the intention to increase the funds once they could be used.

As soon as the community fund is growing at a faster rate, this epoch reward share should be increased again, and we still have the ~6 million CELO as buffer.

This CGP as part of all four proposed Epoch Rewards CGPs are proposed as a temporary solution which buys the community and the cLabs economic teams some time to come up with a better, more sustainable long-term Epoch Rewards mechanism.

Discussion

  • How can we use the community funds and put them to a good use?
  • What arguments for and against reducing the Community Fund Epoch Rewards share do you see? Curious to hear other perspectives and maybe there is something that’s missing from the more general epoch rewards discussion so far.
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When people are in a position of power to modify changes to the protocol, especially if it impacts reward allocations that touch the community/public, there is a high chance that the people in power won’t change it later on back to where it was.

By turning the tap off, we are saying that the community fund has had enough. We are saying that “Hey, we dotted our I’s and crossed our T’s on everything that is needed to show that we care about the community to some degree and now we need to focus on where to move the rest of the rewards.”

It should be noted that this CGP was originally tied with the “Increasing Validator Reward” initiative. That is already bad optics since it’s basically saying “Let’s enrich our validators at the expense of the community”. It is against Celo’s mission of Prosperity for All.

Keyword here is: All

That includes the community fund. The community fund acts as a large moat and defense against any centralization on the protocol. It provides a neutral reserve that anyone with enough of an idea, a proposal, or a major initiative that can help Celo can propose from this pool and governance can play its role with community voting to support a proposal or not.

In my opinion, this forum post shouldn’t discuss “how do we use these funds?” because that’s separate CGP discussions. It should answer “Should we change the allocation to the Community Fund from 25% to 5%”. My personal opinion is: absolutely not.

The argument that there aren’t enough proposals using this fund isn’t a good one. The network is 1 year old, Celo’s name and brand and community is still growing. We have energized and created a culture around the Core Community of Celo that’s been growing larger and larger, with the Governance Calls, the All-Core Devs Calls, the Governance Working Group, livestreaming Plumo ceremonies and the Donut Hardfork, growing a mailing list for Celo Signal that’s highly engaged, while also doing major events for Celo’s Bridges initiatives with the Crosschain Salon in Paris amongst other things. The point is, this is hard work that takes time. This proposal might not see it resulting in a lot of applications to the community fund now, but there’s a community that’s passionate about the mission and growing. Compare it to the Uniswap grants fund which is in the billions but has barely any applications because there’s no Uniswap community.

I will be making a major proposal for allocation of the community fund to aggressively make Celo the number 1 protocol for developers and the community at large, but doing that is a separate discussion. What I personally don’t want to see is us fiddling with the tap for the community fund just because we can.

I understand you don’t see many proposals, but looking at the numbers after a year since the network is live isn’t a good benchmark imo. This requires a lot more time to analyze and view. Currently, Celo is small. It benefits from an increasing community fund that makes this more grassroots. It can also benefit from more marketing and awareness about the community fund so more folks can request from it.

This proposal is not taking into account the passionate entrepreneurs and developers in emerging markets who might not speak English as a first-language nor understand how governance work but would have ideas for best use of community funds local in their region. This proposal is not taking into account that these things take time.

If the community wants to see a use of these funds, I am happy to propose something I’ve been working on for a while as a separate CGP. I however don’t think me proposing something should be a good enough reason for stopping the tap from flowing to the community fund. This community fund is for all who are mission aligned with Celo, not just 1 individual. They are to secure Celo’s future and play an independent role in the protocol, from now until 10-20-30 years in the future.

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This proposal is not taking into account the passionate entrepreneurs and developers in emerging markets who might not speak English as a first-language nor understand how governance work but would have ideas for best use of community funds local in their region. This proposal is not taking into account that these things take time.

This is way too polarizing and not true in my opinion. This reads as if the proposal would abandon the community fund and the people we care about, which is clearly not the case nor the intention. It does neither turn the cap off nor mean that ‘we cared enough’ about the community.

What CGP35 instead means to do, again, is to temporarily propose the community fund growth reduction to relieve some pressure of the epoch rewards mechanism. This would buy some time to come up with a better, more sustainable long-term solution. At the same time it intends to emphasize the importance of the community and the opportunities with its rewards, but that there should be a shared understanding or plan on how to use these funds to justify the overall downscaling effects on other rewards they currently have.

If the proposal would pass, the community fund would still grow by ~1 million CELO a year, more than what has ever been used. If it’s the community’s desire to grow the community fund to a much larger amount, in the area of the Celo foundation’s size, longer term, to think about way bigger projects, this could be something that’s built into a more long-term epoch rewards mechanism. Although that will be a separate discussion.

I don’t think that as of now there is a clear understanding in the community on what to use these funds for and how to allocate them, please correct me if I’m wrong here. But right now, the high growth without utilization of funds comes with negative effects on epoch rewards overall and reducing them would help fix that.

If how you receive the proposal is how the majority of the community receives the proposal though, I myself would not be in favour of it anymore. I don’t want to risk sending that message as this is not what the proposal intends to do. Other opinions on how this proposal is perceived would be helpful.

I do agree with several of your important points:

  1. Growing Celo’s name, brand and community should be top priority
  2. To make Celo the number 1 protocol for developers and the community should be top priority
  3. It is a risk that when helpful in the future, a proposal to increase the community fund rewards again could not pass, maybe even due to fairly centralized voting power.
  4. The network is fairly young and this is probably the main reason why the funds have not been touched so far.
  5. Community Fund is a looong-term fund

and at the same time want to add that the reason why Epoch Rewards exist is to not only provide funds to the community, but mainly to ensure the security of the blockchain via incentivizing Voting and Validating, which incentives CGP 35 tries to improve.

Overall, I would really like to start to see a shared understanding and more plans on how to actually use more of these funds and would be in heavy favour of growing them when helpful. But until then or when we’ve come up with a better long-term epoch rewards mechanism, I think reducing them with CGP 35 has greater utility for the Celo network and community than just saving them without a plan on how to use them. Also, if it becomes clear that the 6 million + CELO could be put to good use in the next few months, this proposal would loose it’s reasoning and meaning.

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I agree that’s bad optics. Might make sense to reframe the validator proposal? It does not propose to increase the rewards from what was initially agreed upon, 75k cUSD per year. Due to the downscaling effect from rewarding ahead of schedule, only 63k cUSD are actually rewarded to a validator, who face increasing hardware requirements at the same time.

Validator incentives are hard to measure and calibrate on-chain, and in the epoch rewards discussion the shared understanding was to better not take any security risk here and have too few incentives to validate. That proposal is to restore the original 75k a year by bumping the target reward to 85k a year per validator (which is then downscaled to ~75k by the protocol).

Since validator rewards are <10% of the epoch rewards, while the community fund reward is 25%, this does not have a big effect on the overall rewards.

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@Yaz and @Tobi, I think you each make good points on keeping vs decreasing community fund rewards for now.

I certainly agree it is a high priority to ensure more of the community funds are deployed. A dedicated effort on awareness seems in order, supported by a working group as suggested previously by @asa .

Having being involved in the working group with @willkraft, @ebeth and @CalicoKittencat on governance documentation, it is clear that there is a lot of confusion betwee i) Celo on-chain fund (referenced above), ii) Celo Community Fund @deepak , and even iii) Celo Foundation grants. Better naming of each would be beneficial as would improved clarity/communication to the community of a) the funding source/approver for each, and b) the scope of each type of funding/grant.

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I think Community Fund has not been tapped because it needs support to both drive awareness and engage with the community to identify opportunities as well as guide the community to apply. The cLabs dev rel team is now able to help this effort. I’d prefer not making changes to these until these efforts can be energized.

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@Pinotio.com +1 on the potential for confusion with names.

As feedback: Until my second read, I wasn’t quite sure whether the conversation revolves around the Celo Community Fund (related to @deepak) or the on-chain fund (referenced by @Tobi and @Yaz in the discussion above).

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I have no doubt of your good intentions when you say this 100%. What worries me here is the use of the word “temporarily”. History will show that what we mean to be temporary when it comes to reward reduction will end up being permanent.

This is way too polarizing and not true in my opinion. This reads as if the proposal would abandon the community fund and the people we care about, which is clearly not the case nor the intention. It does neither turn the cap off nor mean that ‘we cared enough’ about the community.

It is 100% polarizing as this proposal is very polarizing. I get it’s not what you intended when you wrote it, I really do. But here, we are looking at the proposal as it is. And what it’s doing is a 80% reduction in the Community Fund for reasons that are very premature as this network is 1 year old.

This would buy some time to come up with a better, more sustainable long-term solution. At the same time it intends to emphasize the importance of the community and the opportunities with its rewards, but that there should be a shared understanding or plan on how to use these funds to justify the overall downscaling effects on other rewards they currently have.

I’d like to see an alternative first before anyone proposes modifying community fund allocation. At the moment, it’s very vague. “Temporarily”, “better, more sustainable long-term solution” are vague keywords.

On this quote: “but that there should be a shared understanding or plan on how to use these funds to justify the overall downscaling effects on other rewards they currently have.” I respectfully disagree because it sounds like we are trying to add conditions on the Community Fund when there weren’t any before. The Community Fund is a netural party, it shouldn’t be the one participating in a “shared understanding”. The community decides what it can use allocations of the fund for.

Validators will still validate as long as there’s a profit. Currently the profit margins are very high for them. They’re service providers for the network and they’re rewarded for their service.

I don’t think that as of now there is a clear understanding in the community on what to use these funds for and how to allocate them, please correct me if I’m wrong here.

I think this is a premature judgement to make. The community is still growing. Celo is still growing. It doesn’t matter if your proposal moves it to 1 million CELO a year “temporarily” until “better, more sustainable long-term solution” are in place, I guarantee you that it will never be temporary and the whales and validators will get too comfortable with the way things are and after that they’ll resist moving the dial back. Imo, 5 million CELO per year isn’t enough if we are to bring prosperity for all from a grass-roots movement, but that’s another debate. 25% allocation for the community fund is perfect and we will energize the community to use this fund and make our own proposals as well.

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@Pinotio.com I 100% agree on the naming choice.

@deepak is one of the most honorable folks in our community and I appreciate his effort on energizing part of the Community Fund. I do agree though that the resulting name for their allocation is confusing everyone. It’s hard to keep track of it.

Deepak, any chance on a rename? :stuck_out_tongue:

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Naming convention
@Pinotio.com @Tobi - yes it is a bit unfortunate naming from our part. We didn’t anticipate some of this when we were creating it. Legally it might be a pain to change our name but I think publicly we could consider calling the fund something else. I am thinking we should just call it “CCF” or “CCF fund I” or “Celo Community Fund I” to differentiate it from the governance controlled OG Community fund. cc: @Patrick @Dee

Reducing the epoc reward allocation towards the fund
I think both @Yaz is on point here. Temporary changes do tend to become permanent and we have to be thoughtful about making such changes that might hurt us. Currently the ecosystem is still relatively small and when it grows, we might need the community fund to get money in the hands of builders who are building cool things that community needs but might not be easily monetizable among other things.

Also, I have been talking to several people within the community to start an alternate community fund. Another use case - Something that many teams have told is how hard it is to get information on security audits and getting audits done. This could be another community fund just for this.

At the same time since a big chunk is not being used currently. @Tobi is there a solution where we could reduce the fund allocation to 5% for say 1-2 years (based on a block number) and then it goes back to original %. And hopefully that should give us a chance to come up with a better solution. At at that time if have a more clear path forward - either keep the 25% or reduce to to some x% we could do it then?

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@Yaz @deepak @Pinotio.com Wouldn’t it be easier to rename the on-chain fund? The funds are in the governance contract and allocated via governance, how about calling that ‘governance fund’?

I initially also thought for quite a while that the community fund would be the Celo Community Fund and it would receive the Epoch Rewards share directly. So the CCF brand is probably stronger than the on-chain fund.

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@deepak I don’t think it’s possible with the way the governance contract works.

@Yaz @deepak @ericnakagawa if you see good use of the community funds in the next months or years then I agree that proposal might slow down the community development and I don’t think proposing it is a good idea anymore.

I also get the ‘temporary permanent’ argument, which I think would likely not develop that way, but I don’t know enough about governance dynamics to have a strong opinion and trust that you can better evaluate that than me.

Maybe the better decision would be to skip the temporary changes for community fund + validators, accept and closely monitor the epoch rewards downscaling, and start working on revamping the epoch rewards mechanism for better long-term incentives with higher priority.

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@Tobi - I feel that your suggestion still has some merit. My take on this is that 25% might be a bit high for the governance community fund. If a portion of that is needed to secure the network, we should do that. Personally I feel in general the governance community fund should get in the range of 10%-15%. As the activity in the network increases, then price of CELO would increase and governance fund will have a bigger portion even with decreased allocation %

I would like to hear more thoughts on this one from the community and also if there is any study around allocation % to a community fund in other networks or non-blockchain projects in figuring out what an optimal % would be.

Even with this small CCF fund when the community is relatively small, we hear a lot of criticism from a small minority. This has actually caused many individuals to not take up the role of creating another fund. I think @Gavin faced similar issue in the Cosmos ecosystem.

I feel the bigger the community gets, the harder it will be for smaller players to run a community fund on the side while having another role within the community and bigger players or dedicated community fund managers will need to get into it. As it will require more community engagement and PR to convince a bigger group.

A vocal minority making decisions applies to this discussion as well - The Most Intolerant Wins: The Dictatorship of the Small Minority | by Nassim Nicholas Taleb | INCERTO | Medium -

So TLDR before closing this discussion:

  • I feel we should do a little more engagement to get community feedback
  • I think in general, 10%-15% if more optimal for the community fund
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Brief idea I thought I’d share for a potential use of the untapped on-chain fund:

  • Might it be interesting to create a governance driven “matching fund” (of some size) for quadratic funding of public goods for Celo?
  • This idea is borrowed from the Ethereum community and their use of Gitcoin for funding public goods (in Ethereum’s case, the matching fund is composed of wealthy donors and not governance driven if I understand correctly)
  • I haven’t thought this through in detail, just an idea I thought I’d put out there.

What is quadratic funding?
Here is a 60 second explainer from Gitcoin if you’re interested:

cc @ericnakagawa @Yaz @Tobi

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Is this a problem that needs to be addressed?

It looks like the voteRate and total number of votes has continued to trend up even as CELO yield rewards have trended down (source: https://thecelo.com/). Regarding validator rewards, I haven’t heard any validators suggest that they’d shut down their validator because of a lower CELO yield. cUSD rewards for validators are still well above the cost of operations. My conclusion is that network security is not at risk and rewards to voters and validators could continue to trend down.

I also believe that earmarking CELO for a community treasury/community fund/governance fund is going to be a powerful growth engine over the next decade and should only be considered for reduction if there are imminent threats to network security.

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Hey all, Elizabeth from Figment here.

I’m not convinced that this is the best way to address having a large, under-utilized community fund.
Decreasing the funds to the community pool opens the door that it might not ever be raised again. But taking that funds to raise rewards for validators doesn’t have good optics.

Instead, I’d like to consider periodical burns of the community pool. After the community pool reaches a certain amount of funds, the pool gets burned.

This leaves the option open for community members to access the same amount of funds, keeps the same parameters around filling the community pool and incentivizes validators. This also will incentive developers to ask for funding! If developers know that the protocol burns the tokens available in the community pool at a certain time, they are more likely to ask for funding when they know there is, essentially, a time limit.

Terra started to implement the same thing, and I think it’s a great way to solve having a large treasury like this.

This also opens the door for us to start a developer program. We could form a governance organization to reward developers building in the space or establish a marketing committee to advocate for developers to build on Celo.

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No, I don’t think so at the moment. I agree that the system currently is working well. The over-rewarding might likely become one in the future though: What the protocol spends today it can no longer spend tomorrow. That’s why I think reducing overall Epoch Rewards would be an investment in the future security of the protocol. Which would be financed by slower growth for the community fund now …

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Thanks for chiming in, Elizabeth.

Interesting idea. In such a mechanism I would prefer sending the CELO to the reserve instead of burning, there they would continue to have utility, otherwise they would be lost but still came at a cost to the protocol.

Strongly agree with this!

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Thank you for everyone participating yesterday! It felt like a good governance call and a productive discussion.

After some reflection and weighting the good arguments on both sides I’d like to move forward with a compromise:

I hope that balances the conflict of trying to reduce overall epoch rewards for long-term protocol health and to not slow down the community development well. For CGP 36 I just don’t see the need anymore, I’ll outline in more detail here.

For everyone who couldn’t participate in Governance Call 9, you can find the recording and notes here Celo Governance Call 9 · Issue #242 · celo-org/celo-proposals · GitHub as well as my presentation slides here Epoch Rewards CGPs: 33, 34, 35 ,36 - Google Slides.

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Thank you for clarifying.