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

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.

@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:

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?

@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.

@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.

Hey Tobi,

It’s not very clear why this decision is made. I assumed both were needed at the same time. But if you’re withdrawing CGP-36, it seems clear to withdraw CGP-35 as well.

Fiddling with the number of the community fund at the moment makes no sense given the arguments it’s very premature. I think the community is clear that the community fund allocation shouldn’t be modified at the moment, it’s not clear to me why a decrease by 2 Million is useful for anything.

I assumed the takeaway from this call was to put the capital to use instead of reducing allocation.

Now, I’m not too sure why you want to reduce the number, even if not a lot. Governance around a specific number will rally folks to come up with new number proposals that make more sense to them.

TBH, I think community fund allocation shouldn’t be governable but rather modified via a hardfork so everyone is aligned on it and it’s harder to do.

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Thank you. I, too, am of the view that CGP-35 should be withdrawn altogether with CGP-36.

The arguments and viewpoints presented against have had everything to do with pointing out the premature and controversial nature of any reduction whatsoever of this on-chain treasury.

And there does not seem to be any defensible motivation to discern for making this reduction to the community fund, at this point in time and given the current network state. To summarize from the points shared via slides + the call:

“Would decrease Epoch Rewards downscaling”

  • This same effect holds for decreasing validator rewards and/or voter rewards for downscaling epoch rewards. Citing this as a pro to decreasing the community fund obscures this wider fact.

“No clear plans on how to use those funds”

  • The moot point of on-chain governance is that human coordination is hard, and a key learning from fellow protocols (ie the Interchain Foundation) especially concerning on-chain funding is, quite literally, to not let funds “burn a hole in the pocket”. It would serve well to heed these hard-earned lessons.
  • This does not seem like a valid argument because an on-chain treasury of a decentralized protocol does not function via “central-planning modes” with plans, but rather via proposals, with emergent consensus. And if we simply switch out terms here using “no clear proposals on how to use those funds”, then the same has already been addressed by others here as to reasons why that would be case (such as needing dedicated focus from certain teams, or widespread confusion from unfortunate naming on parallel efforts).

“~1 million per year is still higher growth than what is currently allocated”

  • Unclear what is meant by this point, and unsure of relevancy given the content for advocacy herein which is for maintaining a current allocation rate

“Growth could be increased again when helpful”

  • Respectfully and without judgment, this seems to be a value statement more based in opinion rather than fact. And on this same point here there also exist differing opinions. Again, if experiences with other protocols can inform an indicative precedent, it would seem less likely this would be the case.

“What the protocol spends today it can no longer spend tomorrow”

  • There seems to be a language problem here. A community fund is hardly analogous to the concept of “spending” in the same fashion as other things, even like validator rewards and voter rewards for example. A community fund is inherently actionable (whereas other rewards are not necessarily so), and also requires further action as a collective to then “spend”. A more effective conceptual designation might be escrow, or interim allocation, or holding pool, or shared trust.

Furthermore, a detrimental downstream effect of what happens impact-wise because of this proposal is the material consequence of further concentrated funding power toward network actors and addresses which are not community-governed.

And to the claim that “A reduction in overall Epoch Rewards would be an investment in the future security of the protocol”, I would counter that “Maintenance of a community’s public fund is a direct investment in effective decentralization for the future and long-term longevity of a protocol.

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Why would I still propose to reduce the Community Fund growth?

The origin of this proposal is the Epoch Rewards discussion. Epoch Rewards on Celo are designed as a self-evolving system (with CGP 33 to activate dynamic adjustment) to dynamically adjust rewards to the protocol’s security needs: Voting and validating. However the way I understand it that system was designed for a lower amount of rewards per epoch. As a result of the over-rewarding, which mainly come from higher-than-initially-expected voter rewards, all Epoch Rewards are downscaled. If that continues for long-enough, the protocol at some point might not be able to dynamically adjust well to it’s security needs anymore.

If we want to reduce rewards to take a step towards solving that problem, there are three areas where the protocol could reduce it’s rewards:

  • Voting
  • Validating
  • Community Fund

Validator rewards are <10% of total so no big impact. Reducing voting rewards is risky in my opinion. Reducing the Community Fund share would in my current opinion and based on the sentiment in the epoch rewards discussion below be the choice with the least risk and loss to the protocol.

I don’t like proposing to reduce the Community Fund growth but I think it’s the best option here.

To put it in perspective again:

  • Currently: ~7 million CELO in the fund, ~5.5 million growth
  • If CGP 35 would pass: ~7 million CELO in the fund, ~3 million growth

However, reducing the Community Fund Epoch Rewards share by 10 percentage points as CGP 35 proposes won’t solve the epoch rewards downscaling, it would just be a step in the right direction.

So if the majority of the community thinks that reducing the Community Fund growth by 10 percentage points hurts the development and growth of the community more than it would help mitigate the downscaling consequences of the Epoch Rewards over-rewarding problem, it would make sense to not propose this. It’s hard to actually measure but right now I don’t think that’s the case.

If you think (@Yaz @gabrielllemic) that either no epoch rewards should be reduced manually for now or that the protocol should rather downscale voter rewards, please chime-in here: Discussion on Celo Epoch Rewards - #32 by nambrot

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Can you expand on why you think decreasing voting rewards is risky? Imo, there is far too much CELO locked in the system which is clearly causing downstream issues. Decreasing voting rewards by even 30 or 40% can only have net positive outcomes if people actually unlock their CELO and deploy it in other places.

Right now too much locked CELO is not beneficial:

  • Election threshold is simply too high. It would actually be better for the network if election threshold got lowered. This would allow other large funds to enter into validation so we get more true decentralization.
  • Too much CELO is locked and not used in other parts of the ecosystem. I would rather see voting rewards decrease more, so that people are encouraged to go and look for other opportunities to deploy their capital instead. (They can put CELO in Moola, in various Ubeswap pools, maybe in some other future projects). Having so much of CELO just locked for network security doesn’t seem super useful for growth of the ecosystem.
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Answered in the more general Epoch Rewards discussion Discussion on Celo Epoch Rewards - #33 by Tobi

Withdrawing CGP 35: Reduce Community Fund Epoch Rewards share

Hi everyone,

so after some discussion in the cLabs economics team I changed my mind on the above question. Proposing to reduce might actually have more negative than positive consequences. CGP35 will be withdrawn together with 36 and we should begin thinking about what might solve the over-rewarding problem more sustainably.

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you can donate to people who lost money sending on cusd contract Celo team is not helping me