Community Treasury Status and Diversification Options

Yesterday, during the Celo Governance Call #42, we had a vivid discussion about the potential of diversifying the Celo Community Treasury into some vital digital assets, including BTC and ETH.

While CGP115 focuses on reducing risk and doesn’t aim to predict future market developments, it does move the Celo Community Treasury in a direction where it could decide to acquire digital assets beyond CELO and cStables to diversify its holdings.

This thread provides an update on the state of the Celo Community Treasury and explores Celo’s available options to diversify its holdings.

Current Status of the of the Celo Community Treasury
The Celo Community Treasury currently holds approximately 26M CELO, with up to around 16M CELO of these holdings yet to be claimed by approved proposals, including Chainlink, MiniPay, cLabs, and Climate Collective, as showcased in the Accounting sheet I created.

In addition to these holdings, following CGP79, Mento will return 120M CELO, 25M of which have already been sent to the Celo Community Treasury.

The current hypothetical total holdings of the Celo Community Treasury are 105M CELO (26M in Treasury + 95M to be returned - 16M approved).

Following CGP115, 13.66M of the to-be-returned CELO is repaid in freshly minted cUSD instead of CELO, and a budget of 1.6M cUSD + 700K CELO is approved for Celo Public Goods Funding in H1 2024.

After CGP115, the hypothetical total holdings of the Celo Community Treasury are 90.93M CELO + 8.4M cUSD.

The Importance of Stablecoins for the Community Treasury
To realize its purpose of supporting projects that share Celo’s Mission, the Celo Community Treasury needs to maintain sufficient funds to allocate grants and provide support.

While some projects request CELO as a long-term reward, many proposers need to convert their CELO to some form of Stable asset to pay for expenses. As such, having a portion of assets in Stablecoins can simplify accounting for all involved parties, reduce price risk, and minimize sales pressure on CELO.

The opportunity for diversification
We’re now at a point where we, as the Celo Community, can decide how we want to manage our Treasury. We can convert some of our CELO or cUSD into alternative digital assets that we believe will outperform or are strategically important, such as ETH or BTC.

I hope this thread can start a conversation around the following topics:
A. Do we want to limit the spending of the Celo Community Treasury to guarantee a certain duration of guaranteed runway?
B. How many months/years of Stablecoin runway do we consider the right amount?
C. Which Assets do we value strategically or consider likely to outperform?
D. What relative share of the Community Treasury do we want to allocate to alternative assets?
E. What additional ways are there to increase the size of the Celo Community Treasury?
F. If we would diversify into other assets within the next month, which assets and how much would you consider the right amount?

I’ll share my thoughts in response to this thread, and I look forward to community input and potential additional questions we want to answer.

Management and Operations of the Celo Community Treasury Assets
The Celo Community Treasury doesn’t currently have an active manager. This means that all decisions need to be made by Celo Governance, without any specific person or group responsible appointed to provide Treasury management and accounting services.

Diversifying into new assets would add additional responsibilities, which Celo Governance could fulfill collectively or can be taken on by an elected person/team.

I believe we should discuss whether we can keep the diversification effort simple and relatively static so that Celo Governance can manage it or elect a person/team to manage the Community Treasury.

Logistics of a short-term diversification efforts
Yesterday, during the call, we discussed the potential operational and cost savings that can be generated if the Celo Community Treasury wants to diversify into ETH or BTC and settles that amount with the Mento Reserve instead of another third party.

While this would take some planning and careful execution, I believe this option is debatable and can be realized if we have a unilateral agreement that we want to diversify into ETH and/or BTC and specific numbers we wish to acquire.

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Given the Treasury Diversification discussion can take longer than a few weeks - I’ve already started working on a solution with @roman that can be submitted as a follow-up proposal to CGP115 that would settle the 10m cUSD in 6 equal tranches (with CGP115 being the first tranche) using 30-day moving average CELO prices on the day of transfer of each remaining tranche.

We’ll have a draft ready early next week for review and an alternative/compliment to this diversification discussion.

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Thank you @LuukDAO - great to see you incorporating feedback from yesterday’s call and forum comments so timely. Personally I am supportive of the proposal moving forward with a fast-follow for the 6m cost averaging.

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you think other digital assets outperfom than CELO? why we have to consider converting CELO into other digital aasets?

Hi @rene_celo, we’ve produced a draft proposal that settles the 10m cUSD in 6 equal tranches, instead of a single transaction.

You can find it here: Minting 10m cUSD from Mento Reserve in six tranches .

I look forward to stakeholder input on the cUSD thread and additional comments in this thread.

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