Discussion for CGP [0017]: Activation of Celo Community Fund

[deepak]

In response to Pranay’s Post - Community Fund Activation - and also after talking to community members, we decided to create a Proposal to manage a portion of the community fund. We have already had some discussions over several documents as well as community calls.

The current full CGP proposal can be found here - CGP [0017] on Github
The older versions of the document and the comments can be found here: CCF v1, CCF v2, CCF v3

Please leave your feedback and questions here.
-Deepak, Patrick, and Dee

[tim]

Hi folks – thanks for pushing this forward!

Will join the call later to discuss, but overall:

• Technical mechanism: @nambrot suggested you create a multisig then call approve as the Governance contract to permit the multisig to spend up to a certain budget of the community fund. If it is necessary to revoke those funds, a subsequent governance proposal (or emergency hotfix) could reset the approval to 0. I really like this approach: That way the funds don’t ever need to leave the community fund until you’re actually approving a grant.

• Separate framework from individual grant teams: I would love to see this be a framework for how teams of stewards set themselves up, but don’t see this limited to a single set of stewards or focus area. To that end, I would suggest we focus on agreeing a framework first, then have you three put yourselves forward for a given budget, focus area, and terms. E.g, we may have Deepak Patrick and Dee ask for X CELO with a management fee of Y for a focus area of “tools for governance, projects around network security, and decentralized economic projects including dexs, market making etc”. And then some other team at the same time makes a separate proposal to ask for A CELO with no management fee for some other focus area. I would also love at this point to see much more of a investment thesis and approach.

• Finally, for guidance, I feel that 10% is a much higher management fee than I would be able to support.

[thezviad]

Some more notes from me:

• For initial funding, I preferred original setup with 2 stewards and ~300-350K CELO. If you want larger funding and 3 stewards from the start, I would much rather prefer if one out of 3 of you had deeper technical/engineering background, specifically with EVM/Smart Contract development. (Unless I am misunderstanding the backgrounds and one of you does have that experience).
  Of course, in grand scheme of things I much prefer for the community fund to get activated rather than for it to get delayed again, so if this is the only option on the table, i will probably still support it, but just voicing my preference.

• To counter @tim’s final point, I would be pretty strongly against lowering the management fee. At least until funds that stewards manage is within few millions of CELO. If we want to have high quality stewardship, pay needs to be appropriate. I would much rather have higher pay => higher expectations and be more aggressive in no longer extending new funding to the same team of stewards if they don’t meet those high expectations. We can’t have those high expectations if the payout is way too low.
  My expectation of stewards is that they won’t just be passive reviewers of grants, waiting for right teams to magically apply for the right projects. My expectation is that stewards will be more proactive to actually find the right teams within the community and entice them to work on meaningful projects. I believe if we want to have these type of proactive high quality stewards, pay level has to be higher compared to some sort of a passive review board that just gives out random grants.

• I want to also +1 @tim’s second point. I already mentioned similar feedback during the last call. So it would be useful if your team gives us a sense of grant plans for the first distribution. Things that I would like to know about:
  – primary size of grants that you will target? (i.e. are you going to look for very small projects <1000-5000 CELO? average projects 10k-50k CELO or large projects 50k+ CELO?). If you plan on targeting various grant sizes, a break down of distribution would be useful (i.e. something like 30% of total funds for small projects, 40% for average, 30% for large projects, as an example).
  – what area of development will you target to fund? (this can also have multiple options, like DeFI projects 50%, validator tools: 50%, or something like that).
  – grant deployment schedule (which you already mentioned to be 6 months in the document), and grant follow up schedule (i.e. at what frequency will your provide updates/reports on given out grants and for how long?)

Once again thanks for taking the initiative and as you already know I am in full support to get community fund activated sooner rather than later.

[tim]

I feel like having an “investment thesis” that is more focused and ties in closer to your personal areas of expertise makes the whole proposal more compelling. I’d favor combining that with a smaller ask in the first instance.

[Patrick]

Thanks for your input here, Tim.

• Technical mechanism. We are planning on using this mechanism as you described it. If I understand correctly, our multi-signature scheme will have spend authority up to the amount approved by the proposal. The CELO will not actually be transferred from the governance contract (until we disperse it to recipients) and thus CELO owners could reclaim any unspent funds via CGP, if needed. On the call yesterday @asa raised a concern about whether or not this would provide protection for the fund as described. Could we use this thread to clarify how this mechanism will work? One of the open tasks we have is updating the language for this on our CGP.

• Separate framework from individual grant teams: I hear you and this was also mentioned on our call yesterday by @asa. We will take this feedback add some language about the sorts of projects we are seeking to support. With that being said, I would prefer to have flexibility in the event that we come across a project worth supporting that is outside of our stated thesis.

• Mgmt Fee: Can you please help me understand why you feel 10% is much higher than you would be able to support? For reference, we anticipate that this will work out to ~$127/hr, which makes it a negative opportunity cost compared to the hourly rate that we typically earn for our labor.

[Patrick]

Thank you for your input here and the helpful suggestions you’ve made during this process, Zviad.

• Initial Funding: I agree that it would be nice to have someone with your level of technical background but as of now Deepak, Dee and myself are the only volunteers. So we have to dance with whoever is on the dance floor. The community fund is accumulating ~517k CELO per month so we’re asking to distribute ~38 days worth of accumulated funds, which I don’t think is an unreasonable amount.

• Mgmt Fee: I agree that there will be an outreach aspect to this role to bring high quality builder/projects into the Celo ecosystem, in addition to filtering inbound funding requests.

• Funding Specifics: We will add language answering these questions.

[Patrick]

We will add thesis language with specifics on what sorts of projects we will be seeking, the size grants we anticipate making, and communication cadence.

[nambrot]

1. The technical implementation accomplishes that the funds are never owned by the multisig, but due to the fact that it can spend the whole amount, from a security perspective, you’d still want to minimize the amount if you can (since governance can never act faster than the Multisig itself).

2. I share everyone’s preference to get this out of the door sooner rather than later. I view this proposal similar to the cUSD Reward proposal: There is a large benefit to get the learning/experiment process going without having to have all assumptions clarified. As part of that process which I think y’all have done well to “cut scope”, a reasonable/appropriate funding amount should reflect the rate of learning traded-off against cost to governance, both financially and “vote-overhead”-wise. That of course is subjective, but a 2-3 month time-horizon seems more practical than a 6-12 months one. It should be enough time to learn about what kind of applicants you see and how to operate the fund, while the burden on governance would not lead to apathy. Additionally, it keeps less funds accessible to the Multisig and thus less of a honeypot. Follow-on funding can increase in scope as we learn more about operating the fund + making improvements to the custody setup.

3. To me, a framework/thesus is less important as it feels quite speculative at this point as @Patrick mentioned.

[deepak]

1. MultiSig and the total amount - Of course there is a risk of the stewards being faster than the governance, I think there is some trust the community is putting in the stewards. In addition, the stewards don’t know each other and 2 of us will have to collude to steal the money. And we have our own reputation at stake and the risk is mitigated in part because of this. We feel this is the amount that will help us with flexibility - it’s not too little so we are unable to fund projects and neither is it too much for us to risk our reputation by stealing the funds.
2. 6months vs 3 months: We are going more for 6 month+ period here - to give some time. 2-3 months makes sense for the cUSD experiment with only one goal. Here we will be marketing to builders and vetting projects as well. It might take us a 1-3 months just to build some interest and kick this off. Then some time to assess the projects
3. Theses - while we wont have a specific theses, this is our thought process —> “We will aim to deploy capital in line with key priorities identified in the Celo Foundation Wave III Call for Proposals”

[cmcewen]

I don’t have fully formed thoughts here, so I will just share what I have and hope that people weight accordingly

• I understand the desire to experiment, but I don’t agree that doing something fast is better than nothing, especially with the amount of money involved. To me there has to be a “minimum viable product” that we actually have some belief will work and bring net positive value to the ecosystem

• I’d vote for using ReleaseGold contracts for both grants + stewards. Funds should vest over time and if we are unhappy with either grant recipients or stewards, it’s an easy way to reduce risk to the fund.

• On the fees - I’m definitely down to pay well for good labor, and we are limited by the proposed stewards, but just because someone is on the dance floor doesn’t mean they should be compensated like a tango expert. I was a member of Dorm Room Fund as a student, and we were not compensated but did have the opportunity to manage a $500k fund, with the logic that gaining this experience positioned one well to get into VC as a career. I think the ideal candidate for a steward would be someone who has existing access to lots of builder/founders (big twitter following), experience in VC or an ecosystem fund, lots of unique crypto experience, marketing background, etc. So I’m happy to pay a professional rate for a professional, but I would need to be convinced that one’s previous experience qualified as professional.

• If the thesis is “do what the foundation is doing”, where is the foundation lacking? I’d be more compelled if I heard “the foundation is missing these builders, and we as stewards can reach them”. If the goal is get something out to maximize learning, how can this proposal maximize the community learning by doing something different?

• I’d love to see an “investment prospectus” of potential grants to give me more confidence in how the stewards will manage the grants as part of this proposal.

• I would also prefer a smaller initial fund (200-300K) + 2 stewards to build momentum. If this first proposal doesn’t work well, we look at a tougher governance vote in 6 months for the “Fund II”. However, I think coming back in 6 months with a few success stories and a proposal to double the size + add a steward seems a lot nicer

In general, I think perfection is the enemy of progress, but I also think we should hold a reasonable bar for the community fund

[Patrick]

Investment Thesis
We have heard from a number of people (@tim, @asa, @thezviad, @cmcewen) that you would like to see an investment thesis on which we will be disbursing funds. We think that it is important to use the correct language in our discussions here. To be clear, we will not be making investments, entering into investment or securities contracts, and we will not be generating an investment prospectus. We will be disbursing community funds to teams and projects that we believe will add value to the Celo ecosystem.

Narrow focus + It’s a community fund
Initially, in v1 we proposed a set of guidelines that would provide formal and informal boundaries for our decision making. Based on community feedback we narrowed that focus down to make community fund distributions in line with areas the Celo Foundation had identified as important. Our thinking on this was that the foundation has a long, well defined list of potential project areas, and limited resources. We believe that we can help ‘fill in the gaps’ by being more nimble than the Foundation, as well as recruit projects proactively.

CCF Thesis
In response to the feedback from the community, we have decided to narrow down our focus again to a few areas that we believe will have the greatest impact on Celo achieving product market fit. Those areas are on/off ramps, community tools, and research/education.

On/off ramps: CELO/fiat or cUSD/fiat CLOB exchange pairs (e.g. OKCoin), fiat-to-crypto software (e.g. Simplex), P2P platforms (e.g. Paxful), wallet integrations, point-of-sale integrations, e-commerce integrations, etc.

Community tools: Desktop/browser/hardware wallets, developer tools, governance voting applications, block explorers, validator metrics dashboards, etc.

Research & Education: Support people and projects that want to conduct research and/or create educational content, host Celo related talks, etc. This can include both technical and non-technical areas relevant to Celo.

Other: In addition to the above three areas, we will be open to considering other great teams/projects that might be beneficial to Celo’s mission/ecosystem.

Funding Projects
@thezviad asked about specific project amounts and percentages. We will target projects that we believe will be able to deliver measurable key results in exchange for 20k-33k CELO. We will target funding 30 projects which would give an average funding amount of 22,180. This parameter set would enable us to for example, fund 10 small projects (<5,000 CELO), 15 projects of medium size (~22,180 CELO), and 2 large projects (>40,000 CELO). These targets are not set in stone.

Communication
@thezviad also asked about communication cadence. Within 24 hours of funding a proposal, we will disclose the amount, team, and use of funds. We will maintain a public spreadsheet with the following information for community fund recipients; project name, website/github, recipient name(s), funding date, funding amount, use of funds. On a quarterly basis we will provide a consolidated on the progress of community fund recipients.

Dripping Funds - monthly cadence
@nambrot brought up a concern about minimizing the funds at risk. @asa had surfaced a similar concern earlier. While we initially proposed a multi-sig that would have spent authority up to the full amount approved by the community and this authority could be revoked by CGP, that protection would be limited because a CGP could probably not act as quickly as a malicious multi-sig transaction. As such, we agree that using a Release Gold contract is the correct precedent to set. We will be proposing a 6-month timeline with 1/6 of the CELO released each month. This will limit the risk of unexpected financial loss down to ~1/6 of the total amount allocated.

Caveat:
We think that it is important to set proper expectations around distribution timelines. We do not anticipate community fund distribution to be linear. There may be months that end with some of the funds undistributed, especially early on.

Stewards
We have also received feedback on the number of Stewards we are proposing and the backgrounds of the Stewards. We have stepped forward to take on this responsibility because we believe in Celo’s mission and want to help the Celo network achieve product-market fit. We understand that some community members would like to see Stewards with specific prior experience. We would also like to see this and we encourage the community to seek out those folks to submit an additional CCF CGP. This proposal has been under discussion since October and we hope that it will encourage others to act and help create a decentralized funding mechanism within the Celo Community.

We would like to highlight the relevant experience of the team submitting CGP-17:

Patrick, General Partner of Validator Capital: Validator capital is a digital asset fund that manages assets on behalf of family offices, accredited individuals, and institutional Limited Partners.
Validator Capital is a certified master validator, receives foundation votes, and contributes to the price stability for cUSD.
Patrick is also building Moola, a money market protocol on Celo. He previously ran the Blockchain Consulting Group where he consulted for blockchain startups on fundraising and go-to-market strategy. He was previously President of Ambisafe, a security and utility token issuance platform where he helped clients raise more than $300m. He was previously cofounder of Hitfin an Ethereum powered derivatives trading platform.

He has published Blockchain 101 and Intro to Stablecoin web courses for the FinTech School and led educational workshops for executives and MBA classes from more than a dozen countries. Prior to crypto, he held quota carrying sales roles at a global retail bank, a solar energy company, and several SaaS companies. He earned a B.S. in Business from Wake Forest University.

Deepak, Founder at MultiSig and Security at cLabs: MultiSig is a boutique security consulting company helping blockchain companies with operational security and incident response processes. He has been involved in the field of Information security for over 15 years with expertise in incident response, security operations, and social engineering.

Deepak got involved in the Celo community by helping lead the Validator Audits during the Celo’s stake off challenge. He later started helping cLabs build their security team from the ground up.

He is involved with the Celo ecosystem and in the broader blockchain community. He was a mentor during Celo Camp Batch 2. He has been involved in the Crypto space since 2013 and considered raising a VC fund during 2016-17. He currently manages a private investment portfolio of over 25 investments.

Previously, he has helped Fortune 500 companies with Incident response management and has conducted investigations of state sponsored breaches (APT intrusions). He has conducted security training for USA’s three letter agencies. He holds a Bachelor’s degree in Computer Science (India) and a Master’s degree in Information Security (Purdue University).

Dee, Usopp’s Club. Usopp’s Club is one of the genesis validators which launched the Celo blockchain in April 2020.
He is an entrepreneur who has worked as a Financial Controller and Founder. He has worked for leading French construction companies on large infrastructure projects ($50m+) in East and Central Africa. He was responsible for budgeting, variance analysis, and reporting on projects funded by the EU and World Bank. Dee is a self-taught coder who has built a complete Android application and created a popular wallet for a top 20 blockchain project. He has a Masters degree in Business Management (France).

Conclusion
In conclusion, we will be distributing community funds, not making investments. We will be focused on projects that are building on/off ramps, community tools, and research/education for the Celo ecosystem. We will target funding 30 projects which would give an average funding amount of 22,180. We will communicate within 24 hours of funding a proposal and maintain a public spreadsheet of recipients. We will use a release gold contract that disperses 1/6 of the funds per month. We recognize that this role comes with a high level of responsibility and we appreciate the community’s continued input on this process and support for us.

Patrick, Dee, and Deepak

[Alesh]

Great to be part of this conversation.

Couple of questions:

1. Separation of duties: I assume stewards cannot receive funding from the Community Fund?

2. Investment thesis: This should be designed / implemented by a panel of specialists that includes both on-chain, community, investment as well as operations specialists; who understand the realities of getting a project off the ground in-country, at the ‘last-mile’. Not just tech people.

3. Grant management: It looks like we may be bringing on a new employee who’s got 10+ years of institutional / donor portfolio management who potentially could provide some pro-bono input into the design, reporting, compliance and risk management functions (if appropriate).

4. Similarly, I feel that 10% is a higher management fee than I would be able to support at this stage, requiring more definition and specifics on what this pays for. Established, global private sector consulting firms (like PWC) running international development projects in the field (with arguably much more operational overheads) charge 10%. Similarly, technical specialists brought onto funds like Humanitarian Innovation Fund are not paid. Their time / expenses are covered. Being invited to be part of the quarterly judging panel was enough for most (along with travel and a basic per diem / daily fee). I guess it all comes down to how reactive vs proactive the fund is.

Notes

4.1.3.1. voters weighting is dependant on how much celo they have - seems a potentially unfair way of doing things. Quadratic voting may help.

4.4.9.7 stewards SHOULD 100% ensure funding budgets are correct, not just ‘generally ensure’. Where is the compliance here? How does the fund/community want to learn any lessons from giving funding? Will there be any sharing of outcomes, audits of how funds are spent? Will there be any costs that won’t be covered by funding? ie VAT etc?

In summary, I think having a volunteer set of ‘technical experts’ and a paid fund manager could be an interesting path to explore?

Examples of successful impact funds doing this include:

-https://www.elrha.org/programme/hif/
-https://www.gsma.com/mobilefordevelopment/eainnovationfund/

[Patrick]

Thanks for your input here, Alesh.

1. Correct.
2. We will not be making investments, these are grants. We have proposed a grant thesis on how to deploy a portion of the CF in a way that adds value to the Celo ecosystem as a whole. Agreed that having a diversity of backgrounds and skillsets will achieve better results which is why we are proposing a framework where other potential Stewards can submit spend CGPs for CELO owners to vote on.
3. Would love to have their input.
4. Taking on this responsibility will probably end up being a negative financial opportunity cost for the three of us. We proposed what we believe is a fair amount to cover CF related expenses as well as compensate us for the time we’ll be spending finding and funding qualified projects.

Notes: I think you’re reading v1 of the proposal. Please see the most recent version.

[deepak]

I want to add some more context around #4 here. Typically when you have these committee/panel driven initiatives, it means that there is already an organization setup that enables the management of it with employees and such. The specialists come in and help make decisions with most of the work/tools etc being managed by the team supporting it. In this case, we have none of that. It’ll technically be just the 3 of us doing all that work. It’s not fair to compare us to that.
Also, we have addressed in our earlier reply why we have such high % of management fee because we are asking less amount of the fund. Also, management fee means something else the VC/hedge fund world and we are used to seeing the typical 2% management fee in the 2/20 VC model (2% management fee and 20% carry). But as Patrick mentioned, we are not a fund nor are we looking for monetary ROI.

[thezviad]

This might be useful as another example of flexible dev fund setup: https://app.uniswap.org/#/vote/3

[Thylacine]

Thanks for all the planning everyone.

I was involved in commenting on one (or more) of the original proposals but got a bit sidelined with my work, and a bit confused over the two different proposal documents.

I placed myself down as a potential Steward (and I had a couple of people independently suggest I should be one) on at least one document but I guess I dropped out of the running as I wasn’t active in the discussion.

Nonetheless whoever is running it, I’ll probably apply for some of the grants for Pretoria Research Lab to continue tooling and development.

Cheers

[deepak]

Hey Thylacine - welcome! I think I reached out to you and you said you were busy for a few months.

Yes - please do apply once ( and if) the proposal goes through

[thezviad]

@deepak @Patrick one additional piece of feedback. I think it would be useful if you guys come up with a name for your team. It is a bit confusing to refer to this effort as just the “Community Fund”, and it is way too long to refer to it as “Community Fund distribution that Deepak, Patrick and Dee manage”

[Patrick]

Team Shake-n’-Bake…