Discussion for CGP 48: Reserve Gift Policy

Following the initial discussion and helpful suggestions by @Patrick, @papa_raw, @Pinotio.com and @sep, we would like to propose the following reserve gift policy to the Celo community. The policy consists of two parts, (i) a gift acceptance policy and (ii) a gift liquidation policy further outlined below.

The proposal can be found here.

Please let us know if you have any comments or concerns!

@martinvol and @Slobodan

CGP 48 - Reserve Gift Policy


Multiple Celo community members expressed a wish to gift tokens to the Celo Reserve to express their support as members of the community and to contribute to the stability of the reserve.

The Celo Reserve backs the Celo-native stablecoins (cUSD, cEUR, cREAL) and consists of a basket of crypto assets, including CELO, BTC, ETH, DAI and natural capital backed assets such as tokenized voluntary carbon credits (in the following referred to as “core assets” and “core reserve”).

Through this proposal, gifted tokens can contribute to the stability of the core reserve in case the core reserve comes under severe pressure, in which case gifted tokens are liquidated and the proceeds are used to purchase additional core assets to stabilize the core reserve.

Proposed policy

Gift acceptance

The Celo Reserve accepts and welcomes gifts of mission-aligned community members. All gifted tokens are held in a supplemental reserve that is logically separated from the core reserve. Gifts are accepted into the reserve’s multisig address 0x298FbD6dad2Fc2cB56d7E37d8aCad8Bf07324f67. A separate gift address may be established in future contract upgrades.

Gifts do not contribute towards the core collateralization ratio of the core reserve. They do not constitute core reserve assets, nor does the decision to include a particular token as a core reserve asset depend on whether the token was a part of the supplemental reserve or not.

While the Celo Reserve welcomes gifts of mission-aligned community members for stability purposes, it should not be misused for token promotion. We therefore suggest that only a subset of the supplemental reserve is explicitly reported in the context of the Celo Reserve (e.g. on celoreserve.org). As an initial step, we suggest a gating criterion of $50K in liquidity across trading pairs that involve either core reserve assets or Celo stablecoins.

Gift liquidation

Gifts can be liquidated without public announcement and without separate governance approval in case the core reserve comes under severe pressure. In particular, gifts can be liquidated to purchase core reserve assets if the core collateralization ratio (USD value of core assets / USD value of circulating supply of stablecoins) drops below a critical collateralization threshold. If the collateralization ratio is above the critical threshold, gift liquidation and/or transfer requires governance approval (e.g., to return unwanted gifts to the sender).

The critical collateralization threshold is initially set to 200%.

In case of liquidation, gifts are liquidated on a pro-rata basis to the extent possible (applying pro-rata may not make sense for gifted tokens without liquidity) until the collateralization ratio exceeds the critical collateralization threshold.

Liquidated assets shall be swapped for Celo and immediately sent to Celo Reserve Address.


Gifts can be a valuable supplementary stability mechanism. This becomes particularly evident in light of recent developments on the broader crypto market which led to a sharp decrease in the overall collateralization ratio of the core reserve.

The gift acceptance policy should incentivise gift-giving without jeopardizing the stability characteristics of the core reserve. Similarly, the liquidation policy should demonstrate to gift givers that their contribution is only liquidated as a last resort mechanism.

The gating criterion of $50k in liquidity serves two primary purposes. On the one hand, it acts as a deterrence mechanism to avoid misusing the Celo Reserve as a “stage” for newly launched tokens (keyword: airdrop) or potentially dubious projects. On the other hand, it also acts as a minimum requirement to contribute stability in a meaningful way (gifted tokens can only contribute to stability if there is a minimum level of liquidity to trade them in).

Gifts that pass the gating criterion could then e.g. be counted towards an extended collateralization ratio that would not only include core reserve assets but also gifted assets, which would likely be valuable information for stablecoin users and could contribute to trust and transparency.

We suggest an initial value for the critical core collateralization threshold of 200%. On the one hand, the threshold should be as low as possible so that gifts are not liquidated unless absolutely necessary. On the other hand, there is some lead time involved to evaluate market conditions and to execute liquidations, suggesting a higher liquidation threshold to start executing before the core reserve becomes undercollateralized. In light of this tradeoff, a threshold of 200% appears to be reasonable.

It should also be noted that the policy does not suggest always liquidating if the collateralization ratio drops below the critical threshold but only introduces the option to liquidate. This is important to prevent unnecessary liquidations and also mitigates a potential problem of market timing (e.g. market participants building up short positions in gift assets anticipating a liquidation sale by the Celo Reserve).

In case of liquidation, gifted assets are sold on a pro-rata basis to the extent possible. E.g. if the reserve needs to sell 20% of its total gifted assets to boost its core collateralization ratio, then 20% of token A and 20% of token B will be sold. This prevents a situation in which the reserve would need to choose which token to liquidate and thereby potentially disproportionately impact the token’s market price. This assumes sufficient liquidity for token A and B. In case the liquidity of one of the tokens is insufficient to apply pro-rata in a meaningful way, the share of the more liquid tokens is increased proportionally to boost the core reserve.

The liquidation policy can serve as a blueprint also for further reserve management and rebalancing activities. In particular, a similar policy could be explored for the natural capital backed part of the reserve to avoid overly frequent liquidation of tokenized natural capital.


This proposal itself involves no code changes or verification.


We believe there are no economic risks associated with the gift acceptance policy as it does not alter or interact in any way with the core reserve. On the contrary, the gift liquidation policy could serve as a valuable last-resort stabilization mechanism.

We believe there might be a risk that unwanted or potentially even illegal tokens are gifted to the reserve. However, this appears to be beyond our control as even without a gift policy, such tokens could be sent to a reserve address anyways.


This is awesome.

Random idea for another time but I could also also see a “community gift” option connected with some sybil-resistant registry (e.g. Proof-of-Humanity) being a reasonable way to handle gifts as well.

Basically any gift deposited to a given splitter contract could be pro-rata distributed to registry members.

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could you clarify who exactly is doing the liquidation if not passed via governance? and why would it require a governance vote if not within critical collateralization ratio?

Thanks for composing this @Slobodan. It is a thoughtful policy proposal in regards to how it provides clarity for gifting projects to understand how tokens might be used while also putting a barriers to entry to prevent spam gifts.

I’d like to see the liquidation mechanism implemented in coordination with @Pinotio.com suggestions because BTC and ETH can withstand the greatest sell pressure so they should be the first sold in a crisis. Reserve gifts assets should be sold after BTC and ETH but before CELO.

The idea is that the reserve multisig is authorized to liquidate if the ratio drops below the critical threshold without going through an additional governance process to be able to react quickly, e.g. if markets are crashing. A separate gov process for each liquidation might simply take too long to react effectively.

If the ratio is above the critical threshold, this of course no longer applies and gifts should remain untouched. Governance might still decide to do something with the gifts (e.g. move them to a separate address because of a contract upgrade, etc.) but this should require a separate governance decision.


Thanks Patrick. I think the gift policy would actually be largely in line with what you are describing because it is intended as a last-resort mechanism that should kick in if essentially everything else fails. If e.g. the Celo part of the reserve is crashing, the rebalancing mechanism should kick in first and BTC and ETH should help stabilizing. If collateralization ratios keep on dropping (e.g. because all three are crashing), then liquidating gifts should be an option.

I think it becomes particularly clear if you consider the scenario of a collateralization ratio below 100%. Then rebalancing from e.g. BTC to Celo wouldn’t help to get the ratio back up to 100% but you might be able to get it back up at least to some extent by liquidating gifts.


Got it. Thanks for clarifying!


Thanks @Slobodan . I support getting this done as I believe it adds some stability to the reserve.

I also think separating out the “Core” and “Extended” collateralization ratios makes good sense.


Yowdy @Slobodan , how’s this going? Would love to see it happen, cheer, p

Hey @Pinotio.com , hey all, the gift policy proposal will be discussed in this week’s governance call:

Looking forward to the discussion!