FINAL] Revenue-Based CELO Burn — Allocate 25% of Net L2 Sequencer Revenue to Permanent Burn
Following community feedback, Governance Call #96, and subsequent technical review with Katy Gielty, I am posting the FINAL version of the proposal below.
This version supersedes the original DRAFT at the top of this thread.
The core proposal remains unchanged:
25% of future Net L2 Sequencer Revenue will be permanently burned, while the remaining 75% will continue to the Celo Community Fund.
The temperature check and subsequent technical discussions have now clarified how this can be implemented using Celo’s existing infrastructure.
Key changes since the temperature check
- The existing 2-of-5 Operations Safe will execute the burn and Community Fund allocation within the same Safe batch.
- The burn will use the CELO token contract’s existing
burn()function. - No new smart contract, signer set, or audit is required.
- The burn will be calculated on Net Sequencer Revenue after L1 operating costs and the OP Superchain revenue share.
- Burn amounts, transaction hashes, and the cumulative burned amount will be included in the bi-weekly reporting.
- Any future change to the 25% allocation requires a new governance vote.
- Revenue-backed staking remains outside the scope of this proposal and can be considered separately.
Thanks to everyone who contributed feedback during the temperature check and Governance Call, and special thanks to Katy for helping clarify the technical implementation.
Proposal Key Aspects
- Status: FINAL
- Title: Revenue-Based CELO Burn — Allocate 25% of Net L2 Sequencer Revenue to Permanent Burn
- Type: Network Decision / Tokenomics
- Funding Request: N/A
- Burn Rate: 25% of Net L2 Sequencer Revenue
- Community Fund Allocation: 75%
- Initial Review: After 6 months
- Start: First full bi-weekly sequencer revenue distribution following governance approval and operational implementation
1. Summary
This proposal asks Celo Governance to allocate 25% of future Net L2 Sequencer Revenue to a permanent CELO burn, while directing the remaining 75% to the Celo Community Fund.
The objective is to establish a simple and transparent relationship between:
Celo network usage → protocol revenue → permanent CELO value accrual
The proposal does not affect:
- the existing Community Fund balance;
- previously approved funding commitments;
- existing Community Fund allowances;
- or the Governance Reserve.
It applies only to new Net L2 Sequencer Revenue generated going forward.
Following the temperature check, community discussion, Governance Call #96, and subsequent technical review, the proposed implementation can use Celo’s:
- existing revenue-distribution infrastructure;
- existing Operations Safe;
- and existing CELO
burn()function.
No new smart contract, signer set, or audit is required.
2. Background
Following Celo’s transition to an Ethereum L2, the network generates sequencer revenue from transaction activity.
Under the existing CGP-287 revenue framework:
- CELO-denominated fees contribute directly to protocol revenue;
- stablecoin-denominated fees are converted into CELO;
- L1 operating costs are deducted;
- the OP Superchain revenue share is deducted;
- and the remaining amount becomes Net Sequencer Revenue.
This has established a recurring protocol-revenue stream under the control of Celo Governance.
The current process already creates an important relationship between Celo network activity and CELO, particularly because non-CELO fee revenue is converted into CELO before distribution.
This proposal adds an additional value-accrual mechanism:
25% of Net Sequencer Revenue will be permanently burned.
The remaining 75% will continue to support the Celo Community Fund.
3. Proposed Allocation
For every bi-weekly revenue distribution:
Net Sequencer Revenue = Gross Sequencer Revenue − L1 Operating Costs − OP Superchain Revenue Share
Net Sequencer Revenue will then be allocated as follows:
25% → Permanent CELO Burn
75% → Celo Community Fund
The burn therefore occurs only after all operating costs and Superchain obligations have been satisfied.
This proposal does not modify the calculation of Gross Sequencer Revenue or any existing cost obligations.
4. Why 25%?
The proposed 25% allocation is intended to create meaningful CELO value accrual while preserving the majority of protocol revenue for ecosystem development.
| Allocation | Purpose |
|---|---|
| 25% | Permanent CELO burn |
| 75% | Community Fund / ecosystem reinvestment |
A higher percentage would reduce the amount of protocol revenue available for ecosystem development.
A lower percentage would create a weaker relationship between protocol profitability and permanent CELO supply reduction.
Starting at 25% therefore provides a balanced starting point.
The mechanism is also automatically proportional to network performance:
- if Celo generates less revenue, fewer CELO are burned;
- if Celo generates more revenue, more CELO are burned.
There is no fixed treasury expense.
5. Technical Implementation
Following technical review after Governance Call #96, the proposed implementation is intentionally simple.
The existing revenue-distribution process remains unchanged until Net Sequencer Revenue has been calculated.
The existing 2-of-5 Celo Operations Safe:
0x7A1E98FC9a008107DbD1f430a05Ace8cf6f3FE19
already executes the recurring revenue distribution.
For every distribution period, the Safe batch will include two actions.
Action 1 — Burn 25%
Call burn() on the CELO token contract:
0x471EcE3750Da237f93B8E339c536989b8978a438
for an amount equal to:
25% × Net Sequencer Revenue
The CELO token’s existing burn functionality permanently removes these CELO from circulation.
Action 2 — Transfer 75%
Transfer the remaining:
75% × Net Sequencer Revenue
to the Celo Community Fund.
Both actions will be included within the same Safe batch.
This means the distribution is atomic:
Either the burn and Community Fund transfer both execute successfully, or neither executes.
This prevents a situation where the Community Fund allocation is executed while the corresponding burn is not.
6. Burn Mechanism
The burn will use the existing burn() functionality of the CELO token contract.
Burned CELO are sent to the burn/dead address:
0x000000000000000000000000000000000000dEaD
The cumulative amount of CELO burned can be independently verified through:
getBurnedAmount()
on the CELO token contract.
This creates a publicly verifiable onchain record of the cumulative CELO supply permanently removed through the mechanism.
7. Precision and Calculation
The 25% allocation should be calculated using CELO’s native 18-decimal token precision rather than rounding the calculation to whole CELO.
The implementation should ensure that the amount burned never exceeds the governance-approved 25% allocation.
Any remainder resulting from the smallest representable token unit should remain with the Community Fund allocation.
8. Existing Operations Safe
The mechanism will continue to use the existing 2-of-5 Operations Safe:
0x7A1E98FC9a008107DbD1f430a05Ace8cf6f3FE19
The same existing signers responsible for the current bi-weekly sequencer-revenue distribution will therefore also execute the burn.
This means the proposal requires:
- no new signers;
- no new private keys;
- no new multisig;
- and no new trust assumptions.
9. No New Smart Contract or Audit Required
The proposed implementation does not require:
- a new smart contract;
- a new multisig;
- additional signers;
- new private keys;
- modification of the sequencer fee vault;
- a new CELO token contract;
- or a new smart-contract audit.
The mechanism uses:
- the existing CGP-287 revenue-distribution process;
- the existing Operations Safe;
- the existing CELO token contract;
- and the existing
burn()functionality.
The recurring tooling that already calculates Net Sequencer Revenue and prepares the Safe distribution batch only needs to add the burn action to the existing process.
10. Failure Handling
There is no separate autonomous burn process that can independently fail after revenue has already been distributed.
The burn and Community Fund transfer will be executed within the same Safe batch.
If the Safe batch reverts:
- no CELO is burned;
- no CELO is transferred to the Community Fund;
- and the signers can correct and resubmit the batch.
If a bi-weekly distribution is skipped operationally, the missed amount can be included in the following distribution period.
The corresponding burn amount should then also be included in that next batch.
11. Example Using Recent Sequencer Revenue
For the September 1–15, 2026 reporting period:
Net Sequencer Revenue
673,236 CELO
Under this proposal:
25% Permanent Burn
168,309 CELO
75% Community Fund
504,927 CELO
Therefore:
168,309 CELO burned
504,927 CELO allocated to the Community Fund
=
673,236 CELO Net Sequencer Revenue
This demonstrates that the proposal does not eliminate ecosystem funding.
The majority of Net Sequencer Revenue continues to accrue to the Community Fund.
12. Reporting and Transparency
The existing bi-weekly sequencer-revenue report should be expanded to include the burn mechanism.
Each report should disclose at minimum:
| Metric | Amount |
|---|---|
| Gross Sequencer Revenue | X CELO |
| L1 / Operating Costs | −X CELO |
| OP Superchain Revenue Share | −X CELO |
| Net Sequencer Revenue | X CELO |
| Burned — 25% | X CELO |
| Community Fund — 75% | X CELO |
| Burn transaction | 0x... |
| Community Fund transaction | 0x... |
| Cumulative CELO burned | X CELO |
The cumulative burned amount can be independently verified through getBurnedAmount() on the CELO token contract.
This allows the community to verify:
how much the network earned
↓
how much was burned
↓
how much remained available to governance
13. Governance Control
The initial burn percentage will be:
25%
This percentage remains in effect unless Celo Governance explicitly approves a different percentage through a future governance vote.
The Operations Safe signers or operational contributors cannot independently modify the burn percentage.
For example, changing:
25% → 20%
or
25% → 50%
would first require a new governance decision.
The distribution tooling would then be updated to reflect the newly approved percentage.
14. Six-Month Review
The mechanism should be formally reviewed approximately six months after implementation.
The review is intended to evaluate the mechanism using real data.
It does not automatically terminate, pause, or modify the 25% burn.
Unless governance approves a change, the 25% burn remains active.
The review should consider:
Protocol Economics
- Gross Sequencer Revenue
- Net Sequencer Revenue
- stablecoin-denominated fee revenue
- CELO acquired through stablecoin conversion
- operating costs
- OP Superchain revenue share
Token Economics
- total CELO burned
- Community Fund revenue
- Community Fund expenditures
- CELO supply dynamics
Network Activity
- transaction activity
- stablecoin activity
- active users and addresses
- payment activity
- FX activity where measurable
Operational Performance
- reliability of the Safe-batch process
- failed or delayed distributions
- reporting quality
- whether additional automation would provide meaningful benefits
Following the review, governance may choose to:
- maintain the 25% rate;
- increase the burn percentage;
- decrease the burn percentage;
- pause the mechanism;
- or consider additional revenue-allocation mechanisms.
Any change requires a new governance decision.
15. Revenue-Backed Staking
During the temperature-check discussion, community members also raised the possibility of directing a portion of protocol revenue toward CELO staking incentives.
This proposal intentionally does not include revenue-backed staking.
Revenue-backed staking introduces separate questions around:
- eligibility;
- distribution mechanics;
- lock periods;
- reward allocation;
- smart-contract implementation;
- and potential governance effects.
Revenue-backed staking may be worth considering through a separate governance proposal.
Keeping it outside this proposal allows governance to evaluate the burn mechanism independently and keeps the initial implementation simple.
16. What This Proposal Does Not Do
For clarity, this proposal:
- does not burn 25% of the existing Community Fund;
- does not burn 25% of CELO’s circulating supply;
- does not affect existing Community Fund balances;
- does not affect previously approved funding commitments;
- does not affect existing Community Fund allowances;
- does not modify the Governance Reserve;
- does not increase transaction fees;
- does not change the OP Superchain revenue share;
- does not modify the calculation of Net Sequencer Revenue;
- does not introduce a new smart contract;
- does not introduce a new signer set;
- does not automatically expire after six months;
- does not guarantee or target any particular CELO market price.
The mechanism applies only to:
future Net L2 Sequencer Revenue.
17. Expected Benefits
Revenue-Based Supply Reduction
CELO is burned only when Celo generates actual protocol revenue.
Stronger Alignment Between Usage and CELO
Increasing network economic activity results in increasing protocol revenue and therefore a larger permanent burn.
Preservation of Ecosystem Funding
75% of Net Sequencer Revenue continues to accrue to the Community Fund.
Simplicity
The mechanism uses infrastructure that already exists.
Transparency
Every burn can be independently verified onchain.
Governance Control
Celo Governance retains full authority over the burn percentage.
18. Risks and Trade-Offs
Opportunity Cost
Burned CELO can no longer be used to fund ecosystem initiatives.
Mitigation: 75% of Net Sequencer Revenue remains available to the Community Fund.
Irreversibility
A completed burn cannot be reversed.
Mitigation: the initial allocation is limited to 25%, while future revenue allocation can be changed prospectively through governance.
Revenue Volatility
Sequencer revenue may fluctuate significantly over time.
Mitigation: the burn is percentage-based and therefore automatically scales with actual revenue.
Operational Execution
The recurring distribution remains dependent on the existing Safe-signing process.
Mitigation: the proposal introduces no new signer infrastructure, while the burn and Community Fund allocation execute atomically within the same process.
19. Start Date
If approved, the mechanism should begin with:
the first full bi-weekly sequencer revenue distribution following governance approval and operational implementation.
This avoids partially applying the policy to a revenue-reporting period that is already in progress.
The first report after activation should clearly identify the mechanism as active and include the corresponding burn transaction.
20. Governance Decision
Celo Governance is asked to approve the following policy:
Allocate 25% of future Net L2 Sequencer Revenue to a permanent CELO burn and allocate the remaining 75% to the Celo Community Fund.
The burn will be executed through the existing Operations Safe using the CELO token’s existing
burn()function as part of the same bi-weekly Safe distribution batch.The 25% allocation remains in effect unless changed through a future Celo Governance vote.
YES
Approve the 25% revenue-based CELO burn mechanism.
NO
Do not implement the proposed burn mechanism.
ABSTAIN
Participate without expressing support or opposition.
21. Closing
CGP-287 established a recurring stream of protocol revenue controlled by the Celo community.
This proposal does not replace that framework.
It adds a simple allocation policy on top of it:
Celo generates protocol revenue
↓
L1 operating costs and Superchain obligations are paid
↓
Net Sequencer Revenue is calculated
↓
25% is permanently burned
75% continues funding the Celo ecosystem
The mechanism is:
- proportional to network performance;
- transparent;
- technically simple;
- governance-controlled;
- and does not require new smart-contract infrastructure.
The network earns. Governance allocates. A portion of that success is permanently reflected in CELO supply.