Granda Mento Exchange Proposal 1 Discussion: 1,000,000 CELO for 6,450,000 cUSD

Granda Mento Exchange Proposal 1

  1. What token and quantity are you selling, and what token are you buying?

Selling 1 million CELO for 6,450,000 cUSD

  1. Who are you?

AP Grant Foundation Company

  1. Why do you want to execute the exchange?

Acquiring cUSD to issue grants in cUSD as needed by grant recipients. It’s the corporate mandate of AP Grant Foundation Company to issue grants to support the Celo Ecosystem.

  1. What is the on-chain proposal ID and the on-chain buy amount?

Current proposal ID is 1. After a feedback period to this post lasting until next Friday, an on-chain exchange proposal will be created assuming feedback is supportive.

  1. How did you acquire the CELO?

Genesis block allocation, details of CELO allocation can be found here.

  1. At what price did you acquire the CELO?

N/A

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Judging by the current market price alone, this seems like a significant discount on cUSD and so would be difficult to approve. I understand that when proposed, this was aligned with the current market price, so my question here is more general.

With Granda Mento proposals, is there a good strategy for handling the fact that the market price will change between the proposal time and the referendum? Assuming the proposal is to mint a stable token (i.e. to sell CELO for a stable token) then the CELO price increasing would make the proposal seem more beneficial for the network, and would make it easier to approve. If the CELO price goes done, as is currently the case, then it makes the proposal seem less beneficial and harder to approve.

This is also relevant to Granda Mento Exchange Proposal 2 Discussion: 1,000,000 CELO for 5,547,000 cEUR

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Hi Victor,

When there is an active derivatives market, we could use a forward contract or futures to “lock-in” the price.

Currently though, the choice is between (1) use normal mento to immediately mint (and utilize the xy=z liquidity buckets increasing slippage for other users) and (2) use granda mento to mint at scale and take on market risk.

If the concern is around people backing out, I think there’s an option to potentially put the funds in an escrow smart contract that forces the transaction if governance approves regardless of the price movements. This would guard against, for example, an institution converting at a low CELO price before the price goes up and then backing out to exchange at a higher price. What do you think?

Why don’t you just use a programmatic sell strategy and route the order in small increments (100 celo) every 5 mins over the course of 5 weeks? If you utilize the available liquidity across all of the DEXs, this shouldn’t cause any noticeable slippage from whatever the market rate is at all of those sells.

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Greetings @alexcelo , I’m on the multi-sig for Granda Mento and am writing to share my personal perspective. Note that I am unaffiliated with cLabs and have only gotten involved with Celo over the past year.

For background

  • There is reasonable liquidity for going between fiat-USD <> Celo
  • There is poor liquidity going from Celo <> cUSD.
  • One interpretation of the intent for Granda Mento is to facilitate large transfers of fiat-USD into cUSD format by bootstrapping the liquidity that is there to go from fiat-USD to CELO. A participant can buy CELO using fiat-USD at market rates, and then Granda Mento honours converting that CELO into cUSD at the same rate as was done from fiat-USD to CELO.

The current proposal

  • The current proposal centers around a different (but also real) issue - particularly for CELO grant organisations - of converting large amounts of CELO into cUSD.
  • This scenario is much more tricky for Granda Mento to help with because there fundamentally isn’t large liquidity for Celo <> cUSD. This makes it impossible to determine at price at which to allow a large trade that would be fair for the Celo community. Strictly speaking, there is no market clearing price that exists for a single transaction of 1,000,000 CELO today. [This speaks to the points made above on the difficulty of establishing a fair price.]

In conclusion

  • I am sympathetic with the challenge of converting CELO into cUSD in large amounts, but I don’t think it is in the best interests of the CELO community to facilitate this via Granda Mento.
  • The documentation on Granda Mento is unclear in its stated goals, and I would recommend that this be clarified in a future governance proposal to be voted on by the community.
  • I welcome any further ideas or differences in view you and others have.
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Hi there, there are programmatic sales done in accordance with the published Treasury Policy (Celo Foundation Treasury Policy. Last Updated: September 10, 2020 | by Celo Foundation | Medium) by the Celo Foundation and AP Grant Foundation Company.

In addition to acquiring funds for grant distribution in cUSD/cEUR, this proposal is also largely as a pilot and blue print for partners like Deutsche Telekom or PayU to acquire large amounts of cUSD/cEUR, which is currently difficult.

The feedback we received from partners is it’s difficult for them to set up programmatic buy/sell strategies and they’d rather acquire cUSD/cEUR in bulk as trading isn’t their core business.

Hello @Pinotio.com and thank you for your concern, I interpret this as caring for the future of Celo. As you’ve made several points, I’m responding in segments below each quoted segment.

" One interpretation of the intent for Granda Mento is to facilitate large transfers of fiat-USD into cUSD format by bootstrapping the liquidity that is there to go from fiat-USD to CELO. A participant can buy CELO using fiat-USD at market rates, and then Granda Mento honours converting that CELO into cUSD at the same rate as was done from fiat-USD to CELO."

-This is currently being worked on and is definitely an important use case to tap on CELO liquidity for current and future stablecoins.

" * This scenario is much more tricky for Granda Mento to help with because there fundamentally isn’t large liquidity for Celo <> cUSD. This makes it impossible to determine at price at which to allow a large trade that would be fair for the Celo community. Strictly speaking, there is no market clearing price that exists for a single transaction of 1,000,000 CELO today. [This speaks to the points made above on the difficulty of establishing a fair price.]"

  • Correct, if there were a liquid market for clearing 1m CELO, the need for Granda Mento would be significantly lessened.
  • In terms of price discovery, as mentioned in the comments above, we could “hog up” xy=k liquidity and continually exchange CELO into cUSD/cEUR instead and liquidate 1m CELO with relatively little slippage if done over say 1 week.

" * The documentation on Granda Mento is unclear in its stated goals, and I would recommend that this be clarified in a future governance proposal to be voted on by the community."
-We did have a community call to discuss goals, although I agree documentation should be improved.

" * I am sympathetic with the challenge of converting CELO into cUSD in large amounts, but I don’t think it is in the best interests of the CELO community to facilitate this via Granda Mento."

-The exchanged CELO will be used for stablecoin grant distribution, all with the intention of contributing to the Celo Ecosystem and Community.
-(Alex deleted inaccurate statement) If the community rejects a Granda Mento proposal, I agree it’s not in the community’s interest and should be rejected.

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Hey Alex, thanks for your response.

As I understand multisig signers will gauge whether there is a rough consensus on the forum based on the posts here. If so, then multisig signers sign and you can activate the exchange. (So community members don’t directly vote with their CELO, unless someone was to bring another CGP to alter the Granda Mento process.) Granda Mento Process

So, it’s important for community members to post here with any input on support or concerns.

Cheers

Hey Alex thanks for the proposal. We discussed this specific situation during the original Granda Mento proposal, You can see me probing about this scenario very specifically here:
Question: Discussion on Granda Mento: Enabling Larger Stablecoin Mints - #2 by thezviad
Consensus: Discussion on Granda Mento: Enabling Larger Stablecoin Mints - #40 by trevor

My understanding was that we all came to an unanimous agreement that Granda Mento’s purpose is to enable large scale conversions for USD → cUSD and for EUR → cEUR. NOT for liquidating existing CELO to cXXX assets.

These proposals are exactly what we agreed wouldn’t be done using Granda Mento. I can’t in good faith approve/support this proposal. If this proposal does indeed pass, I should probably be taken off from the Granda Mento Multisig, since I would not have supported original Granda Mento proposal in the first place, if it was going to be used for liquidating existing CELO for cXXX assets.

EDIT: Just to add to this, the specific price of conversion is irrelevant from my point of view. There is no valid price in my mind for a proposal like this, as I discussed at length in the original Granda Mento discussion thread.

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Hey Alex, congrats on being the first Granda Mento proposal! In summary, I agree with most concerns already raised and I will not be supporting this proposal.

As Zviad pointed out, Granda Mento’s purpose is to allow new capital to mint/burn stablecoins, not existing token holders. While I believe the funds would be put to good use, the current iteration of Granda was not intended to fulfill your request(s). Perhaps this is a conversation worth revisiting, as only a handful of people seemed to be part of the discussion. But I do not believe the current multisig should authorize transactions like this, since that is not what we were elected to do via governance. This should be done via a new on-chain proposal with clear intentions for these types of trades.

Regarding Victor’s points on the price spread, I agree but I think that only applies because this is with existing CELO, not new capital that just bought CELO specifically to mint stablecoins. If someone were to buy CELO right before submitting a proposal, followed by an immediate price contraction, I believe we would go through with it (because they presumably bought the X CELO solely to mint Y cUSD. However, if price were to appreciate then whoever submitted may want to amend their proposed exchange rate. It will be interesting to see if that is well received (when/if it happens). The best way to minimize price deviations like this is for us to be more responsive. Perhaps a better notification system; the first Discord discussions happened 9 days after this post.

For future proposers, I would also recommend providing more detail in your initial proposal. For example, it was not immediately clear to me who AP Grant Foundation Company is, or why the acquiring price was N/A. Providing more detail in your proposal help multisig signers reach consensus quicker.

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I am really happy that there is some slight controversy around using Granda Mento. It feels good to know that there is a place for discourse in the Celo community and decisions are not made easily.

As a mechanism Granda Mento grants a specific group the privilege to bypass the market. Potentially with the advantage to reduce natural market friction (slippage etc). In general, I think privileges should be avoided if possible, unless they are granted to protect weak members of the community. If it is not possible, it should be clear what is the benefit for the community and that it out-weights the imbalance it creates. Most mechanisms in crypto favour groups with capital, advanced equipment or elite knowledge.

I think we should ask what is the benefit the community has by granting AP Grant Foundation Company the privilege to bypass the open market and see whether the benefit out-weights the imbalance. For example, what would be the consequence for the market if AP would try to sell 1m Celo for cUSD in the open market. Maybe it would cause the cUSD to rise above 1 and trigger minting through Mento. So the benefit for the community could be that the privilege to use Granda Mento would temporarily stabilise cUSD. The questions is whether this is benefit enough.

Related to the function of Granda Mento I would like to add some thoughts about slippage as it is quite often considered as something negative.
Slippage is caused by order book imbalance or volatility. Both are natural in a healthy market. If I saw an order book with zero or very low slippage, I would conclude it is very likely rigged. Because either it has to be perfectly symmetrical or there is almost no volatility. In that sense I think slippage is the pulse of a healthy market. I understand that investors want to minimise slippage. But in my opinion this should happen within the boundaries of an open market using tools and mechanisms accessible to anyone.

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For the sake of a meaningful discourse and good decisions, I hope the Multisig represents a variety of opinions. And from that perspective I think your opinion is very beneficial

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+1 on having a variety of multi sig views and @thezviad

Hi folks, my reading of the Granda Mento Documentation (docs, github) is that - as a multisig signer - I should approve if there is “rough consensus” from the community.

My view is that Granda Mento is designed to facilitate fiat-USD → CELO → cUSD . Facilitating CELO → cUSD at prices below market effectively constitutes a grant to the exchanging party from the CELO community, a task that is better overseen by grant-specific programs .

Since I judge that there is not rough consensus on this forum for the proposal, my current position is not to sign the multi-sig.

My point is that I would rather not be a gatekeeper where I have to evaluate complex things like “is specific Granda mento proposal a net benefit or not to the reserve, or to the community”, or “what is the right price for proposal”, etc…

I agreed to be on the MultiSig to perform very simple specific checks. Essentially being a human check for something that can’t be done in the smart contract. Specifically to check following:

  • Is Granda mento proposal part of larger USD → cUSD conversion flow (or any XXX->cXXX conversion)?
  • Does price in Granda mento match the average price that CELO was bought at by the proposer entity? (i.e. essentially allowing 1:1 trade from USD → cUSD, not more, not less, irrelevant of current price of CELO)?
  • Is the proposer a legitimate entity and not some sketchy entity that could potentially be a market manipulator?

That is it. A very simple set of steps that can’t easily be checked programmatically but it is fairly easy for humans to verify.


If the responsibility of Granda mento Multisig involves more complex evaluation of proposals or complex evaluation of is proposal something that is good or bad for reserve, community, etc, I think that is not the responsibility I would want to take. And honestly, I wouldn’t really want any group of 9 people to take on that either. It is too much responsibility for too few people, and not in the spirit of decentralized or autonomous systems.

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Hi @Pinotio.com,

You’re correct. Multisig signers will gauge whether there is rough consensus. If there is not rough consensus, proposals should not pass. Thanks

Source: celo-proposals/cip-0046.md at master · celo-org/celo-proposals · GitHub

Hi @0xhuman,
I wasn’t aware the purpose of Granda Mento is only to allow new capital to mint/burn. I thought Granda Mento was also trying to solve for some of the limitations of Mento like some bucket sizes limiting transaction sizes without significant slippage.

Agreed, I think this is a good general point to have a better notification system as many dispute periods are ~7 days. Perhaps posting can automatically trigger a discord bot?

  1. The N/A for question 6 was because of the answer to number 5, it didn’t buy/acquire CELO per se (instead it was allocated at the genesis block)
  2. More generally, I worry requiring significant amounts of information may scare of some partners from exchanging funds in the first place

As AP Grant Foundation Company would otherwise be transacting via a bot after every 5 minutes, it’s “hogging” liquidity and the average user trying to exchange via Mento will have relatively more slippage to their detriment.

My understanding is that this is one of the goals of Granda Mento.