Initial allocation of Celo Euro (cEUR)

Contracts Release 3 will include CIP-33, which updates the Reserve smart contract to support stabilizing multiple currencies. It also adds the Celo Euro (cEUR) as a second stabilized value digital asset to the Celo Network.

When deploying new stable tokens like cEUR there is an opportunity to specify an initial token allocation.

This is a useful feature. First, Mento is only able to expand or contract the supply of stable tokens at a limited rate, and starting with non-zero demand but zero supply may make it difficult or expensive for arbitrageurs to quickly close that gap and mint the requisite cEUR into existence, which in turn could temporarily affect the stability characteristics of cEUR in the early days.

Second, this is an opportunity to leverage more of the capital in the reserve. According to, the reserve is currently >10x over collateralized, which far exceeds the necessary margin of safety. Minting an initial supply of cEUR allows the protocol to make effective use of more of the capital being held by the reserve.

Finally, there is a clear opportunity for an initial supply of cEUR to be put to use in the form of grants given out from the Celo Foundation and the Community Fund. The Celo Foundation is on track to give out approximately $6MM of Celo currencies in the form of grants over the first year of the Celo network. Furthermore, a CGP was just made to allocate ~$2MM equivalent of CELO from the Community Fund to be given out in grants.

I’d love to kick off the discussion about what initial cEUR balances should be specified as part of this release. I would propose that both the Celo Foundation and the Community Fund should be allocated an initial supply of cEUR.

The Celo Foundation can use these funds to support the development of a Euro-based ecosystem (predominantly in Europe and some African countries), by giving out community grants in cEUR to foster development on Celo in these regions. Similarly, the Community Fund could use an initial allocation of cEUR to give out grants for protocol development.

Concretely, I’d like to propose: 6MM cEUR going to the Celo Foundation, and 2MM cEUR to the community fund. Based on current values the reserve will remain >10x overcollateralized.

I would love feedback on this wherever folks are happy to share it, either in this forum post, #celo-governance on Discord, or in the community governance call on Thursday (invite link).


I really like this idea but I have a question about timing because both of those grant processes typically take a long time to get money out the door, which could lead to price instability. Will there be other channels to get cEUR into circulation or are you thinking that the grants will be issued in advance of the cEUR Mento going live?

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Great question about timing. Most important for price stability is Mento as a decentralized exchange based on an automated market maker. Mento is responsible for cEUR to maintain its peg right from the start, even in times of low liquidity. A governable parameter that depends on overall liquidity influencing on-chain price stability in Mento is the initial tank size.
Off-chain price stability will become relevant as soon as first exchanges or other markets would list cEUR. As soon as the Celo foundation and the community fund have an initial cEUR balance they can start to pay out loans and grants to existing and new grant recipients in cEUR to support initial off-chain liquidity. In terms of timing / sequence this means that the initial allocation of cEUR to the foundation and community fund would happen first, then Mento is activated and transfers can happen, both before any a potential cEUR listing. As soon as transfers can happen the foundation can start lending and granting cEUR.


I would love to see some of the cEUR set aside for a UBI program that targets communities where we can potentially achieve very high rates of user adoption. My thesis is that by targeting a geographically isolated population, such as a small-medium size island community, we can overcome the cold-start problem associated with generating network effects.

The main question that would need to be answered is; what is the cost of acquisition required to incentivize a critical mass of the population to join the network?

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Thanks to everyone that discussed this in yesterday’s governance call. For those who missed it, you can find the recording here.

Tl;dw: it sounds like there was agreement around moving forward with this allocation but with a desire to put together a framework with which we can guide initial allocations of future proposed stable tokens.


Thanks @asa, some follow on questions from the governance meeting yesterday. Please consider that these questions are forward looking towards stablecoin issuances beyond cEUR. I understand the need to keep things moving with the proposed cEUR approach.

  1. What are the key collateralisation metrics that we should be looking at? Do we only look at raw as-converted-dollar value over circulating cUSD value (currently over 10x)? Is there a better collateralisation metric that is robust to an adverse market scenario (e.g. cGLD, BTC and ETH all tank)?

  2. This would need much more thought, but one alternative way to get a pre-mint into circulation would be to lend those funds out on a platform (such as Aave or Compound). I believe this may be the analogous approach to how governments get funds into circulation.

2 Likes both are great questions.

  1. I’m not sure I’m the best person to answer this question. Definitely reserve ratio has been the primary one that I think about, but I agree there is more nuance to it. A reserve with 100% CELO looks different than a more diversified reserve, even if the USD fair market values are equivalent. @MarkusBerlin and Nadiem are probably the best folks to answer here.

  2. That’s an interesting idea, and one that should be technically feasible once @Patrick and the Moola Market folks launch. Another approach would be for the reserve to “OTC sell” a pre-mint in exchange for reserve collateral. You could even imagine a combination of any of the three approaches. I’d be interested to dive more into which scenarios are most appropriate for which approaches, and that research could inform the playbook used to guide future stabletoken issuances.


As a proposal, minting cEUR sounds like a good idea. However, it seems a bit random to just mint free money with fairly arbitrary looking amounts and thresholds (i.e. why 8MM?, why 10x collateralization?).

Should there be some pre-defined guidelines and rules on pre-requisites/limits/amounts for minting stable tokens? This would inspire a bit more confidence so platform doesn’t just more or less randomly decide to print free money from the reserve.

@thezviad this is more or less the same conclusion we came to in the governance call :slight_smile:

Specifically I think we decided that we should not block cEUR on coming up with those pre-defined guidelines and should aim to put them in place so that they’re ready for whichever token is next.

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Thanks @asa !

@MarkusBerlin , I’d be keen to chat collateralisation. I’ve added you on Discord.

“OTC selling” of cEUR for in exchange for reserve collateral (i.e. CELO) would seem to make a lot of sense to me, although I have no idea how to implement this in a decentralized and manipulation resistant fashion. I am attracted to the idea because it matches best with the problem that the supply cannot expand to meet the demand in a timely fashion.

One simple version of this would be to temporarily increase the cEUR Mento bucket size such that the rate at which cEUR can be minted is increased. Obviously this also increases the potential cost to the reserve as a targeted manipulation or issues could pull a larger profit.

Another option that comes to mined would be to run a sort of cEUR auction. Have some supply of cEUR available and have buyers bid in CELO to buy a portion of it, with all CELO going to the reserve.

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Hey Guys , just read through the thread ! I’m Serge , founder of DuniaPay and we’re launching a digital bank on Celo in Africa. Had some thought i wanted to share.

Let’s say a project is looking for initial liquidity. For example we’re launching some African currencies on mainnet and would need liquidity at start to Mint initial amounts of local currencies and exchange them to user for fiat when they onboard the DuniaPay banking app.The advantage of this approach is that cEUR are not actually spent they would be locked to mint equivalent local currencies in Africa. Applying the same method we could start testing multiple new currencies on celo without having to go through a governance proposal to add them to the protocol and also it would keep 100% on chain collateral.
Happy to here everyone thoughts on that !
Should it be deemed interesting i have a more formal proposal that includes technical aspects on how this could be implemented that i can submit to the community for feedback

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Hey @kiems1,

We’re just beginning to wrestle with a similar problem with a local currency in the Caribbean and I’d love to have a chance to look at / discuss your technical research.

I tried to DM but I don’t believe I have privileges as such on this board yet (first post). Would love to connect over email if possible: [email protected]


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Of course ! Don’t hesitate to shoot me an email!

Hey @Kiems1 — that’s the issue, I don’t have your email — which is why I offered my own in the previous post.

Hey Patrick, just seeing this I sent an email but it bounced here’s mine [email protected] !

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Hi @Kiems1 , would you be writing the smart contracts that would lock the cEUR?

If so, I don’t believe this would be a governance matter - you would be creating your own system of stables outside of Mento.

Kindly clarify as I think I have misunderstood your proposal.