Launching the CELO Tokenomics Initiative: Designing the Next Era Together

[rene_celo]

Dear Celo Community,

Over the past five years, the Celo ecosystem has delivered some of the most significant achievements in our mission to create the conditions of prosperity for all. The technical accomplishments and distribution reached in these efforts put Celo in a uniquely strong position today.

We’ve become home to one of the most active Web3 user bases, consistently ranking among the highest daily active users of all Ethereum Layer 2s. Through our recently extended partnership with Opera, more than 11 million real people have already onboarded to MiniPay, using their wallets to move financial transactions onchain, at a scale few networks have achieved. Across 2024–2025, we completed a seamless L1 → L2 migration, bringing Celo home to Ethereum and propelling the ecosystem with renewed energy. Network innovation hasn’t stopped there, with cLabs activating a series of major hardforks, from Ice Cream and now Jello tomorrow, which introduces OP Succinct Lite + ZK fault proofs to make Celo one of the first ZK-secured rollups in live production.

These are achievements any ecosystem would be proud of. CELO’s tokenomics have continued to evolve since mainnet launch, including recent updates with the Great Celo Halvening reducing inflation from 2% to 1% around the L2 hardfork. Celo’s growth now calls for a more holistic redesign of the model, considering new token burn mechanisms, buybacks and/or additional approaches that will best align CELO tokenomics with the growing transaction fees and scale with network activity.

We’re entering a new phase of real-world, community-led growth as a network used by individuals throughout the world in their everyday lives, serving for many as a gateway to financial solutions with user-friendly blockchain tools. With everything we’ve built together, now is the time to evolve the economic foundation that will support Celo’s growth as we onboard the next billion users by 2030 and onwards.

Today, we’re excited to propose the kick off of the Celo Tokenomics Initiative - a fast-moving, transparent, community-driven process to review and define CELO’s long-term economic design. As Celo continues to grow, we’re inviting the ecosystem to help shape the next chapter of CELO’s tokenomics, with the Celo Foundation and cLabs stewarding this effort.

We built the infrastructure. We scaled with global distribution. Now it’s time to ensure the economics scale with us.

Across Ethereum L2s, token models are maturing beyond governance-only designs, evolving toward frameworks that better reflect everyday activity, sustainable demand, and long-term ecosystem alignment. CELO is ready for this next stage.

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Why Now?

Celo’s usage has grown at a scale few L2s have reached:

• Highest daily active users (700K+) among Ethereum L2s, exceeding Base, Arbitrum, and more

• 11M+ MiniPay wallets; with an extended partnership for Celo exclusivity in support of Celo’s Vision 2030 campaign

• A successful L2 migration completed without disruption or impact on end users

• Multiple successful hardforks that modernized Celo’s pioneering architecture

• OP Succinct Lite + ZK proofs activating on mainnet, accelerating our path toward Stage 1+ readiness

• EigenDA v2 integration, supporting further growth of scalable, global payment rails

At the same time, Celo’s footprint is rapidly expanding. Celo-native stablecoin adoption is accelerating, ecosystem partners are scaling globally, and new enterprise and financial use cases continue to emerge.

This growth is creating meaningful economic activity across the ecosystem - far more than what CELO’s current model is designed to reflect today.

With this momentum, now is the time to explore a sustainable, long-term token model that matches the role Celo plays today: A leading Ethereum L2. The frontier chain for global impact, scaling real-world solutions for all.

This initiative is to design an economic foundation for the next decade - one rooted in real usage, global scale, and long-term alignment across the entire ecosystem.

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Goals of the Celo Tokenomics Initiative

This initiative will explore a broad set of economic design levers at both the protocol and ecosystem levels to understand how CELO’s role can evolve as the network scales.

Specifically, the initiative will:

1. Review Celo’s current token dynamics

How CELO functions today, how the economics interact with application usage, staking, governance, gas, and the rollup architecture.

2. Explore data-driven improvements to the token model

Focused on better aligning CELO with transaction fees and real, growing usage across the network as adoption scales further. We will prioritize mechanisms that are feasible to implement and strengthen Celo’s long-term growth.

In these efforts, we will draw on lessons from ecosystems that have evolved their token models like Ethereum, Optimism, and zkSync. Ethereum’s EIP-1559 demonstrated how protocol-level fee burning can create deflationary pressure proportional to network usage. Optimism has explored ecosystem-aligned incentive frameworks that evolve with network growth, while zkSync has experimented with alternative fee flow structures within a rollup architecture. These examples are not blueprints for Celo, but they provide useful reference points as we evaluate approaches that best align with Celo’s mission and usage patterns.

3. Identify sustainable demand drivers

Grounded in real usage - not emissions-heavy or circular models.

4. Design a transition strategy

A measured approach that considers multiple avenues for strengthening CELO’s long-term value, including how network fees and protocol revenue are allocated, potential treasury buybacks and burn mechanisms, and other sustainable, mission-aligned ways the protocol could reinforce CELO’s role.

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How the Process Will Work

We’re approaching this with both speed and openness. The goal is to move quickly while gathering the best thinking from across the industry and the Celo community.

Phase 1: Open Call and Kick-Off

In the coming weeks, we will publish a Tokenomics Call for Participation on the Celo Forum.

Researchers, token economists, and ecosystem contributors can share perspectives and express interest in participating.

Phase 2: Research & Modeling

A set of contributors, including external teams and community members, will begin developing models that explore CELO’s long-term economic alignment. Multiple approaches will run in parallel, with clear milestones to maintain momentum.

Phase 3: Community Review

Draft models will be shared publicly for discussion. The community will help pressure-test assumptions, highlight tradeoffs, and refine the strongest ideas into a cohesive direction. This phase will include interviews with validators, users, partners, and builders.

Phase 4: Governance

Once a preferred direction emerges, it will follow Celo governance processes for formal review and decision-making.

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Community Involvement Starts Now

Celo has always been strongest when we build together, as evidenced by the community’s collaboration to define the architecture of Celo’s pioneering migration to an Ethereum L2. This initiative is an open invitation to everyone shaping the future of our ecosystem, including:

• Builders

• Users

• Researchers

• Partners

• Long-time CELO holders

Every perspective matters as we define a token model for a network that millions are already leveraging in their everyday life.

In the weeks ahead, we will share participation details, timelines, and open channels for collaboration. All research, discussions, and drafts will take place transparently on open calls and on the Celo Forum.

Your input will be central to shaping CELO’s next chapter.

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The Road Ahead

We set out to make financial tools user-friendly and accessible to everyone, everywhere, through the power of blockchain. With our ecosystem delivering on that vision, making Celo a network trusted by millions, today we are ready for the next phase of growth.

It’s time to evolve the economic layer that will power the next decade of global blockchain adoption.

The process begins now. We couldn’t be more excited to build this chapter together.

Marek & Rene

[LuukDAO]

Thanks for taking a leading role in the CELO Tokenomics rework! I’ve mapped some interesting developments from other ecosystems and created a summary (GPT) of past forum conversations around the topic in this thread. Looking forward to continuing to provide input and participate in this process.

[Dmitrii007s]

Strongest community-driven ideas to supercharge CELO utility & value:

70–80 % of all sequencer fees + stablecoin spreads → automatic CELO buyback & burn

5–8 % gas fee discount when paying with native CELO — real everyday demand driver

Continue the Great Halving path → inflation down to < 0.5 % in the coming years

Higher staking rewards + long-term lock bonuses → significantly lower circulating supply

Validator set reduction 110 → 50–60 → higher yields and staking ratio

Small CELO collateral required for premium features (ZK identity, priority blockspace, etc.)

Community Buyback & Prosperity Fund v2 funded by ecosystem revenue

Real-yield distribution to stakers from Mento fees, DeFi revenue, and future RWAs

If we implement just 3–4 of these → CELO instantly becomes one of the most deflationary and in-demand L2 tokens.

If we implement all of them → it will be outright perfect and no other token in the industry will come close.

Let’s make it happen.My Twitter @Dmitrii007s

[pytman07]

Celo has made a lot progress over the years, now I agree it’s best to bring foward a new celo tokenomics Initiative, looking at it on a long term sustainability plan and economic point of view.

Let’s get it started soon enough

[Dmitrii007s]

Radical Improvement of Celo’s Tokenomics.

Hello, esteemed participants of the Celo project!

I have prepared an article on improving tokenomics to enhance the token’s long-term value and increase its attractiveness to institutional investors, individual investors, and users.These measures are aimed at creating token scarcity, reducing inflation, and stimulating demand. It is necessary to implement a series of strategic changes in the tokenomics. Below, I will break down what exactly needs to be done, why it is necessary, and how beneficial it is, based on the current state of the network (where the total token supply is about 1 billion CELO, and the circulating supply is around 539 million).

Point 1 (the most key one, in my opinion): Implementing a Token Burning Mechanism for Every Transaction (Similar to EIP-1559 in Ethereum)

What needs to be done? Introduce a system where a portion of transaction fees in the Celo network is automatically burned, rather than fully distributed among validators or reserves. This is similar to Ethereum’s mechanism, where the base fee is burned, reducing the overall token supply.

Why is this needed? Celo’s current tokenomics does not include full-scale burning for transactions. Without this, the CELO supply grows due to inflation (rewards to validators and stakers), which dilutes the token’s value. As the network grows (with an increase in users and transactions), the absence of burning leads to excess supply, suppressing price growth. In Ethereum, this mechanism has already proven effective: since 2021, more than 4 million ETH have been burned, making the token deflationary during periods of high activity. According to Celo co-founder Rene Reinsberg’s vision (Vision 2030), by 2030, the annual transaction volume on Celo (Total Value Settled, TVS) is expected to exceed $1 trillion, including over $850 billion in stablecoins and $150 billion+ in other tokens. This is significantly larger than the current volumes of many crypto networks (for example, stablecoins on Ethereum and Tron amounted to $772 billion per month in September 2025, or about $9 trillion per year for these networks combined). This will make Celo one of the leaders in volume. With such growth, the burning mechanism will lead to an “insanely high” level of token destruction, enhancing scarcity.

How beneficial is this? The benefits are enormous, especially considering the network’s further growth. If Celo reaches $1 trillion in annual transaction volume by 2030, as Reinsberg predicts, and even 3-4% of fees are burned, this could remove tens of millions of CELO from circulation annually. Result: The token becomes scarce, increasing its price due to the law of supply and demand. This will attract major investments—institutions (funds like BlackRock or Grayscale) prefer deflationary assets, such as ETH or BNB. By analogy with Ethereum, where burning led to price growth of 300-500% during peak periods, CELO could see a similar boost.

Point 2: Introducing a Buyback and Burn Mechanism for Tokens (Buyback and Burn)

What needs to be done? Use a portion of Celo’s reserves or network revenues (e.g., from stablecoins) for periodic buybacks of CELO on the open market and subsequent burning of these tokens. This can be automated via smart contracts, as in projects like Binance (BNB) or Terra (before the crash).

Why is this needed? Buybacks will directly reduce circulating supply. Without this, the token is vulnerable to selling pressure from validators and early investors, which suppresses the price.

How beneficial is this? This is a direct path to scarcity: buying back 10-15% of circulating supply annually (e.g., for $50-70 million from reserves) could reduce supply by 10-15% per year. As a result, CELO’s price could rise by 50-100+% solely due to supply reduction, as happened with BNB (growth of 1000%+ after introducing buyback). For investors, this is a signal of stability, attracting institutions seeking assets with built-in inflation protection.

Overall benefits? Influx of capital into the ecosystem worth hundreds of millions of dollars (in the best case, billions), growth in TVL (total value locked), and strengthening Celo’s position among L2 networks.

Point 3: Introducing Dynamic Inflation Reduction (Halving or Adaptive Emission)

What needs to be done? Implement a mechanism where the CELO emission rate automatically decreases over time or based on network metrics (e.g., transaction volume or TVL). For example, halving every 4 years, like in Bitcoin (we can do this once a year or every two years), or an adaptive model where inflation drops upon reaching certain milestones (e.g., below 5% at $500 billion TVS).

Why is this needed? The current inflation of ~9.84% is too high for long-term holding, deterring investors. Without dynamic control, emission will continue to dilute the token, even with network growth. This is especially relevant for Vision 2030, which anticipates exponential growth, but without inflation control, the price could stagnate. Similar models in Solana or Cardano show how reducing inflation enhances scarcity.

How beneficial is this? Huge benefits for scarcity: reducing inflation to 2-4% over 3-5 years can significantly boost CELO’s price due to lower new supply. This will attract long-term holders and institutions seeking “hard money” assets. By analogy with Bitcoin halving (price growth of 200-600% after each), CELO could see a 100-300% boost, especially with $1 trillion TVS. Overall effect: market cap growth by billions+ and strengthened community trust.

Point 4: Reducing the Number of Validators by Half or More (from 110-136 to 44-55)

What needs to be done? Reduce the maximum number of active validators in the Celo network from the current 110 to half, through a governance proposal and community vote. This will cut reward expenses.

Why is this needed? The current number of validators leads to high payouts—about $2.75 million per year just for rewards (forum.celo.org), which amounts to 3% of the circulating supply in the form of inflation. This creates “structural sales” (validators sell rewards to cover expenses), putting pressure on the price. Halving will reduce these payouts to ~1.5%, strengthening the supply-demand balance.

How beneficial is this? Significant benefits for tokenomics: a 50% reduction in inflation in this area will make CELO less susceptible to dilution, potentially increasing the price by 30-50% due to reduced selling pressure. The network will remain decentralized (55 validators is still more than in many PoS networks) but more efficient. This will attract investors seeking sustainable models and could increase staking participation, as fewer validators will heighten competition and efficiency. Implementation will bring quick results—capitalization growth of 30-40% in the first months.

Point 5: Increasing Staking Rewards

What needs to be done? Raise the APY for staking CELO from the current 6-7.3% to 10-15%, using reallocation of funds from reduced validator rewards or reserves. Make this temporary (for 1-2 years) to boost activity.

Why is this needed? Current rewards are not competitive enough compared to other PoS networks (e.g., Solana at 7-8%, Cosmos at 10-15%). This does not motivate investors and institutions to buy and hold CELO, especially in a volatile market. An increase will make staking more attractive, raising locked supply and reducing market liquidity.

How beneficial is this? Benefits in stimulating demand: higher APY will attract institutions (funds, hedgers) that prefer passive income. If locked CELO grows by 20-30%, this will reduce circulating supply, lifting the price by 15-40%. Similar to projects like Polkadot, where high rewards led to billions in TVL inflows. Combined with other measures, this will create synergy: scarcity + yield = influx of billions+ in investments into the ecosystem.

Point 6: Stimulating Liquidity Through Farming and LP Rewards

What needs to be done? Introduce a rewards program for liquidity providers (LP) in CELO pools on DEXs like Ubeswap or external ones (Uniswap, Curve). Distribute a portion of reserves or new emissions as CELO for providing liquidity, focusing on pairs like CELO/cUSD or CELO/ETH.

Why is this needed? CELO’s current liquidity is low (TVL in the ecosystem ~$200 million), leading to high slippage and volatility. Without incentives, investors are not motivated to lock tokens in pools, reducing utility. This will strengthen the DeFi ecosystem on Celo, especially with a focus on mobile payments in developing countries.

How beneficial is this? Benefits in demand growth: farming programs can increase TVL by 50-100% per year, as in projects like SushiSwap. This will reduce circulating supply (due to locked LP), lifting the price by 30-40%. It will attract DeFi users and institutions, adding $200 million to billions in capital. Combined with burning, this creates a cycle: more transactions = more burning = higher price.

General Benefits and Risks

Implementing these changes will make CELO a deflationary asset, similar to ETH and BNB, with enormous price growth potential toward Vision 2030.

Benefits include an influx of investments (institutions invest in projects with strong tokenomics), increased network activity, and market capitalization (from the current ~$172 million to tens of billions+). Reinsberg’s Vision 2030 with $1 trillion in annual transaction volume enhances all points, especially burning, making Celo competitive on a global scale.

Risks are minimal: decentralization will be preserved, and Celo’s governance will allow the community to make adjustments. This is timely—with current community proposals, implementation could occur in 2026, strengthening Celo’s position in DeFi and mobile finance.

I think we can do almost all of this in principle, the only big question is about halving like Bitcoin, but I think everything else is necessary, for the maximum improvement of the token economy, for I think we can do almost all of this in principle, the only big question is about halving like Bitcoin, but I think everything else is necessary, for the maximum improvement of the token economy, for Long-term growth

[Dee]

Thank you for taking the lead on this important initiative. It’s encouraging to see a structured approach to revisit CELO’s economic model.

Celo has achieved remarkable traction with real users and global reach. Now is definitely the right time to align these achievements with stronger value flows to token holders, bring in new users and a healthier long-term economic foundation.

There has been many ideas shared over the past years and this initiative is going to concretely helped things move forward. I’m looking forward to contribute and help shape a sustainable framework for the next decade of Celo’s growth.

[Frerehugi]

IMHO we need to implement a couple of changes that value:

• CELOs high number of users
• CELOs long-term investors and supporters
• CELOs increasing daily throughput
• CELOs attempt to become the leading and most inclusive financial global network

For this, we should change CELOs tokenomics by

• ending the dilution (burn the locked 400M CELOs)
• Implementing a buyback-and-burn mechanism in order to make the system deflationary
• Encouraging onchain Holding and trading of CELO by adding CELO-trading to MiniPay

Ideally

• every CELO/MiniPay user should hold at least a tiny amount of CELO/„part of the network“
• the amount of CELOs continuously decreases
• Network fees are sufficient to Cover Ethereum-costs, staking rewards, carbon offset, buyback-and-burn, cLabs-support and Investment grants
• Long-Term CELO holders and supporters will finally have the Financial capacities to use their Knowledge of the ecosystem and invest in/build the „second layer“ (RWAs) of the ecosystem.
• a good amount of CELOs will be bridged to Ethereum and made available for long-Term ETH-Investors onchain.

WAGMI!

[mbarbosa]

Great to see this initiative. IMHO, we need to move beyond tweaking APR parameters and fundamentally rewrite Celo’s Economic Operating System. Based on recent community discussions, here is a proposal to replace discretionary committees with an algorithmic “Burn-to-Route” model.

1 ) The Core Mechanism: The “Prosperity Engine”

I would replace the standard “burn” (which is just deflation) with a system where burning CELO buys Protocol Influence.

• Minting (Anti-Whale): Transactions burn CELO (EIP-1559 Base Fee) => Mint Gas Credits (Souldbound).
• Decay (Use-It-or-Lose-It): Gas Credits decay by ~2% per week. Influence is rented, not owned. This forces continuous participation and prevents early whales from dominating forever.
• Routing (Not Just Claiming): Gas Credits grant the right to Route the Surplus Pool/Yield. You don’t just “cash out”; you steer the river of value to:
  • Yourself (Rebate/Yield): For active MiniPay users.
  • Builders (Growth): Subsidizing gas for new users.
  • Public Goods: Funding dev tooling.

2 ) The Economic “Shock Absorber” (Counter-Cyclicality)

This model solves the “Bear Market Death Spiral.”

• The Dynamic: If fees are mostly considered in USD terms, a lower CELO price means the same fee burns more CELO.
• The Result: In a downturn, it becomes cheaper to acquire Routing Power (Gas Credits). This acts as a “Traction Trampoline,” incentivizing builders and allocators to deploy capital and burn CELO exactly when the network needs activity most.

3 ) Evolving Governance to “Allocator Competition” (Stop The Bleeding)

Well, I think that is absolutely fundamental to address the structural supply pressure caused mostly by grant programs selling CELO for opex. Instead of a single committee, I would like to introduce Competitive Allocation.

• The Challenge: Any group (CeloPG, VCs, DAOs) that wants to direct ecosystem funding should prove their conviction.
• The Mechanism: Allocators raise external capital (stablecoins) and burn CELO to mint Gas Credits. They then use these credits to route the Protocol Surplus to their portfolio projects.
• The Shift: This turns Allocators into investors with skin in the game. If they pick winning projects that drive network usage, the Surplus Pool grows, and their Routing Power becomes more valuable. If they pick losers, they wasted their burn.
• Result: A marketplace of allocators competing to grow the network, rather than a monopoly spending inflationary rewards, where everyone in the ecosystem wins.

IMHO, we are funding an “ecosystem growth” narrative by dumping on our own holders. I strongly believe that stopping this constant downside pressure is the single most important and quick fix for CELO tokenomics atm.

4 ) The “Super App” of Global Yield

Finally, I would leverage Celo’s Mento infrastructure, bridging partners and staking tools, to aggregate high-yield opportunities from other chains (Stellar, Ethereum, etc).

• The Protocol Surplus Pool isn’t just local fees; it includes yield bridged from best-in-class global sources.
• This makes Gas Credits the “Key” that unlocks global yield for the everyday MiniPay user.

In summary, I would not build another fancy “governance terminal” with shiny useless badges, but maybe a friendly super-app (lets call it ProsperON), where ‘Steering’ feels like ‘Allocating Rewards.’ Users log in to claim their Yield Rebates, and while they are there, they use their earned Credits to vote on the next wave of builder funding. It’s a loyalty app where the loyalty points (Gas Credits) control the bank.

I believe something in line with this proposal would move Celo from a “Grant-Dependent” ecosystem to a “Proof-of-Conviction” economy. It aligns incentives, eliminates political bottlenecks, and turns the token into a tool for active growth.

–

P.S. The Evolution of “Prosperity for All”.
Ultimately, I believe this proposal kinda also fulfills part of Celo’s original intentions around UBI, but makes it sustainable.

• Old UBI: Passive income funded by inflation / donations (unsustainable).
• New UBI: Active income funded by Network Revenue (sustainable).

By converting gas fees into “Protocol Equity,” we power the users creating the value (the people in Kenya, Brazil, etc.) to become the owners of the value. This isn’t just tokenomics. I would frame it as a kind of “Universal Basic Equity”.

[ddd]

CELO requires a model that institutes structural, sustained deflationary pressure to align its token value with its high user activity and scale. While incorporating EIP-1559 or a simple buyback-and-burn mechanism as proposed by @Dmitrii007s is necessary for near-term scarcity, a more rigorous and theoretically sound approach is required for long-term economic resilience.

I like the Burn-to-Route direction proposed by @mbarbosa as it invokes similarities to the Plural Community Asset Resource Exchange (PCARE) model recently proposed by Puja Ohlhaver, which is designed to address the fundamental conflict between money and governance in networked economies.

The full relevant theoretical framework is detailed in Puja’s recent paper, Community Currencies: The Price Of Attention And Cost Of Influence In A Networked Age.

However, in short PCARE works like this:

The current token structure suffers from a “crisis of capture” because the CELO token attempts to serve two conflicting functions: a liquid medium of exchange and a source of governance influence. PCARE resolves this through a dual-currency model:

• CELO: Retains its role as a transferable currency for exchange and MiniPay transactions.
• “Gas Credits”: Become the non-transferable, irrevocable stake for influence.

This approach provides a more potent source of deflation than simply burning gas fees. The burn is no longer tied solely to the cost of transaction execution, but to the competition for “Routing Power” over the high-value Protocol Surplus Pool (yield, sequencer fees, RWAs).

I think this proposal represents a unique opportunity for Celo. Implementing a PCARE-like system would make Celo the first blockchain to build its tokenomics on this idea and certainly draw the attention of our community.

If there is strong interest in this direction, we should formally loop in Puja Ohlhaver to consult on the modeling and implementation details.

[dexter]

It seems that aside from Minipay, Celo has no other value or purpose. Currently, Celo relies too heavily on Minipay, and almost every narrative revolves around it. However, it’s important to note that Celo and Minipay are two separate companies. Minipay’s profits and performance do not benefit CELO holders. Therefore, I believe Celo should start doing something else on its own, something that truly benefits $CELO holders. Additionally, short and fast hackathons don’t seem very meaningful—they often attract temporary programmers (mostly inexperienced newcomers who are not proficient in coding) who participate solely to claim rewards. Once the rewards are distributed, the projects from these hackathons are abandoned. It’s time to think of some effective activities.
What I really meant is that while embracing Minipay, we also need to pursue something greater or explore domains that truly belong to $CELO holders. Following the current trajectory, both the price and market cap seem to be declining further.

[kalatsong]

I completely agree that hackathons seem to have very little real impact these days, and honestly, after so many years of running them, I still don’t see any meaningful long-term effects from them.We’ve had countless hackathons in the Celo ecosystem (and across most other chains), with millions of dollars in prizes handed out over the years. Yet when you look back, how many of those winning projects actually shipped a product that got real users, sustained traction, or even survived past the prize announcement? Very few.Most of the time, teams build something flashy just for the competition, collect the bounty, and then quietly fade away. The ecosystem ends up with a lot of short-lived prototypes, but very little lasting value.In contrast, there are people who are consistently contributing high-quality, thoughtful ideas directly to the community — like the post by @dmitrii007s (and others like him) who take the time to write detailed, data-backed suggestions on the forum, propose concrete improvements to tokenomics, governance, or protocol design, and actually help move the needle forward.These contributors don’t do it for a one-time prize — they do it because they genuinely care about the long-term success of Celo. They’re the ones spending hours researching, modeling, and debating on the forum, often without any direct financial reward.If we really want to accelerate progress, I think it would be far more effective to redirect some of the hackathon budgets toward rewarding sustained, high-quality community contributions. For example:

• Monthly or quarterly “Impact Grants” for the best forum posts, research papers, or governance proposals

• Retroactive rewards for people whose ideas get adopted into the protocol or tokenomics redesign

• Bonuses for consistent, constructive forum activity over a period of time (measured by quality, not just volume)

• Public recognition and small token grants for the top contributors in the Tokenomics Initiative

This approach would incentivize the kind of deep, long-term thinking that actually helps build the ecosystem — rather than one-off demo apps that disappear after the event.I’d love to see Celo lead the way in shifting from “hackathon hype” to “sustained community value creation.” It would be a much smarter use of resources and would probably produce far better outcomes for the network in the end.

[ABC]

1. The idea of limiting validators and stakers is crucial. We need to eliminate inflation. This saves $2.8 million per year, which is no small amount. Validators will earn income from the deflationary component, which will increase the price of Celo. Validators will profit from the price increase.
2. Since Celo is already the largest L2 solution, we need to limit developer payments. It’s not a charity; developers should pay for the ability to use Celo’s features.
3. Currently, 60% of the total coin supply (1 billion) is unlocked. We need to burn the remaining 40% of locked coins right now; no more inflation.
4. A large number of users + a limited supply of 600 million coins + no inflation + gas fee revenue—this is what will make the coin deflationary, a direct path to value increase.

[AustinOheb]

Proposal (Preliminary Version): Optimizing Celo’s Fee Structure and Tokenomics for Competitive Advantage

Introduction

Celo has effectively established itself as an extremely user-friendly blockchain ecosystem with a heavy emphasis on financial inclusion and “prosperity for all.” However, in order to compete effectively in the current environment, the project needs to alter its business model, tokenomics, and fee structure, in order to (a) meet the needs of Celo users in a more comprehensive manner, and (b) demonstrate to the crypto community that the chain has a financially viable business model.

This proposal outlines a simplified yet powerful transaction fee system inspired by Tron’s proven successful bandwidth/energy model, adapted specifically to enhance Celo’s usability, sustainability, and revenue generation.

Proposal Overview

I propose implementing a streamlined transaction fee mechanism based on a single resource, cFuel, which will govern transaction costs within the Celo network. This model ensures free transactions for low-income users, incentivizes CELO coin holding, creates a sustainable revenue stream primarily from individuals in higher income countries, and provides mechanisms to support high-frequency applications.

Keep in mind that the nuances and complexities of this system are “under the hood” in nature: the typical end user can be completely ignorant regarding most or even all of them and have a completely seamless experience, while others–developers, investors, project managers, corporations, employees, etc.–will factor in the details and make any necessary adjustments.

Key Features of the cFuel System

1. Unified Transaction Resource: Instead of separate bandwidth and energy resources (i.e. the Tron model), Celo will use a single resource called cFuel, and employee a fee structure using round numbers (unlike Tron)

2. Fixed cFuel Costs for Transactions:

   • Native Celo stablecoin (cusd, ceuro, etc.) transfer: 50 cFuel

   • Any Other Fungible Token (including USDT and USDC) transfer: 100 cFuel

   • Non Fungible Token transfer: 200 cFuel

   • Non Fungible Token minting: 300 cFuel

   • CELO coin transfer: 10 cFuel

   • Token approval: 100 cFuel

   • Mento DEX token swap: 50 cFuel

   • Other DEX token swap: 500 cFuel

   • Claim: 10 cFuel

   • cFuel transfer: 10 cFuel

3. Automatic Weekly cFuel Allocation:

   • Accounts linked (via SocialConnect) to a mobile phone number in a low-income country receive 300 cFuel per week.

4. Incentivized CELO Holding:

   • Each CELO coin frozen in a user’s wallet generates 1 cFuel per week. (Example: A user with 1,000 frozen CELO receives 1,000 additional cFuel weekly, covering ten USDT or USDC transfers). “Whale” accounts with more than 300,000 frozen CELO receive cFuel at 3 times the normal rate.

5. Fallback Paid Transaction Option:

   • If a user lacks sufficient cFuel to cover a transaction, they can (through a mechanism similar to the one Tron currently uses) pay $0.10 (in CELO or stablecoin) per 100 cFuel (e.g., a USDT or USDC transfer costs $0.10)

6. Transferability of cFuel

• cFuel can easily be transferred from one account (address) to another, but only from accounts that hold over 300,000 frozen CELO coins. (The recipient’s account does not need to contain any CELO; only the sender’s account does.) The 300,000 CELO requirement will ensure that the market for cFuel is governed mainly by major entities (for instance, Celo Foundation, Opera Ltd., cLabs) who will (a) subsidize transaction fees for individual users of Celo wallets who perform certain actions, and (b) establish relationships with Celo projects (GoodDollar, Blockscratch, etc.) and sell them bulk cFuel at low rate, or offer grants through which the projects receive free cFuel (more details on these matters will be provided later in the proposal)

Benefits of the Proposed System

1. Free Transactions for Low-Income Users:

   • Ensures financial accessibility for users in developing regions.

   • Supports Celo’s mission of financial inclusion.

   • Creates simpler accounting relating to a user’s funds. (Example: A user with $20 USDT who transfers $5 will be left with exactly $15, and have a blockchain record/receipt showing exactly that as it relates to his USDT balance [$20 - $5 = $15], as opposed to the current system which is considerably more complex and not particularly understandable to the typical person. This will make Celo user friendly in a more wide ranging manner, by adding a clean, streamlined record of a user’s account activity when he accesses blockchain records.)

   • Offers MiniPay, Valora, and other Celo-oriented wallets the option of marketing a zero transaction fee experience

2. Revenue Generation and Token Utility:

   • Users in high-income countries will either freeze CELO, or pay substantial but not excessive transaction fees

     1. Creates a substantial use case for CELO, increasing demand and reducing sell pressure, which in turn will stimulate the entire Celo-based economy in a variety of ways

     2. Generates sustainable, significant network revenue, as opposed to the current model which generates under $2 million a year

     3. Creates opportunities to utilize Tron style tokenomics, and the potential for Celo to develop into a high revenue network and/or a network with a deflationary coin

3. Competitive Differentiation:

   • Celo will be the only Ethereum L2 offering free transactions, and it will offer users an easy-to-understand, low fee version of what Tron offers (Tron currently being by far and away the highest traffic network for real world stablecoin transfers among non-whale / non-institutional crypto users)

   • Positions Celo as an attractive alternative to not only Ethereum L2s like Arbitrum and Base, but also actively used L1s such as Solana, Tron, and Binance Smart Chain

4. Strategic Tokenomics Shift:

   • Makes use of the proven Tron model, but in such a way that users do not have to adapt to a complex system or face any possibility of especially high transaction fees. (Tron employs a system that is complex from the user’s perspective, and often results in fees of over $1 and sometimes even $4 or more [in TRX] for a single USDT transfer)

   • Considerably strengthens Celo’s long-term economic viability.

5. Creates Opportunities to Make Celo More Incentive-Based:

   • Users as well as projects will have much more of an incentive to buy and hold substantial quantities of CELO coin

   • Gives MiniPay and Valora opportunities to direct wallet users to performing certain tasks in exchange for free transactions (i.e. cFUEL transferred from Opera Ltd. and cLabs/Valora to a user’s wallet address, thereby subsidizing a user’s transaction fees). These wallets can create a user friendly experience that shows users how many free transactions they have left for the week in their account, and how they can earn more free transactions if needed. In other words, users do not have to actually familiarize themselves with the concept of cFuel; they can simply be guided by the app, which will track how many free transactions they have left and direct them towards what they need to do in order to get more

6. Ensuring Viability for High-Frequency Applications (Gaming, Social, Micro-NFTs)

   • The cFuel distribution model, where major CELO holders and ecosystem partners like the Celo Foundation, Opera, and cLabs/Valora can generate and allocate cFuel, is designed to ensure Celo remains a competitive platform for applications with high transaction volumes. These entities can provide targeted cFuel grants, offer subsidized cFuel pools to dApp developers (e.g., game studios, NFT platforms), or directly sponsor user interactions within specific applications. This allows such dApps to offer low-cost or even ‘gasless’ experiences to their end-users, mitigating the impact of the standard cFuel costs for these specialized use cases."

Implementation Considerations

• Adoption by Key Stakeholders: Opera Ltd., the Celo Foundation, cLabs, and Mento Protocol should actively support and facilitate cFuel distribution by freezing their held CELO coins and distributing them based on their respective objectives

• Adaptation for dApps: Projects like GoodDollar and Blockscratchm, as well as high-volume platforms such as gaming dApps or NFT marketplace, can acquire cFuel via CELO freezing, by receiving grants, and/or by making bulk purchases from supporting entities

Conclusion

Celo has first-mover advantages in several key areas, including SocialConnect, live links, stablecoin gas fees, a lineup of local decentralized stablecoins, and web 2.0 style wallets. However, these innovations alone are not enough to secure long-term success, and have so far not generated substantial mainstream interest in and adoption of the Celo blockchain, while other networks such as Solana, Binance Smart Chain, and Tron have experienced extreme growth in key metrics.

By adopting and improving upon Tron’s fee model, Celo can combine its first mover advantages with the advantages from chain that has proven real-world success (both in facilitating real-world stablecoin transactions and generating substantial network revenue), and in doing so, can enhance Celo’s economic sustainability, create strong CELO utility, and provide an even more frictionless, easy-to-understand user experience.

This new system will pave a path to make Celo (a) generate significant revenues and/or have a deflationary coin, (b) create demand for CELO coins, which will stimulate the entire Celo-based economy on multiple levels, (c) create a more user friendly Celo experience that extends even to the availability of simple, easy to understand “blockchain receipts,” (d) offer a zero transaction fee experience for SocialConnect users in low income countries, and (e) incentivize a wide variety of actions that will benefit the Celo network, Celo decentralized projects, and companies offering Celo-based wallets

Items (a) and (b) are not to be underestimated in significance. Increasing the value of CELO coins will strengthen the entire Celo-based economy, and greatly increase the chain’s perceived credibility and appeal across the board. Keep in mind that this is even more important in Celo’s case than it is with other chains, given that Celo’s native stablecoins (cUSD, cEUR, etc.) are decentralized and governed by Mento Protocol, and rely on a blockchain system that uses CELO coins as collateral for all stablecoins. From that perspective, it should be plainly evident that in order for Celo to achieve its goals as a financially inclusive chain providing practical, effective real world solutions for people around the world, it is imperative that CELO coins play a more widespread and vital role in the Celo ecosystem.

The proposed system utilizes operating procedures and protocols that can deliver such results.

Given the speed at which the stablecoin market is currently moving, Celo should be motivated to take action in the immediate future so it can position itself more favorably in a crowded and competitive field, and make good on its core mission of “prosperity for all” and delivering the benefits of decentralization to the very general public.

Questions

I believe in this system wholeheartedly and am very eager to move forward and hopefully wind up with a system of protocols that better suits our goals. That being said, I’m not so confident about the particulars, and I’m admittedly not so knowledgeable when it comes to plenty of the intricacies and cryptocurrency network operations and how they apply to this new system, nor am I an expert regarding exactly how Tron’s system operates from top to bottom. In other words, I feel confident I have a sound nucleus in place (custom tailoring Tron style tokenonomics for Celo’s mission of being an inclusive, low fee, user friendly blockchain) but as far as the exact execution goes, I would leave that up to other people here better suited for that task.

Again, this is not a finalized proposal; so here are some questions I’d like to ask the Celo community

The proposal aims to strike a balance between providing free transactions for some and generating revenue from others. Do you think it achieves this balance effectively?

Regarding the proposed cFuel costs for different transactions (e.g., 50 for stablecoin transfer, 100 for other fungibles, 500 for ‘Other DEX swap’): What modifications should be made in order for the system to be more suitable for the needs of Celo users and optimal functioning of the ecosystem? Are there any critical transaction types missing, or any costs that seem too high or too low?"

The proposal suggests 300 cFuel per week for users in low-income countries. Is this a suitable amount? Also, what are your thoughts on the challenges and best practices for reliably identifying eligible users and preventing misuse of this benefit?"

The proposed rate for generating cFuel is 1 CELO frozen = 1 cFuel generated per week is proposed. Is this a suitable rate? Will users feel properly incentivized to freeze CELO? How does this compare to staking rewards or other DeFi opportunities currently on Celo and other blockchains?

I proposed weekly refueling of cFuel, whereas Tron utilizes a daily system for energy and bandwidth. What frequency do you feel would be best from the perspective of creating a positive user experience while also increasing network revenue?

What are your thoughts on the 3x cFuel generation for accounts freezing >300k CELO, and the restriction of cFuel transfers for non whale accounts which would thereby have large entities regulate the distribution of cFuel? Do you favor this system that has key organizations heavily influencing the ecosystem via subsidies and other measures, or does it raise concerns about centralization of cFuel? Do you think it would be preferable to use Tron style economics in this area, which could create a relatively open marketplace for cFuel renting?

The fallback option is $0.10 per 100 cFuel (e.g., $0.10 for a USDT transfer for users without cFuel). Clearly this is considerably higher than what users typically pay on not only other L2s, but also Solana as well as EVM compatible chains such as Binance Smart Chain. I feel like this is preferable for multiple reasons, one of which is that the overwhelming majority of users will not make much of a distinction between sub cent, 1 cent, 5 cents, and 10 cents; another is that higher fees could actually bolster the chain’s credibility and establish us as a premium, more reliable L2. Do you agree, or do you feel like we need to compete on price with L2s, Solana, BSC, etc. To be clear, I am very adamant that we don’t need to compete on price at all, and in fact, I feel like even ten cents is too low, but do you think I’m neglecting to look at key factors in this matter, or I’m looking at things from the wrong perspective?

The proposal aims for significant, sustainable network revenue. What factors are most critical to achieving this? Are there any economic modeling aspects we should prioritize for further analysis?

Will this model actually lead to Celo becoming a deflationary coin? I am not an expert on tokenomics by any means, I simply feel like we ought to copy Tron to some extent, and I’m not clear on the particulars of how to execute on this and make it work effectively and reliably.

Do you believe this system will lead to a genuinely simpler and more user-friendly experience for the typical end user? Are you confident Opera and Valora will adjust to the system properly? Do you think simple, uncluttered blockchain records should be established as a priority, so that users can look at a “blockchain receipt” (as MiniPay puts it) and clearly see exactly how much stablecoin their address sent or received in one specific transaction? My opinion is that the “cluttered” blockchain records we have now are not at all suitable for the typical user, and in fact, I don’t quite understand the multi transaction back and forth nature of what is essentially an individual Celo stablecoin transaction.

A crucial aspect is ensuring Celo remains attractive for high-frequency applications like gaming, social dApps, or frequent NFT mints. The proposal suggests large entities will distribute cFuel via grants, subsidies, or bulk sales. How can we best structure these support mechanisms to be effective, transparent, and easily accessible for developers in these sectors? What are your specific ideas or concerns regarding this subsidy model for high-volume dApps? How might existing dApps on Celo need to adapt to this new fee structure? What support or tools would they require?"

What do you foresee as the main technical challenges or considerations in implementing a system like this on Celo?

How should the key parameters of the cFuel system (e.g., transaction costs in cFuel, weekly allocations, fallback fee rates, whale thresholds) be governed and potentially adjusted over time?"

What role should the Celo Foundation, cLabs, and major partners like Opera play in the rollout of this new system?

What are the primary risks or potential unintended negative consequences you see with this proposal? (e.g., impact on network performance, user confusion, etc.)

Are there any ways this system could be exploited?

[Thylacine]

I applaud thinking outsize the box here. However my first impression is that while it may be a good sink or utility for CELO tokens, at first glance it would be a massive undertaking in development and communication to users of how the system works. It’s not easy to change the wheels on a car that’s still driving, and the existing model of being able to use whitelisted tokens for gas is already one of the selling points for Celo.

It “feels” a little like existing solutions provided by some account abstraction models, like the gas station network on xDAI (now Gnosis), or subsidized gas-free transactions on Safe (some other browser extensions offer this also).

Perhaps a smaller-scale app-level trial of this could be implemented as a beta test? You could get an organization to sponsor a paymaster / AA model for accounts that are connected to Self and registered with a list of countries, and sponsor them with free transactions up to a certain limit per day.

A couple of potential issues with some of the technicals in your proposal:

• Identifying what transaction is a token transfer, or NFT transfer, etc is problematic, not easy to determine, and could result in a cFuel-savings wrapper contract economy where you create a NFT mint inside an ERC-20 transfer call, and make money on the difference in cFuel saved for the user. What about any other transaction type from any random contract? What do they cost? Gas costs are already calculated based on computational complexity and storage costs of nodes, so recreating that entire system with a token acting as a subsitute could be very difficult.
• What is the incentive for enterprises to freeze CELO here? Isn’t this a net cost to them if the purpose is to mint and distribute cFuel? Why would they do this over say, putting 300K of CELO on Aave? (Or any other investment choice)
• Another black market could also arise from people in low-income countries with a free tier of transactions merely acting as transaction relayers and selling it on to to others. How technically could we prevent this? Proving with Self for example, before every transaction would be a very high friction point.

[Frerehugi]

In the end CELO will only be an economic success if we keep investors interested. Therefor it is crucial to

• establish a deflationary system
• have regular buybacks
• Interconnect with TradFi

I suggest to continue the (obviously ongoing) buyback until (maybe) 200M or 250M CELOs are reached and use these CELOs as the basis of a new CELO or L2-ETF.

Yes that would mean to cooperate with TradFi-companies and success is not guaranteed, but it might help to tap new liquidity sources.