Launching the CELO Tokenomics Initiative: Designing the Next Era Together

[Dee]

I want to start with my personal belief. I am not an oracle and I do not know the future. Last October’s mass liquidation event wiped nearly $1 trillion from the crypto market, plunging us into severe bear territory. It was arguably the largest deleveraging event in history; a massive portion of leveraged DeFi users were liquidated with estimates suggesting over 2 million accounts went to zero. Market makers and exchanges alike sustained substantial losses.

However, as we look forward in 2026, we are beginning to see signs of life and now is the time to rebuild better.

I propose we create a Positive Feedback Loop for the Celo ecosystem driven by four key pillars:

1. Increase Revenue Streams within Celo.
2. Maximize Yield for Users.
3. Drive Celo Price Appreciation (via demand & confidence).
4. Re-invest in communities, builders, DeFi and moonshot projects.

1) Increase revenue streams within Celo

a) Stand up a Celo ETH Validator Collective

Lido has become one of the largest fee-generating systems in crypto. As we enter the ETF and DATs era, staking ETH remains a key opportunity but it’s also centralizing around Lido.

Why can’t Celo create its own set of Ethereum validators? It gives us a quadruple advantage:

• Strengthen Celo’s voice and visibility within the Ethereum community
• Generate ETH staking yield for bridged ETH on Celo
• Create a new recurring revenue stream for the ecosystem
• Boost TVL in Celo

Unlike Lido, Celo can offer “yield composability.” By contributing ETH to Celo liquidity pools or Mento CDPs, users could stack additional revenue on top of standard staking yields. This positive feedback loop needs priority. By partnering with institutional staking providers and directly with DATs, we can drastically increase TVL.

b) Strategic Public/Private Partnerships

MiniPay with Opera is a major success story in web3. This partnership template can be used to bring more value-aligned private entities. A prime candidate would be Beast Philanthropy. Since 2020, they have become one of the most effective global giving engines. Celo is uniquely positioned to complement their efforts with the global user base and stablecoins.

Furthermore, last October Beast Financial was registered and their aim is to launch a fintech and crypto app and they’ve been looking for partnerships. This is such a unique opportunity that BMNR invested $200m in Beast Industries in order to have a call option on future products coming from Beast Industries. This is the moment for Celo to step in as the infrastructure partner.

We should propose a strategic partnership where private entities and profitable ecosystem projects commit to holding 1% of their value in CELO (capped at 5% of circulating supply to preserve decentralization). This creates alignment, long-term stability and sustained demand for the token.

c) Re-integrate Mento

Celo’s historical approach was to spin off independent entities (cLabs, Valora, Mento). While this may have helped with operational focus and fundraising perspective, it has unintentionally fragmented our ecosystem and diluted value capture for CELO token holders. With Valora returning to cLabs, we have a precedent for re-consolidation.

It is preferable for the community to rally behind one token rather than fragmenting attention across multiple assets and adding complexity. Getting CELO to $100 with Mento integrated is far more beneficial than trying to legitimize two separate tokens. We need a path to merge Mento back into Celo, where Sequencer and Mento revenues are combined to boost token yields.

I propose a pragmatic revenue-sharing pact to align incentives immediately, without forcing a complex merger on day one and only talk about deeper consolidation if the economics prove out:

Phase 1 (immediate alignment): Mento routes a defined % of fees into the Celo Fee Vault (or uses those fees to buy CELO and route it to the Vault).

Phase 2 (Unified Operations): Align key resources, including liquidity programs, governance coordination, growth budgets and shared dashboards

Phase 3 (Optional Structural Consolidation): if the ecosystem benefits and the terms are fair, explore structural consolidation over time.

It secures the “real yield” narrative for CELO holders immediately. This ensures shared value capture now, while leaving room to navigate the structural details later.

d) Progressive Fee Structure

If we look at payment systems like M-Pesa, low-value transfers dominate by count but large payments dominate by value. Celo can adopt a similar tier structure to M-Pesa.

• Tier 1: Transactions under $10 keep the current low-fee structure (preserving our mission for financial inclusion).

• Tier 2: Transactions above $10 incur a slightly higher fee (e.g., 0.05%). If M-Pesa can charge 0.2% and 1%, Celo can certainly capture value on larger transactions without hurting the average user.

The principle: financial inclusion stays protected, while larger / more sophisticated flows contribute proportionally more to the system that secures and runs the network.

2) Maximize yield for users

Celo is one of the most successful blockchains in terms of uptime (zero hacks), real-world usage, and growth rates that surpass most chains. We have sticky global users and native stablecoins, support for USDT and USDC, and offering multiples international currencies through Mento.

The unresolved question is: How does value accrue to token holders? Throughout the world and cultures, gold inspire trust and serve as a reserve currency. Historically, Celo started as “cGold,” implying a reserve asset but people generally tend to look at the previous price action and it is a discouraging view. To regain trust, we must reset expectations by bootstrapping real yield.

Celo has a fixed supply so we must be precise with our tokenomics. Buy-back-and-burn mechanisms work well when supply is uncapped. Furthermore, in a bearish environment, users prefer immediate yield over the theoretical benefits of burning.

I propose that staking rewards be derived from protocol revenue on top of inflation. All burn mechanisms should be cancelled and those fees routed to a Celo Fee Vault (an on-chain smart contract) that tops up Celo staking yield. It receives net protocol revenue and then distributes it transparently:

• Target: 6% of the 700m circulating supply (approx. 42m CELO/year).
• Split (for a later stage): 4% for Staking Rewards, 2% for Governance Participation.

This mechanism incentivizes locking CELO. As the percentage of locked tokens drops, the APR for those who do lock increases dynamically:

- 10% of circulating supply - 70m locked Celo - 60% APR

- 40% of circulating supply - 280m locked Celo - 15% APR

- 70% of circulating supply - 490m locked Celo - 8.57% APR

Benefits:

• No Speculation Required: The mechanism works without assuming price appreciation.
• Scales with growth: Value capture scales with real revenue.
• Simple Narrative: “More usage = More yield.” Network growth is directly tied to token holders’ benefits.

This is how we rebuild trust: not by promising a fixed APR, but by making the mechanism simple and tied to real network economics.

This is a strategy draft but we should still define what “working” looks like. A simple scorecard could look like this:

• Vault inflows: reach $X/month within Y months (net of L1 costs).

• Staked CELO: rise from A% to B% of circulating supply (or “active stake”) over Y months.

• Net revenue to stakers: Y% of sequencer/protocol net revenue distributed via the Vault (once implemented).

• Mento growth: Z% TVL growth in Mento markets and/or stablecoin supply growth (paired with fee contribution into the Vault).

3) Celo price increases

While focusing solely on price can feel taboo, these mechanics are designed to make holding CELO logical. A clear value capture mechanism creates demand, translating user growth into holder value. This should be visualized on a public dashboard (e.g., mondo.celo.org) to display APR and nudge governance participation. Price recovery restores confidence and provides the resources needed to fund our vision.

4) Re-Invest in the Ecosystem

A higher CELO price extends the runway for everyone. It allows us to invest more heavily in communities, builders, DeFi protocols and moonshot projects, closing the loop and starting the cycle again.

This proposal is a starting point. We possess the technology and the mission; now we must build the economic engine to match. I invite the community, developers, validators and holders to critique these mechanisms, challenge the assumptions and refine the numbers. Let’s work together to turn these ideas into actional steps that ensures the next chapter of Celo.

[CeloFoundation]

Season 2 Tokenomics Call Recap – Focused Recap & Next Steps (Jan 8, 2026)

Thank you to everyone who joined the Season 2 tokenomics call on Thursday, January 8th, and for sharing your collective feedback above. The Celo community has shown up strongly for this, making time to share what fuels their work, their perspectives on the current economic structure, and ideas for the future of CELO. Discussed topics have focused on a core question facing Celo in 2026: how can CELO’s economic design better reflect and reinforce the real momentum and adoption being created on the network? The resulting takeaways have surfaced several concrete tokenomics levers and design directions, alongside open questions that the initiative will further explore.

Framing the Problem

The tokenomics call began by discussing the disconnect between network adoption and token performance. Last year, Celo reached new all-time highs in usage with 840K+ daily active users (showing up consistently as the #1 L2 by DAUs), $4.4B monthly stablecoin transaction volume (also becoming the #1 chain for Weekly Active Users of USDT with over 3.3M+), and onboarding 5.2M new users to the network in 2025 alone. Despite this, CELO’s price remains near historic lows.

Celo will continue to strengthen its position as a leading network for stablecoin payments (~77% of network activity), building on last year’s ecosystem progress, notably including MiniPay’s milestone 11M+ wallets activated and 300M+ lifetime stablecoin transactions. With the recent advancements in agentic payments and commerce, significant real-time merchant integrations (building on MiniPay’s expansion last year to PIX, Mercado Pago, and Nigeria Bank checkout) and forthcoming expansion of supported payment processors, the discrepancy between CELO price and network traction is urgent. Participants broadly agreed that ensuring usage aligns with CELO economics is central to Celo’s long-term sustainability.

The discussion emphasized the need for holistic evaluation of value accrual, demand drivers, and incentive alignment across users, builders, liquidity providers, and token holders.

Key Tokenomics Directions Discussed

1. Value Accrual to CELO Holders

A key takeaway was the need to more clearly articulate and strengthen the value proposition for holding CELO.

• Low inflation has supported long-term supply discipline, but also led to relatively low staking yields.
• Increased network activity currently does not translate clearly into holder upside.

Proposals discussed included:

• Introducing additional revenue streams that flow into CELO-aligned reserves, such as staking assets in the native bridge
• Exploring buyback, burn, or hybrid mechanisms tied to chain revenue and/or price, potentially in a dynamic rather than fixed form.
• Using such mechanisms to support higher or more competitive staking yields without relying on inflation.

2. Programmatic Mechanisms Tied to Chain Activity

Several participants emphasized that future tokenomics should be mechanically linked to usage, rather than discretionary or manually administered. Some examples discussed include:

• Funding public goods, builders, or stakers through formulas tied directly to transaction volume or protocol revenue.
• Designing systems that scale automatically with adoption, reducing governance overhead and predictability risk.

3. Liquidity and Capital Formation

Liquidity was identified as a constraint in scaling both DeFi and real-world asset use cases. Solutions raised here included:

• Token models that reward liquidity providers with direct or indirect exposure to network fees.
• Designing mechanisms that allow CELO holders to gain diversified exposure to successful ecosystem projects, effectively functioning as an index or basket of onchain activity.

4. Demand Generation Through Network Usage

Additionally, participants emphasized that demand for CELO must ultimately be driven by token usage. The discussion highlighted:

• The importance of increasing transaction volume and composability across tokens, apps, and RWAs.
• The potential role of internal primitives or flagship use cases that generate consistent, non-speculative demand.

Proposed Next Steps

To kickstart the broader tokenomics overhaul, the first step proposed is to implement a profit-linked, programmatic CELO buyback-and-burn policy that more directly aligns CELO with network activity. Under this approach, protocol earnings would be allocated to CELO repurchases after first covering essential onchain and operating costs (including data availability, Optimism revenue share, critical infrastructure, devops, engineering and security costs).

The framework sets a long-term minimum goal of allocating a minimum of 50% profit to buybacks, with the allocation able to flex over time based on valuation: when CELO is trading low relative to protocol earnings (e.g., the market is assigning a lower-than-benchmark price for a given level of profit), a higher share of profit would be directed toward buybacks; when CELO is trading in line with or above comparable benchmarks, more profit could be routed toward ecosystem growth. Celo is uniquely positioned to be able to execute on such a mechanism because roughly 50% of sequencer fees are paid in stablecoins using Celo’s fee abstraction mechanism.

To ensure these buybacks translate into durable value accrual**, a majority of repurchased CELO would be permanently burned (e.g., 50–100% burned, with a strong default toward the upper end), while any remaining portion could be directed into a time-locked growth vault for structured, transparent ecosystem incentives** rather than immediately returning to circulation. The intent is that, in steady-state conditions, fee burns plus buyback burns substantially offset growth emissions, keeping net issuance near neutral (or deflationary) while still creating a clear and sustainable budget to drive usage and revenue.

Recent network revenue performance helps illustrate the growth trajectory powering this profit-based buyback-and-burn policy. Monthly network revenue increased 10x from January 2024 to November 2025 (Source: Token Terminal), establishing a foundation for meaningful buybacks today while signaling the potential for exponentially greater impact as network activity scales.

Increasing protocol revenue also remains a key priority. Teams are actively testing models to unlock this growth. A strong option to accelerate this could include the introduction of a tiered fee system that maintains ultralow gas fees for use cases such as stablecoin microtransfers and increases the cost for high-value transactions. This model maintains accessibility for real-world applications while unlocking stronger network benefits from large transactions, with incremental revenue flowing into the same profit-based buyback-and-burn flywheel described above, in line with the existing mechanisms leveraged by payments L1s and L2s.

With the momentum in AI, Celo is also especially well-positioned for agentic payments and commerce, a key potential driver of activity growth. Our mobile-first payments infrastructure, global on-/off-ramp support, and portfolio of 25+ stablecoins across 15 currencies can power diverse AI-enabled financial transactions. With this foundation in place, x402’s integration in bringing agentic payments to Celo could significantly bolster revenue via increased activity.

To further support network activity growth and drive onchain revenue, we propose piloting rewards mechanisms, including ProsperOn and an expanded Proof-of-Ship season.

• ProsperOn includes converting gas fees into non-transferable usage credits, backing those credits with yield from stablecoin reserves, and allowing yield to be directed toward users, builders, or public goods without creating sell pressure.
• With 576 total projects and 29% retention across two or more seasons, Proof of Ship was a valuable builder engagement tool in 2025. Taking learnings from previous seasons and expanding to focus on projects that drive everyday usage can optimize the program for onchain profit.

Community members are encouraged to respond in this thread with feedback, including alternative mechanisms that directly address value accrual, demand generation, and long-term sustainability for CELO. This will be incorporated into a future Celo Governance Proposal, posted on the forum, presented on a governance call, and submitted for an onchain vote.

In the meantime, we invite the community to continue discussions regarding buyback-and-burn mechanisms, tiered fee systems, onchain revenue growth activities, and additional efforts to further drive CELO economic growth. This marks the next evolutionary phase of CELO tokenomics, turning our community’s collective ideas into concrete, high-impact designs.

[yanoananize]

The proposed policy is also necessary, but even if you buy back at the current level of revenue, it is far short of the number of tokens that are unlocked every month in the future. A multiple-fold increase in revenue to date does not guarantee that it will happen in the future. This policy only eases inflation, but is not effective in deflation.

Need to stop unlocking at least until the token’s price goes up above a certain level, or an instant token buyback is needed.

Also, there is a need to increase the usage of tokens. The amount of tokens used for the stablecoin transfer fee is very small. If you need to keep a low fee for small transfer, increase the usage of tokens in the other direction. Of course, the tokens used must be incinerated and bought back.

The fact that the price of tokens falls despite the growth of network indicators means that the demand for tokens is too scarce. Simple and low transfer fees alone cannot overcome the current situation.

[Tokenomics]

Quick intro for context: I’m Andres, founder at Tokenomics․com

Sharing the following as technical feedback:

The direction of the proposal is correct: a programmatic buyback funded in external assets is one of the cleanest ways to translate network usage into holder value, especially given that a meaningful share of sequencer fees is already paid in stablecoins.

The place that would benefit form optimization is that the current proposal remains qualitative, while the mechanism itself requires deterministic valuation controls to avoid capital inefficiency and premature commitment to irreversible actions such as large-scale burns.

Below is a tighter mechanism recommendation, structured using the buyback framework we apply elsewhere:

1. Objective and End State

2. Funding source

3. Allocation Policy

4. Trigger Logic

5. Pacing and Smoothing

6. Execution Method

7. Transparency and Governance

Objective and End State

Every buyback program must have a clear purpose and an endpoint. The objective defines "why" tokens are repurchased, while the end state determines "what" happens to them afterward.

A buyback can be designed to optimize for very different outcomes:

• Supply reduction
  ↳ Goal: reduce net supply over time
  ↳ End state: tokens are burned, or permanently removed from circulating

• Holder yield
  ↳ Goal: turn revenue into a recurring return for holders.
  ↳ End state: tokens bought are distributed to stakers or routed into a holder distribution mechanism.

• Liquidity reinforcement
  ↳ Goal: deepen markets and reduce fragility.
  ↳ End state: tokens are recycled into protocol owned liquidity or market structure support.

• **Treasury accumulation **
  ↳ Goal: convert protocol cash flow into a strategic token position that can later be deployed or financed.
  ↳ End state: tokens sit in treasury, then one of two paths applies:
  a) Deployable (incentives, partnerships, acquisitions,etc)
  b) Financeable (collateral for credit lines, runway management, treasury yield strategies, hedging programs, etc)

Some projects have different objectives for the different stages, usually they start with the main objective being float reduction: repurchasing tokens + decreases circulating supply, improves price stability, and strengthens the link between protocol performance and token value.

As the system matures, the objective often shifts from value concentration to value deployment: using accumulated strength to reinforce liquidity, staking, or ecosystem incentives.

Once the objective and end state are defined, you can then design the buyback framework optimized for that objective and end-state.

Founding Source

The foundation of any buyback framework is the capital it draws from. A buyback must use external, productive assets, such as stablecoins, ETH, or protocol revenue, not the project’s own token supply.

For CELO, this condition is already structurally satisfied:

Primary source:
Protocol revenue generated at the chain level, including sequencer fees and other onchain earnings, net of mandatory costs such as data availability, Optimism revenue share, infrastructure, devops, engineering, and security.

Form of capital:
A meaningful portion of this revenue is already denominated in stablecoins, which can be directly deployed into market buybacks without introducing circular demand.

Potential expansion:
Additional revenue may be unlocked through tiered fee models, where high value transactions pay higher fees while preserving ultra low fees for stablecoin micro payments. Any incremental revenue from this model would feed the same profit based allocation framework.

In short, the buyback funding source is recurring, external protocol revenue, largely stablecoin denominated, not inflation or treasury token sales, which is the correct prerequisite for a credible value accrual mechanism.

Allocation Policy

The goal of the allocation policy is to define how much of the protocol’s revenue or treasury capital is directed to buybacks, and how that commitment behaves as conditions change.

At a minimum, the policy needs three specifications: the base, the rate, and the guardrails.

CELO has described parts of this structure, but not yet at a level of precision that makes the policy fully rule-based or market-modelable.

Specifically, the proposal defines a base commitment (a long-term minimum of 50% of profit allocated to buybacks) and introduces the idea of a variable rate that flexes with valuation. However, the mechanism stops short of formalizing how that rate adjusts, over which valuation bands, and under what constraints.

The proposal correctly states that allocation should adjust / flex with valuation: when CELO trades low relative to protocol earnings, a higher share of profit should be routed to buybacks, and when valuation normalizes or exceeds benchmarks, capital should be redirected elsewhere.

I would strongly recommend formalizing this allocation rule using Supply-Weighted P/E (SWPE) as the primary control variable, as it directly captures what the proposal describes: valuation relative to earnings and effective circulating supply.

SWPE = (Market Cap ÷ Earnings) × (Circulating Supply ÷ Total Supply)

Using SWPE allows allocation to behave mechanically rather than narratively:

• Low SWPE (undervaluation) → Allocate the majority of allocatable profit to buybacks.

• Mid-range SWPE (fair value) → buyback intensity is tapered.

• High SWPE (overvaluation) → buybacks are paused.

At this point, instead of routing excess capital directly into ecosystem growth, I would recommend redirecting it into a strategic treasury reserve.

In crypto, valuations shift extremely fast. Routing capital immediately into growth during high-valuation regimes often results in procyclical deployment at the worst possible time.

A strategic treasury reserve instead preserves optionality and allows capital to be deployed during black swan events, liquidity shocks, or market dislocations, when capital efficiency is highest.

Trigger Logic

Trigger logic defines when buybacks execute. Allocation policy sets the budget. Trigger logic decides whether that budget is deployed continuously, opportunistically, or only under specific market states.

If the trigger is vague (“when we think it’s a good time”), the program becomes discretionary. Discretion kills credibility because holders cannot model it, and the market will assume buybacks appear only when optics matter.

A strong trigger system has two properties: it is measurable and repeatable.

Types of Triggers:

1. Continuous triggers (always-on)

2. Time-window triggers (cadence with guardrails)

3. Valuation-state triggers (price-aware)

4. Liquidity-state triggers (market-structure aware)

5. Treasury-state triggers (balance-sheet aware)

6. Event triggers (discrete, not continuous)

The proposal already implies a valuation state trigger. To make it operational and reduce discretion, it should also specify an execution cadence, with pacing constraints and pause conditions

But this is one vertical of the framework that will need work on and further clarity before it is CGP ready.

Pacing and Smoothing

Trigger logic decides when you are allowed to buy. Pacing and smoothing defines how you buy without breaking the market.

Most buyback programs fail here. Not because the project picked the wrong objective, but because execution creates predictable flow, spikes slippage, signals intent, or accidentally turns the program into the main source of demand. That is how you get front run, gamed, and priced in.

A good pacing policy tries to hit four outcomes at once:

• First, minimize market impact

• Second, reduce predictability

• Third, durability**:** keep working through volatility, thin liquidity, and lower volumes.

• Fourth, maintain policy credibility.

A clean template is:

1. Pacing window: how often you execute.
2. Max participation: max share of trailing volume
3. Max slippage: hard cap per slice
4. Min liquidity: do not execute below this depth
5. Slice size: how buys are chunked.
6. Circuit breaker: what pauses the program.
7. Resume rule: what turns it back on.

How pacing changes by objective

• If the objective is supply reduction, pacing should be steady and boring. The goal is long run absorption, not timing.

• If the objective is holder yield, pacing should match the distribution cadence. You do not want yield to look like a random lottery.

• If the objective is liquidity reinforcement, pacing can be reactive. You buy more when liquidity weakens, but only inside strict impact limits.

• If the objective is treasury accumulation, pacing is often opportunistic. You want price aware sizing, but you still need caps so you do not become the exit.

For Celo, the proposal is explicitly framing the initial buyback-and-burn as a supply reduction mechanism intended to keep net issuance near neutral or deflationary in steady state. Under that objective, the pacing policy should be defined up front as a constrained, always-on execution process that stays within strict impact limits, rather than a discretionary or opportunistic program.

The current proposal describes the intent to execute buybacks programmatically, but does not yet specify the operational constraints that prevent predictability, slippage spikes, or the buyback becoming the marginal buyer. Those parameters are the difference between a credible accrual rail and a policy that gets priced in and exploited.

Execution Method

Execution Method

Once pacing defines when you buy, execution determines the actual market impact. Two programs can share the same budget and triggers, but produce opposite outcomes depending on venue, agent, order type, and constraints.

Venue Choice

1. CEX is deeper and usually cheaper at scale, but opaque unless you publish receipts. It also adds counterparty and operational risk.
2. Onchain is transparent by default, but liquidity can fragment and slippage can spike in volatility.
3. Hybrid is the practical default. Use CEX depth where it exists, but keep a disclosed onchain rail for verifiability and governance.

Execution Agent

• Foundation run is operationally simple, but trust heavy.
• Automated executor via contract or bot is strongest for credibility because parameters are enforced.
• Delegated execution can work, but requires strict mandates and reporting to avoid conflicts.

Order Types

I. Taker market buys are easy but remove liquidity, create spikes, and become predictable.
II. Maker biased execution blends into flow, improves capital efficiency, and reduces volatility by distributing buys through resting bids.
II. Options based execution should be avoided unless you want to change the entire risk profile.

Transparency and Governance

A buyback framework is only as credible as its transparency. The market must be able to verify when, how, and why buybacks occur without exposing the protocol to exploitation.

Governance should require: the profit waterfall definition, the allocation function and bands, the pacing constraints, and a monthly disclosure of profit, allocation amount, CELO repurchased, CELO burned, and any reserve or vault balances with lock terms. This makes the program auditable without turning it into a trading signal.

Net issuance should be the headline KPI. If the intent is neutral or deflationary steady state, the governance reporting should explicitly track emissions plus unlock driven circulating increases minus fee burns minus buyback burns, so the community can assess whether the mechanism is achieving the stated objective.

If the Foundation can publish these items as a one page policy specification appendix, the forum discussion becomes parameter driven and implementable.

That is the point where the community can meaningfully review tradeoffs and where a future CGP can be evaluated as a real mechanism rather than a narrative.

I know it’s a lot, but hopefully it’s actionable and helps define a clear rule-based value accrual framework. Respect to the CELO foundation for pushing this forward.

[Frerehugi]

…for the longterm development I believe it is necessary to transform CELO into a classic shareholder company in which 1 CELO represents 1 share and this share can be exchanged with 1 CELO at any point of time.

Let’s bring CELO to FSE and NYSE