Mento Reserve: Returning CELO

Instead of moving it all at once we could explore some portion of it first being used to bolster on-chain DeFi liquidity on Uniswap and/or Curve. Then over time, continue the draw-down CELO from Mento as they launch new features and we get more liquidity in natural capital assets that can be added to the Mento Reserve.

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I find it positive that returning Mento Celo reserve to the community. but I think that how to use it should be considered much better, the pros and cons of possible scenarios should be discussed thoroughly. I would love to read more analysis from community members. There are community members who can do field and impact analysis of such funding with great competence. I hope they join this discussion as well. For example, I would also like to know the risks (if any) associated with Nikhil’s suggestion. It would be right not to make a hasty decision until getting enough feedback from community.

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I think the fund also should be allocated DeFi protocol dedicated to Celo such as Ubeswap, Moola, ImpactProtocol, Symmetric and Immortal.

And it can be DeFi For The People Season 2 by Community.

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How about DeFi for the People: Season 2 by community? I hope the fund to be allocated to Celo dedicated DeFi and ReFi protocols.

One sustainable way to do this would be to put a portion of the funds into stCELO, a lending market, and/or a DEX and use the rewards to fund an evergreen DeFi4ThePeople like campaign. This could boost liquidity directly and indirectly.

We could start with a CELO / stCELO pool.

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Thanks to @roman for sharing this update and to @MarkusBerlin @Slobodan @bowd whole team for your effort in standing up Multi-Collateral Mento. The proposal to return 120M CELO is clearly a testament to your broader success since the genesis block!

I agree with several opinions voiced on this thread, and think the funds should be split for multiple uses:

  1. On-chain community fund for ecosystem grants as @rene_celo supports
  2. Stake for rewards that are redirected to an evergreen campaign as @marek suggests
  3. Bolster on-chain liquidity for key protocols as @nraghuveera suggests
  4. Hold (or delegate) a portion of tokens for Mento to seed future liquidity pools with digital environmental assets (eg. for carbon offsets tokenized by company X, Mento could seed the CELO portion of trading pair XCO2-CELO). This will bootstrap on-chain liquidity for key natural capital assets, which is a prerequisite for Mento onboarding these assets into the reserve itself

There are obvious concerns about impermanent loss for #2 and #3 - but it would fulfill a crucial market making function, without which it is difficult for most projects, climate or otherwise, to scale up.

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Second the idea of strengthening initiatives that lead to natural assets backing Celo Stables. Bringing #ReFi RWA on chain is a necessary step and Celo community is extremely well positioned to do it (e.g. Hacking USD400bi in Brazil Public Goods - How Celo Community Wrote Their Name in 🇧🇷 History - #7 by RodrigoMerakiWeb3 )

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Agreed.

Does a cost-benefit analysis for each option makes sense; breaking down each option into its own proposal?

If so, would it make sense to move all 120m into the community pot. Then start proposals / voting on allocation?

Agreed.

Does a cost-benefit analysis for each option makes sense; breaking down each option into its own proposal?

If so, would it make sense to move all 120m into the community pot. Then start proposals / voting on allocation?

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Hi all – speaking as CEO of cLabs, I strongly support this proposal. It leaves enough of an additional buffer of CELO to mean that Mento assets have a greater cushion that other stablecoins. It is a step towards a crisper separation between the core Celo protocol and community, and the Mento protocol and community.

We could do a lot more with these funds as a community if they are available, over a period of time, through the on-chain Community Fund for the sorts of proposals and funding mechanisms we’ve developed so far (like grants to Climate Collective for their amazing work, and to Prezenti) plus many new ones. I think of this as permanent uses of the funds.

One potential future use of some of these funds: I also see the opportunity to move cLabs towards to a more community-funded model, and more transparent and responsive to community needs. cLabs is a non-stock, non-profit company. We don’t have shareholders or equity. Most of our expenditure goes directly on working to provide public goods for the Celo ecosystem – engineers working on blockchain, core contracts, and developer tooling. I hope you see the results of their work every day.

Right now, we fund that work primarily via a grant directly from Celo Foundation. cLabs also does strategic consulting work, and has spun out companies including Valora and Hyperlane, but as a non-profit any return on equity cLabs owns in those companies would be directed back into more public goods work, or more spin-outs.

Over time, I would love to explore increasing the role of the community directly in funding work done by cLabs (and other contributors) on core platform public goods. It would be awesome to be able to expand the team and accelerate the Celo v2 roadmap.

I also think there are great temporary use of these funds – e.g to provide liquidity and TVL, like @marek @nraghuveera @nirvaan s’ suggestions above. Some of these we might be able to do immediately, some may be held back for projects happening in the near future. But Governance should always be able to reclaim these funds to put to another temporary use, or disburse as a permanent grant.

I feel like if we can identify strong candidates for temporary uses, we should earmark the majority of the new funds for that purpose for now – say 100M out of 120M. And we should identify these before we move the funds, so they continue counting towards TVL metrics for the Celo ecosystem.

That would mean:

  1. get general consensus on returning the 120M to the Community Fund
  2. write and discuss proposals for temporary uses of funds, and agree those, and their allocation
  3. build one or more governance proposals that does (1) and as much of (2) as is possible (or if necessary delegates those funds to community multisigs)
  4. Execute/audit/vote on the on-chain governance proposal
  5. After all that, then discuss permanent uses of funds

Thoughts?

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I like the framework for permanent and temporary use of funds.

Along the lines what’s been suggested in the comments already I’d be very interested to see us evolve to a model where the majority of community fund assets are actively managed by community operators (eg for a fee or rev share), ideally in service of the community (eg by increasing liquidity in on-chain assets, provide debt capital to Celo-based lending protocols, etc) ahead of disbursements.

If there are folks/groups that have been considering something like that or where that’s complementary to an existing biz model, would be great to hear from here.

Generally agree with @tim proposed next steps.

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Following up on this thread @roman – I’ve seen a whole range of exciting new proposals for Community Fund allocations, mostly permanent use of funds, that would need this return of funds advanced first.

It does feel from this thread like we have general consensus on returning the 120M to the Community Fund – do folks agree?

I think the next step after that is explicit proposals for temporary use of funds to make sure we make best use of the TVL here.

And while we’re doing that, queue up and debate the relative benefits of proposals for permanent use of funds…?

Hopefully we can move quickly on this.

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The temporary/permanent framework as outlined by @tim above makes sense to me.

In fact, the temporary portion reminds me a lot of endowment capital funds (sometimes also known as restricted funds) where the capital can be invested but not allowed to be “spent” as part of operations. Of course, in these instances, the income generated from the “temporary portion” is generally available for unrestricted use, i.e., “permanent use of funds.” Given the parallel, I wonder if there is any merit in considering non-web 3 governance frameworks to govern the allocation and management of the temporary portion.

Nonetheless - I would agree that the first step is to firm up the consensus on returning the 120M to the community fund, and it does seem like the general sense from the thread is that we have that consensus.

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One thing to flag here is that when the CELO is returned to the community fund, Celo’s ranking on Defillama will drop substantially. Mento remains the highest TVL protocol and CELO locked into Mento is included as part of the overall TVL figures.

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Agreed that

  • there seems to be a consensus that returning a large portion of the CELO (aiming for 120M) currently held in the Mento reserve is the right thing to do as long as it leaves the Mento reserve in a comfortable state

  • the framework of temporary vs. permanent use of funds proposed by @tim is a good one to structure the discussion around usage of those funds

  • Celo and Mento TVL would be strongly negatively impacted by this as long as there is no new destination for those funds (i.e. liquidity provision in the sense of temporary use of funds)

To still get actionable despite the TVL aspect, I suggest we start by a governance proposal that

  1. asks for official consensus to move up to 120M CELO out of the Mento Reserve and into the Community Fund stepwise over time with the total amount potentially reduced if the Mento Reserve would run uncomfortably low by doing so. Every removal of CELO from the Reserve would be accompanied by a respective reduction in the CELO target weight of the Mento Reserve to make the removal permanent…
  2. proposes a first such transfer of Reserve CELO by adjusting the CELO target weight to 40% (down from 50%) and immediately sending the equivalent amount of CELO to the Community Fund (about 20M CELO at the current price levels).

The idea behind 1. would be to create some certainty around the funding that will become available to the Community Fund in the future whereas 2. would incentivize folks to come up with first concrete proposals on temporary and permanent use of funds through making some funds immediately available. Does this sound like a good first CGP to everyone? If so, I would aim to draft and submit it on chain next week.

Agree with @roman and the overall approach.

Re TVL @nraghuveera: Would it be possible to register the Community Fund as separate protocol on Defilama and other information aggregators? In a sense, the Community Fund is simply a grant DAO governed by Celo holders and the Celo would just transition from one use (safety cushion in Mento) to another (grant funding) without affecting overall TVL.

There’s something I don’t quite understand about this proposal.

The reserve currently has ~125M CELOs. If it returns 120M, there’ll be 5M left. At the current USD price (~0.64), that’s ~3.2M USD worth of CELOs in the reserve. At the same time, there are ~30M cUSD outstanding. How would users swap cUSD for CELOs if the reserve does not have enough CELOs to cover the outstanding amount? And what about cEUR and cREAL?

I’m sure I’m missing something?

With the Mento upgrade that is currently being rolled out (MU01), cXXX assets will become redeemable also against other reserve assets, such as USDC.

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Just voted on this today. Wanted to call out that we should probably be ready to PR manage the people that come out of the woodwork noting that the reserve ratio has significantly changed overnight when this is executed.

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Hi all, the CGP was submitted on-chain and is in voting stage now: CGP 102: Mento Reserve Returning CELO

Please cast your vote!

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I don’t think a community fund would register under TVL as I don’t think Defillama captures grant DAOs as part of liquidity