Mento-Specific Governance Token

Dear Celo and Mento Community,

Over the past few months, there were numerous community discussions about a potential Mento-specific governance token - a digital asset that could play a pivotal role in further supporting mission-aligned stablecoin use cases on the Mento protocol. This post aims to provide you with an overview of the main themes of these discussions and seeks your feedback on the proposed direction.

The primary objective of the Mento platform is to furnish entrepreneurs with a technological foundation for creating and managing stable digital assets that align with mission-driven use cases. The introduction of the MENTO governance token could advance this objective in three significant ways.

Firstly, it would grant access to a tailored governance structure that specifically caters to the unique needs of the Mento platform. Presently, Mento operates under Celo governance, which makes every decision on the Mento platform, even minor parameter adjustments, subject to Layer-1 governance. This places an undue burden on the Celo governance process, leads to inefficiencies, lacks focus, and hampers efforts to establish Mento as a fully independent protocol. A MENTO governance token would enable community members directly affected by governance decisions to voice their preferences more effectively and efficiently.

Secondly, it would allow for a redistribution of Mento-specific voting power from CELO whales to smaller CELO stakeholders, as well Mento stablecoin holders. To accomplish this, a MENTO token Airgrab with claimable amounts that are concave (think of the square root) in past CELO and stablecoin balances was proposed. Such a redistribution of voting power would encourage even broader participation from members of the Celo and Mento communities of all sizes, ensuring that decisions about the Mento platform are made collectively and represent the diverse perspectives within our community - especially the ones of the stablecoin holders which are not necessarily reflected in the current governance setup.

Lastly, a MENTO token would play a vital role in ensuring the self-sustainability of the Mento platform. MENTO holders could directly influence how the value generated by the Mento platform is used for its ongoing growth and development, thereby allowing the Mento platform to remain secure, decentralized, robust and capable of supporting the many products built on top of Mento - like Opera’s cUSD-based MiniPay and eXOF of Dunia, to name some more recent ones.

For the above reasons, it appears that launching a Mento-specific governance token would be valuable. The collective wisdom of the Celo and Mento communities in shaping the future of Mento is critically important, so please share how you feel about the overall direction. Additional discussions and brainstorming sessions on details of this proposal are upcoming on future Celo governance calls as well as Mento AMAs and Mento community calls.

Cheers and best,

Roman

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This looks like a very interesting approach, that could indeed streamline the Mento operations and reduce Celo governance burden.

I very much like the idea of distributing voting power to Mento stablecoin holders and smaller CELO stakeholders, thereby putting the control in the hands of the end users.
I’m curious to learn more about the suggested MENTO token Airgrab distribution. Here, I believe it is crucial to also consider the most active Mento stablecoin DeFi users. For example current and past mcUSD holders, who deposited cUSD into Moola. Or cUSD borrowers. Those are people the are actively using their Mento stables, and in my opinion, should be recognized. Same for users of the actual Mento app to swap in/our of Mento stables.

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I like the idea of a gov token but many gov tokens have failed or descended into pure gov theatre due to misalignment with the protocol (see recent Aragon dissolution).

The structure of the distribution of such a gov token is extremely important, as well as the way it’s minted. There’s a lot of better ways to minting a gov token aligned with the future of a protocol than an airdrop (a discrete retroactive reward), some quick examples:

  • Periodic log distribution to c-stable liquidity providers – this is a continuous future reward that incentivises protocol liquidity provision
  • Some sort of staked CELO model where you lock CELO or other tokens for x period to receive a certain percentage of the airdrop – benefits CELO holders (think: veModel)

The devil is in the details here and the mechanism matters. There’s also the idea that the gov token itself doesn’t provide any gov rights; only by locking the gov token does one earn a separate nontransferrable gov score (this is a more resilient model imho).

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I agree that it makes a lot of sense to think through how the protocol can reward future contributors. Like the idea of having future token emissions being used to reward stablecoin liquidity providers.

veModel also makes a lot of sense. Usually the way it is setup is that the longer you lock for - the more voting power you receive for the same amount of tokens. Thus, voices of those who commit to protocol long term have more weight in the governance process.

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fully agree here - especially given the discussion on the Stablecoin Factory post about what the gov token is expected to govern.

I’ve become wary of liquidity-provisioning related distributions - given the lessons learned during the DeFi for the People liquidity mining campaign on Sushiswap cUSD-cEUR pool where folks withdraw liquidity once the rewards are disbursed. Yield farmers aren’t necessarily the best governers:

This leads me to think “who are the ideal Mento gov tokenholders?” possibly:

  • new stablecoin issuers who have to lockup X gov tokens for Y time before launching a new instance from the factory
  • individuals who use cStables as a “means-of-payment” (as in the Celo whitepaper) rather than purely a store of value that is monetized for other currencies
  • collectives/protocols that deposit cStables in RWA lending pools locked for X amount of time (eg. Credit Collective)
  • external DeFi protocols that specialize in delegated governance (eg. Event Horizon)
  • capital providers to stability pools and CDPs across instances of the stablecoin factory
  • folks who, for whatever reason, care deeply about Mento’s mission and contribute in kind on forums, community calls etc.

in essence - I think this is a huge leap forward for Mento and am supportive of the gov token plan, but agree with @papa_raw that the devil is in the details and look forward to brainstorming more on community calls!

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Relevant blog post: Progressive Ownership: A Model for Application Tokens – Variant

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Hey all,

here are the details for the Mento Community Governance Call tomorrow where we will discuss discuss this topic as well.
:spiral_calendar: November 22
:watch: 6pm CET
:point_right: Join here: http://meet.google.com/ktw-iuvp-ddp

Current agenda items:

  • Mento-Specific Governance Token
  • Yield / Rewards on Reserve Collateral

Please share in “# general” on Mento Discord if you would like to add other topics to the agenda!

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High all, here is a quick update from the Mento Community Call that was held on November 22 on this topic. All this is WIP and simply represents the current thinking wrt. how things could look like. The following points were presented and discussed. Some valuable feedback was collected and we appreciate everyone’s contribution! Those unable to join the call (and everyone else of course) are welcome to provide their feedback and comments below. Thank you!

Pain-Points with Current Governance Setup

The current arrangement where Mento is governed by Celo governance presents several challenges:

  1. Excessive governance overhead: Currently, any code changes to the Mento protocol require approval from Celo governance, even if they don’t directly affect CELO token holders. This creates an unnecessary administrative burden for Celo governance. participants, as evidenced by the recent influx of Mento-related governance proposals.
  2. Potential incentive misalignment in governance decisions: The preferences of CELO holders, who currently govern Mento, may not always align with the preferences of other stakeholders, such as stablecoin holders.
  3. Potential regulatory downsides: As long as Mento remains under the governance of Celo, it cannot be considered fully separate from Celo. This could have regulatory implications for Celo in the future.
  4. Lack of Mento platform self-sustainability: By transitioning to a governance system specific to Mento, supported by a dedicated MENTO governance and utility token, it would be easier to capture the revenue generated by the Mento platform.

The Idea

Creation of a Mento-specific governance token that:

  • allows efficient, focused and well incentive aligned governance of the entire Mento platform
    • Current Core Mento Smart Contracts
    • Mento Community Treasury
    • Mento Reserve
    • Mento Oracles
  • allows to capture revenue of the platform
    • Revenue could stem from:
      • Protocol fees
      • Yield on reserve collateral
  • allows to incentivize certain behavior on the platform
  • allows to share ownership over the platform broadly

High-Level Design Components

  1. MENTO Token: ERC20 protocol token
  2. Voting Escrow (ve-Token design): A staking contract where users can stake their protocol token, in exchange for governance tokens (veMENTO)
  3. Governance: Onchain governor contracts that govern the smart contracts, treasury, reserve and manages the protocol in a decentralized fashion
  4. Emission Contract: Emits MENTO to treasury and therefore controls the upper bound of protocol spending
  5. Mento Community Treasury: Receives MENTO emissions which can be distributed further by the governance
  6. Gauge system: Receives allocation by Mento Community Treasury and then streams MENTO towards a wide range of platform incentives - distribution decided by veMENTO staking.

High-Level Token Allocation

  • 60% - Future emissions to Mento Community Treasury via exponential decay with a half-life of 10 years
  • 22% - Mento Community Treasury
    • 12% of those reserved/intended for potential future Mento Labs incentives (like future employee allocations) - vetoable by on-chain governance
  • 8% - Mento Labs team members, advisors and investors, with a 4 year vesting schedule and 1 year cliff
  • 5% - retroactive Celo Community Airgrab; amounts that were not claimed shall go to Celo Community Fund
  • 5% - Mento Reserve;

Celo Community Airgrab

  • Combined max 5% of overall total supply (total supply is 1 bn) can be claimed by eligible Celo addresses.
    • Unclaimed amounts will go to the Celo Community Fund
  • User’s claiming the airgrab will receive it in a form of veToken locked for 1 year (linearly unlocking without a cliff).
  • To be eligible, address must fulfill one of the next criteria:
    • Held Locked CELO (amount based on avg. over 12 monthly snapshots, between Nov 15 2022 up to Oct 15 2023)
    • Held MENTO stablecoins (amount based on avg. over 12 monthly snapshots, between Nov 15 2022 up to Oct 15 2023)
    • Transacted in stablecoins (volume calculate as cumulative sum over the twelve month before Oct 15 2023)
    • Smart contract addresses are excluded, except for releaseGold addresses (here we would use the beneficiary address) and Gnosis safes
    • KYC requirements, geoblocking and blocking of addresses on the AML sanctions list might apply
  • Claimable amounts are concave (think square root) in the balances of locked CELO and stablecoins as well as the stablecoin volumes
    • 50% allocated to locked CELO holders
    • 50% allocated to stablecoin holders
  • Mento stablecoins held in liquidity pools etc. will not be directly counted (simply not feasible to account for all pools etc on all DeFi protocols on Celo) but since depositing stablecoins in liquidity pools leads to volume, they are counted indirectly

Mento Governance: Overview Diagram

Discussion Outcomes

  • We should think about an early unlock functionality in veMENTO that allows exciting early but with a significant penalty
  • We should consider LP tokens as input token to the ve-model
  • When thinking about gauges, we might want to start from the intended outcome (pool sizes etc.) and work backwards
  • @LuukDAO also shared that we might want to reconsider the 8% allocation to Mento Labs team, investors, advisors etc., as it feels really low compared to other protocol allocation. 60% emissions felt really high to him as well.
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