Paying the bills... Celo's Financials?

What I’m trying to ask here is for the info needed to determine, for example, at what point Celo’s fee structure will be capable of paying the bills instead of requiring investor support to survive. Projected burn rate and how long available capital will last is another example.

Right this moment the Proof of Deposit discussion has reached a point where there is a question about it’s affordability, it would be nice to have some real numbers to answer those questions.

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Where can I find how many transactions happened over the last year?

Have a look here. Don’t know if it is granular enough for your analysis

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Thanks @Nadiem that really helps.

We have a ways to go to become self sustaining. :wink:

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Hi @markbarendt,

I lead the finance functions at the Celo Foundation.

At the protocol level, transaction fees are not meant to be the primary/only lever for accruing value. This is largely by design as the Celo Protocol is intended to be cheap to use for the end user, thus other value accrual mechanisms are important, in particular stablecoin demand. In the short-term, demand for celo stablecoins is an important lever to increasing demand for the CELO asset as 50% of the reserve is in CELO (see celoreserve.org for details). Stablecoin demand is a partial proxy for network demand and thus CELO accrues value with incremental increases in cStables demand (in addition to transaction fees).

With specific regards to the Celo Foundation, please check out the below 3 public resources to understand the sustainability of current expenditures related to the Celo Foundation:

  1. Understand CELO Allocation Over Time (link here)- this article provides an overview of approximately how the fixed 1 billion CELO will be distributed over time;
  2. Celo Foundation Treasury Policy (link here)- this governs the parameters by which CELO can be programmatically sold by third parties on behalf of the Celo Foundation;
  3. Celo Foundation Annual Report (link here) - see the finance section for an overview of 2021 expenditures and current assets on the balance sheet (note, expenditures are scaled to the price of CELO)

In the long-term (4 years +), the Celo Foundation will look increasingly like a university endowment fund in that budget will be generated from returns on investments. The Celo Foundation, for example, has invested in several funds as an LP with a focus on the Celo Ecosystem (see here for more details on the funds and fundraising). In the very short-term, The Celo Foundation, including the grants team, scales the size of expenditures and grant outlays to the price of CELO. In other words, as the price of CELO goes down, the budget for grants in $-terms also goes down. Please note this is separate from the on-chain fund, which distributes grants independent of the Celo Foundation (see link 1 above). As you can see from the first link above, the grants distributed by the Celo Foundation are intended to run out after approximately 10 years as the network becomes increasingly decentralized and the Celo Foundation’s role diminishes in relative importance.

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Thanks @alexcelo

This is a nice step in the right direction.

If the fees charged to end users do not cover the costs of running the system, then where does the money come from to keep the validators validating and pay all the other direct costs like maintenance devs?

Is the reserve depleted?

Is there some other mechanism?

The link led to the fundraising page and that was interesting. I could not find what the foundation has invested in at that link though.

Where else might I find that info?

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Validators and maintenance devs hopefully eventually evolve to a decentralized fashion where people like me come in and start footing the bill. You just have a bunch of devs who benefit from DEFI activity on the network and are incentivized to keep the lights on so that the DEFI apps can keep running.

Likewise, cStable market making is lucrative, once Mento is even more decentralized, people who generate revenue by keeping cStables pegged will also be willing to foot the bill and run the underlying network infra.

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Interesting, is there a defined structure for that?

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No explicit contract but if the network keep growing in real world usage, there will be more and more players like me on the network, and more and more DEFI opportunities to keep everyone engaged.

Network demand and usage solves this category of “who pays for the public goods” problem.

The current validator annual rewards are also orders of magnitude higher than what it actually takes to run a secure high availability validator system. Just because validators earns millions annual in aggregate doesn’t mean they actually cost millions in annual fee.

The actual cost is more like $2000 per year per validator + proxy pair.

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