Paying the bills... Celo's Financials?

Protocol
6

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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