Author(s): Ronan McGovern @Pinotio.com , Trelis LTD
Summary
- This proposal initiates a pilot program for decentralising management of the Celo Reserve.
- The rough technical approach involves allowing Celo governance to control pools of assets on other blockchains, to be called “Remote Reserve Management”.
- The specific technical approach will be the subject of research during this pilot proposal.
- The goal, by the end of this pilot, is to:
- Demonstrate a proof of concept allowing a Celo Governance Proposal (on the Celo blockchain) to safely manage reserve pools on Ethereum.
- Build a suite of tools capable of managing reserve pools on Ethereum to the needs of Celo governance.
- Complete third party audits of these tools and implement feedback, such that tooling is ready for Celo governance to deploy decentralized reserve pools.
- The long term end goal is to facilitate a modular approach to reserve liquidity management, on both Celo and Ethereum (and later potentially other chains). Potentially, this would involve pools of Celo<>Natural Capital on Celo and BTC,ETH,DAI on Ethereum.
- Community input is sought on all aspects of this proposal.
Disclosures
Trelis Limited is an Irish limited company currently offering Trelis Pay and Celo.Tax. The business was founded by Ronan McGovern.
Trelis stands to benefit through:
- Receiving grant funding to develop tooling for this decentralised reserve pilot for Celo.
- Potentially productising these tools.
Any code or contracts ultimately used for reserve management would require Celo governance approval before implementation. Before this, a complete third-party audit and public review of code/contracts would be required. It is envisioned that auditing would take place during a second phase, after this pilot, but before any implementation on actual reserve assets.
Background on Reserve Management
The Celo reserve is currently managed by a multi-sig of trustees. This multi-sig transacts reserve assets in order to move the reserve allocation towards governance-set targets.
It would be preferable - from a community and decentralisation standpoint - that:
i) Reverse assets only be accessible through a governance vote, and not a multi-sig.
ii) Reserve balancing be programmatic (automatic) rather than at the discretion of a group of trustees.
One challenge to reserve decentralisation is that reserve assets are currently cross chain with CELO and cMCO2 on Celo, BTC on Bitcoin, ETH and DAI on Ethereum.
This proposal aims to take a first step towards decentralising the reserve by a) allowing Celo governance to establish and manage small independent Balancer-type reserves on Celo and, separately, on Ethereum, and b) allowing Celo governance to make one-off trades between these pools.
High level: How this approach works
There are three parts to this system:
- Celo Governance, which approves Celo Governance Proposals. This process is already defined and in use.
- Messaging System (including transaction initiation). This can be thought of as a decentralised oracle that detects when a Celo Governance Proposal is passed that requires updates to Celo reserve assets that are held on Ethereum. Choice of messaging system is to be determined during this pilot, but can include Chainlink, Optics (or, ideally, secure decentralised forks thereof) or Layer Zero. Robustness to attack vectors is a critical factor in choice.
- Operations on Ethereum. One can consider Celo governance wanting to control a wide range of operations on Ethereum including asset withdrawals, deposits and trades. For the purpose of this pilot, the specific operations of depositing and withdrawing from a Balancer pool will be considered. [Community input is sought on the complete set of operations to be supported in the second phase post-pilot.]
Fig. 1, High level illustration of how Celo governance controls a reserve on Ethereum
Features of this Approach Remote Reserve Management
In contrast to a unified approach to reserve management, this approach offers the following benefits:
Composability:
The approach above can be used to create many independent pools of reserve assets. This can allow Celo to incrementally decentralise reserves in a piecewise manner, rather than decentralising all at once.
For example, one potential vision is that Celo<>Natural capital reserve pools live on CELO, whereas ETH, WBTC, DAI pools live on Ethereum.
Flexibility:
At the highest level, there are no constraints on the type of messaging system employed. Indeed multiple redundant messaging systems could be employed for increased security.
While this approach does not allow for automatic balancing of the reserve across chains, it provides governance with the tools to initiate one-off commands to trade/re-balance, including using any choice of cross-chain technology (e.g. Abacus, Stargate, Allbridge).
Security:
This approach avoids the Celo reserve (whether on Celo or on Ethereum) from holding any bridged assets, while allowing any choice of bridges to be used for moving liquidity. Yes, the messaging system that relays the outcome of governance proposals is an attack vector, but the ability of attackers can be limited through review of smart contracts and address whitelisting on the Ethereum smart contracts prior to approval of a governance proposal on Celo.
Total Budget
- The total budget for phases 1 and 2 is $500,000 cUSD. [Subject to further review based on community input, incl. on scope.]
Proposal Phase 1 (timing of June-Aug 2022) - Budget of $150k cUSD:
Tasks
- Build a proof of concept that allows a Celo Governance proposal to deposit and later withdraw WBTC and ETH from an Ethereum test-wallet into a Balancer pool.
- Implement a list of Ethereum reserve actions that Celo governance requires (e.g. withdrawing from a Balancer pool, creating a Balancer pool).
- Evaluate and present the Celo community with options for messaging systems that should initially be supported for use in managing an Ethereum based reserve.
Proposal Phase 2 (timing of Sept-Dec 2022) - Budget of $350k cUSD:
Tasks
- Build of messaging systems to achieve the desired reserve actions by governance:
- Depositing or withdrawing an ethereum token from a Balancer pool.
- Swapping ethereum tokens on sushiswap or uniswap.
- Swapping ethereum tokens on Ethereum with Celo tokens on Celo using omnichain protocols (e.g. Stargate, Abacus).
- Testing of reserve actions with low levels of liquidity (<$10,000).
- Publication and audit of all code/smart contracts.
Phase 3 (timing of Jan-Jun 2023) - outside of this CGP scope:
Deployment of Celo reserve pools on Ethereum and Celo as per launch schedule. Subject to audit results and governance approvals.
Disbursement of Funds & Multi-sig:
Payments are to be disbursed to Trelis on the following schedule:
- CELO amount equalling 100,000 cUSD on approval of this CGP by Celo governance.
- CELO amount equalling 200,000 cUSD on completion of Phase 1 including delivery of proof of concept.
- CELO amount equalling 200,000 cUSD on completion of Phase 2.
All amounts will be payable in CELO calculated based on the prevailing exchange rate between CELO and cUSD at the time of disbursement.
Further notes:
- Maximum grant - denominated in CELO: The maximum amount of the grant shall be no more X Celo, where X is 500,000 cUSD divided by the price of CELO at the time of approval of this CGP. Example: if the price of CELO is $5 at the time of grant approval, this grant shall not receive more than 100,000 CELO in total.
- Funds are to be controlled by a 3-of-5 community multi-sig.
- The multi-sig shall approve the first payment within 5 days of this CGP passing.
- On completion of each of Phases 1 and 2, Trelis shall post a progress update to the Celo Forum for a 10 day period of comments from the community.
- After 10 days, should there be rough consensus around the completion of tasks associated with each phase, the multi-sig shall approve the corresponding payment within 5 days.
- Should there not be rough consensus, Trelis shall take up to 30 days to address shortcomings raised that are reasonably within the scope of this original proposal. Trelis shall then post an update to the forum, 10 days of comments shall follow, after which the multi-sig shall determine whether there is rough consensus on the forum to complete the payment.
- Should there not be rough consensus, a new CGP may be required to provide clarity on next steps.
Proposed Multi-sig members:
- Alejandra Fernandez, FlyWallet
- Philipp Toth, HeyMate
- Kunbi Oguneye, Swap Bitssa
- Umar Sebyala, Celo foundation
- […in progress…]
Software Publishing & Licensing during the Pilot
The software will be made public and will be audited in phase 2 (involving an on-chain application for funding). A licence will be issued for permissive use on the Celo blockchain.
Community Involvement
A public community call will be held at the end of each of phases 1 and 2, to be advertised on the Celo Forum.