Proof of Deposit -- Summary and FAQs


Got models of how PoD will behave and how it will be paid for John?

Come on, y’all are the one’s trying to sell this project to the community and y’all keep ducking and putting off answering the tough questions.

Just for reference the attached PDF is what a reasonable assessment (FAQ) of a financial investment looks like.

Why are you ducking my point Mark? after all, this is directly related to the justification of PoD, as you have pointed out…

Why the change of subject? If one needs a credit rating for an asset to appreciate in a risk-off environment, how did gold manage this for hundreds of years?

I’m sure we’d all love to hear your explanation? Educate us!

I very much hope what you are taking such a long time to write addressed the question… not your usual attempt to change the subject is it?

It took gold a long time to establish it’s rep, it’s 'credit rating has risen and fell. Similarly it took the USA a long time to build its rating.

Celo is a nacent enterprise that is relatively unknown in the wider world residing in an industry that is marginally trusted by the world.

This isn’t to say Celo can’t get there, but IMO it needs to learn how to make a profit and interact with grocery stores and gas stations before you can start thinking like it can be something akin to a bond issued by the government that controls the world’s reserve currency.

Now, your turn. Show us the math.

lol. what a lot of intellectually dishonest rubbish. you are a charlatan


Got your math?

BTW, the dollar is winning over gold in the last month.

A very rough and rudimentary model of PoD
If there is some basic concept or detail missed please let me know.

The forum would not allow a csv to be uploaded.

So John, I think seeing these numbers in a spreadsheet helped me figure out where PoD might and might not work.

I’m tired, forgive any any errors.

The problem I see in using PoD here at Celo is four-fold 1) the minuscule gross margin in revenue at the protocol level of Celo makes paying a significant interest rate unsustainable. 2) if interest is paid to the Celo stable coin holders, that of course increases the outstanding supply of coins, and that means that the reserve has to buy a corresponding amount of non-Celo assets to maintain the collateralization ratio and there’s no revenue source to buy those new reserve assets. 3) Because the Celo Stablecoins are pegged to external fiat currency values, the internal inflation is a problem that imposes a real world cost on Celo. 4) Using CELO as a reserve asset to actually guarantee the redeemability of those coins sets up one of the conditions that led to Terra’s fall, Luna plummeted, that is a problem we need to avoid.

Where I do see a possibility of using your mechanism, is in a sovereign situation.

A sovereign nation doesn’t need to worry about having a reserve and balancing that ratio unless they want to, a sovereign nation can levy new taxes (increase their gross margin) to cover the cost of the interest, they could even choose to use the ‘interest’ as a form of inflation or UBI because it’s an internal choice within their own little domain.

Goodnight John

Some supporting info regarding the risks of using/considering the native coin as collateral.

A report released Thursday by Terra backers Jump Crypto, the crypto arm of investment firm Jump Capital, shows based on recorded blockchain transactions that big investors with several million UST each liquidated their stocks early in the depegging process, driving the price ever downward and leaving smaller holders with practically nothing.

I don’t think u two arguing over gold or credit w/e is gonna go anywhere.

Isn’t the biggest issue that somebody has to pay for the 5% and block rewards aren’t sustainable? Neither are block gas fees cus those need to go to the validator infra.

If there’s not a way to pay the interest rate, then it’s just a marketing blitz until the money runs dry and people leave to go elsewhere.

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It’s not that the concept wouldn’t be workable in say a CBDC, it’s that Celo’s financial structure simply can’t afford it.

It is not true that “someone has to pay the 5%”. The return for deposit holders is market rate, so it can be anything. 5% was just an example used for purposes of illustration.

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Thank you for the clarification John.

I’m going to assume that it is fair to say that the interest rate would also be constrained by the transaction volume and transaction fee size.

The transaction count per dollar ratio on the active money in my life is really small. 1:100 maybe. The ratio for saved/invested money is way smaller yet.

It looks to me that at 1:100 (0.01) the mechanics would limit the interest to 0.00005% +/- an order of magnitude.

Does your modeling show similar? I am I missing something here?

Just got info on Celo’s tx info.

The market rate once the block rewards dwindle is gonna be pretty uninteresting.

I don’t think this is a long term sustainable way to draw money in AND keep money in.


Some of the responses here are getting a bit directed. Can we continue to focus on the idea instead of the person please?

I read the new slide deck, and was struck by the mention of cStables being a plausible replacement for Tether in the wider ecosystem. This surprised me a little as since Ethereum and it’s L2s are the defacto rails of the blockchain world, it would require immense inertia to take even a minor slice of Tether’s activity (even with the best designed stablecoin in the world). I had thought much of the original discussion had centered around getting more stablecoin usage and increasing demand for the CELO token and price positive feedback it could create. That said, it’s good to be aspirational in pitch decks, so if we can capture some of Tether’s activity, great.

What is missing from this entire discussion, both this thread and the original, for me is this: if this proposal goes to governance and passes - what are the next steps?

  • Have you completed the protocol-level code changes to implement this work?
  • If not, who is doing the work?
  • How is the work being paid?
  • Is there a comprehensive phased devnet and adversarial testnet planned?
  • Can economically rational actors be automated with some fuzzing / randomness and we watch the results (game of life, but with validators and depositors)?

Additionally, many of my concerns about secondary effects don’t seem to be really seem to be taken seriously. For example - the fact that validator groups now become pricing market adversaries rather than technical collaborators. This is a significant change to the spirit of the Celo infrastructure community and shouldn’t be taken lightly.

Also, the fact that with PoD validator groups don’t have an incentive to run more than one validator node anymore. Mostly, their rewards come from if their MIN(locked CELO, deposited cStables) is in a larger ratio than everyone else, and they only need one validator to do that - unless PoD implements deposit limits per individual validators (just like currently, there are voting caps on groups until they start operating a new validator). How will this affect the current elected seat minimum price? Could we see some scenarios or modelling on this?

I’m guessing this will be a controversial governance proposal when it gets to it. But for a protocol level change of this size, especially one with commercial interest or backing, I would like to see much more execution detail before voting it in.

Final thought… what about starting with a Kusama-like incentivised testnet (“Cambridge”) to try this out and see how it all fits together? Many of us are tinkerers and I would be interested to support infrastructure for something like this to see how it works.

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I wouldn’t call it a “clarification”, its pretty much the whole point of Proof of Deposit.

Morning John,

One of the things that has puzzled me about Celo from the start is, how the heck is it going to pay the bills on $0.001/transaction? It’s the basic question I ask myself before throwing a significant amount of my money at something.

PoD doubled down on that thought and gave it an expectation to look for, a 5%(ish) payout ongoing.

My question became, is there enough money to do that?

In a different thread I got this response from @alexcelo last night.

Celo it seems, is designed not to earn enough money from customers to pay the bills. That’s a problem from my point of view.

That choice by Celo leaves y’all with a purely mechanical math problem.

You or Ying actually identified that thought indirectly for me in I think the first thread, don’t remember exactly where, but it lifted another red flag for me. If the customer isn’t paying the bill, who is? There’s really only one other choice, investors. That’s a real problem in my head.

You and @ying_chan got caught in the middle here, I’m thinking y’all didn’t have all the info either.

In this thread Paying the bills... Celo's Financials? I’ve asked @alexcelo to clarify how that works, to define the mechanism.

The only things I can think of that might fill that gap in perpetuity is a tax of sorts on the Celo native asset or returns on investments.

Hopefully we will see when @alexcelo replies.

see my response to your question in other thread, infra costs to keep the 110 validators alive and funding the public RPC can come from people who benefit from DEFI activity on the network. It doesn’t have to be burden on the foundation’s balance sheet forever.

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