As the Reserve address is public, anyone can send digital assets to it. Some of these assets may be gifts from well intentioned projects, while others may just look for publicity or will lack a real usage. It is yet to be addressed how the Reserve should handle those assets, and the technical limitations the problem currently has.
Every quarter a governance proposal is to be submitted to categorize all assets in the Reserve that do not have a formal allocation. Two categories of tokens exist: Assets to hold and assets to liquidate, no matter in what chain they are sent.
Assets to hold: high quality assets of mission aligned projects. Examples of such could be:
- Ubeswap tokens ($UBE)
- Moola tokens ($MOO)
- Poof tokens ($POOF)
Assets to liquidate: assets the community doesn’t have any intention to hold in the long term. Examples of such could be:
- CELODOGE ($cDOGE)
- CELOSHIBA ($cSHIBA)
If an asset is labeled as liquidate, this proposal itself makes the appropriate smart contracts calls to liquidate them on Ubeswap (or some liquidity aggregator available at that time) for CELO, and sends it back to the Reserve. This call has a potential risk of getting front-run, but assuming there’s no economic interest for these assets, it shouldn’t matter.
If these assets are not tradable or their value is negligible, they shall be sent to a burn address or charity.
If an asset is labeled as hold, they don’t formally have a target allocation in the Reserve composition, but should be counted in the total Reserve holdings and displayed in Reserve communications. These assets shall be kept indefinitely until:
- The community proposes selling all or a portion of an asset. This could be the case if market conditions seem favorable, the projects have a bad growth prospect or stop being mission-aligned. This is ad-hoc and doesn’t need regular check-ins.
- The Reserve’s collateralization ratio has fallen below the Tobin Tax reserve ratio threshold (200%). This can be done right after the tobin tax is activated (this threshold currently only counts the Celo part), which is a safety mechanism the protocol already has in place.
- They move to a formal allocation. Pending market conditions, volatility, correlation with other assets held in the Reserve and the will of the Celo community through a governance proposal, an asset could eventually be added to the reserve, having a target allocation to maintain.
In the future, the Reserve could interact with projects that sent assets to it and were labeled as hold, like for example, staking the assets of a hypothetical project to receive a portion of its proceeds or providing liquidity for pairs of assets gifted and staking the LP assets. As risk exists with assets held in any decentralized protocol, assets with a formal allocation of the reserve should never be put at risk.
At some point in the future if there is a lot of overhead with dealing with these assets, the decision of which tokens are kept and which tokens are liquidated can be delegated to a token curated registry.
In case of gifts received in assets that already have an allocation in the Reserve (like CELO, BTC, ETH, or DAI), they are simply considered part of the Reserve, ignoring the fact that they were gifted. Messages received in the incoming transfers are never considered endorsed by the Reserve, nor the Celo community.
- Assets on the Reserve address: any asset currently sent to this address would be unmovable because this smart contract can’t trigger a transfer, thus for them to be usable in the short term, they should be sent to the Governance Proxy contract, were governance can trigger a smart contract call to move/sell the assets.
A contract upgrade could be proposed to make the Reserve able to move and/or sell tokens in its address. This would create a separation between funds that are meant to help the stability mechanism versus funds that are meant to be distributed as part of the community fund.
- Nothing prevents anyone from sending a non-transferable token to the Reserve (or other core contracts). In that case, the only way to remove that asset from the Reserve address would be an expensive hard fork.
- As assets gifted to the Reserve may also sit on the Celo Platform, all assets gifted to the Reserve potentially have a high correlation with the price of Celo, thus their usefulness as hedge, or even last resort in the case of undercollateralization of stable assets, remains to be proven.
- How should the Reserve handle assets submitted to it on-chain?
- What are the potential legal risks associated with receiving assets and holding them in core contracts?
- Would a contract upgrade to support gifts in the Reserve address make sense?
- Should the Reserve interact with projects built on Celo?
- How are other projects dealing with gifts? Vitalik Buterin notably exchanged and donated $60M worth of assets gifted to him.