Strengthen Tokenomics: Cut Validators from 110 to 55

[alex_Verda]

Firstly, thank you to everyone who posted, I’m glad that we are kickstarting a conversation around strengthening tokenomics, starting with looking critically at the ROI on validator rewards.

After responding to everyone’s comments above, I realize that I should have reframed my main point as follows:

1)Currently, there are emissions of minted CELO sent to the Mento Reserve equivalent to the daily amount of validator rewards, showing as around ~9,041 cUSD per Celo Mainnet epoch 1967 details | Blockscout

If we assume a $0.30 price of CELO (roughly equivalent to the 30 day average https://www.investing.com/crypto/celo/historical-data?utm_source=chatgpt.com), this implies 9,041/0.30 = 30,136.67 CELO per day or roughly 11 million CELO per year.

2)Per the recent passed mento proposal MGP-10, MGP-10: Restructuring the Mento Reserve: Yield on Mento Reserve & Mento Funding, Mento is focused on stablecoin collateral and collateral that provides yield in stablecoins. Thus, increases in cUSD would imply they need to liquidate CELO to acquire their desired collateral. Any selling of CELO by Mento would put downward pressure on CELO (in addition to folks selling CELO after converting from cUSD).

3)The broader point here is that CELO emissions are faster than what was proposed at mainnet launch ( Epoch Rewards - Celo Docs ), namely, “remaining epoch rewards declines linearly over 15 years to 50% of the initial 400 million CELO.” Based on this projection, annual CELO emissions should be (50%*400 million)/15 or 13.333 million per year. Given mainnet launch on April 22, 2020, this would imply 5.47 years have passed or 72.93 million CELO (13.33x5.47).

By contrast, approximately 400m - 291,920,052 = 108,079,948 CELO have been emitted. Thus, the issuance cadence is about 50% faster than what was planned (108.08m/72.93m-1). Reducing the validator would decrease the spend from 11 million CELO per year (see #1) to 5.5 million CELO per year by halving the validator count would help us get back to the original yearly emissions target (13.33 million per year).

4)I’m not married to 55 validators as the only way to meet this objective, but I don’t think we need as many validators now that Celo is an L2 with a centralized sequencer. If/when Celo moves to decentralized sequencing, we can re-assess. However, the current amount of CELO issuance is putting sell pressure on CELO (see #2) and we are currently issuing CELO at a rate that is about 50% faster than what was planned for at mainnet launch (see #3).

I agree there are other topics that should be discussed to strengthen tokenomics, but this seems like a relatively low-hanging-fruit place to start.

[PacoBits]

First of all, we would like to thank you for this initiative, which we understand aims to improve the price of CELO.

At Stakely, as a validator, we never sell cUSD for CELO except to distribute it to users through our faucet, which has distributed funds to more than 36,000 users, helping them to join the Celo ecosystem.

We have also never sold the CELO rewards from our validator; we have kept them staked since 2021.

We convert cUSDC to USDC and use it to pay for servers and services such as our LoadBalancer, which handles more than 500 million requests.

Stakely also dedicates resources to consistently creating content for the Celo ecosystem, including monthly reviews covering Celo ecosystem updates, news shared in our monthly newsletter with over 2,000 subscribers, educational video tutorials to help new users get started with Celo, and ongoing support through our socials. All this content is produced in Spanish and English, and even in French through our website and blog.

We agree that it would be great to see objective criteria for reducing the validator set, and I think it would be important to link this to a broader tokenomics plan in order to carry out actions with a more global objective

[yomfana]

Thus, increases in cUSD would imply they need to liquidate CELO to acquire their desired collateral. Any selling of CELO by Mento would put downward pressure on CELO (in addition to folks selling CELO after converting from cUSD).

Is there any on-chain or governance evidence that Mento has been selling CELO from the reserve into the market?

Mechanically, minting ~9,041 cUSD per epoch is collateralized by an equivalent USD value of CELO being transferred into the Mento Reserve; validators receive the cUSD. That part is clear. What’s not clear is whether the reserve later dumps that CELO for either rebalancing or any other purpose.

Also, the epoch rewards doc you quoted earlier was superseded by the “Great Celo Halvening” proposal; have you factored it into your arguments?

Keep in mind that the same validators have been running this network, actively participating in governance during the pre-delegation phase, and ensuring a smooth transition to Celo L2 for the past five years. Proposing to “gut” the validator set simply to save ~5.5M CELO annually being transferred into the Mento Reserve is not just shortsighted; it undermines the very operators who have secured and stewarded the chain since launch.

Validators will not necessarily be here in perpetuity, but if the community does decide to downscale the set, the rationale must be sensible, transparent, and backed by actual current data. Anything less risks eroding trust for marginal short-term accounting gains.

[Patrick]

@alex_Verda

If we finish with emissions, who would pay validators in the event of a future decentralized sequencer?

Transaction fees?

2)Per the recent passed mento proposal MGP-10,
, Mento is focused on stablecoin collateral and collateral that provides yield in stablecoins. Thus, increases in cUSD would imply they need to liquidate CELO to acquire their desired collateral. Any selling of CELO by Mento would put downward pressure on CELO (in addition to folks selling CELO after converting from cUSD).

Spinning out MENTO from CELO has been a significant financial burden on CELO owners. Now it has led to a situation where CELO and MENTO financial interests have completely diverged. If we’re serious about fixing CELO emissions, then we need to consider all options including re-claiming the cStables protocol under CELO. What if instead of minting new CELO to back cStables we mint new MENTO tokens?

[Patrick]

A lot of these discussions about validator rewards, emissions, and Mento rebalancing boil down to one thing: the CELO/USD price.

If CELO strengthens against USD, then many of the downstream “tokenomics” issues (emissions, reserve adequacy, grant budgets, ecosystem incentives, etc.) become dramatically easier to manage. Inversely, if CELO weakens, every program becomes more expensive and less sustainable.

So rather than looking at emissions in isolation, I think we should zoom out and look at the two levers that directly drive CELO/USD strength:

1. Increase demand for CELO

2. Reduce circulating supply of CELO

A few demand ideas:

• CELO ETF:
  Makes CELO accessible to pension funds and retail brokers (Robinhood, Fidelity, etc.)

• Digital Asset Treasury (DAT):
  Structure vehicles like “CELO Holdings Ltd.” that acquires cash flow positive businesses and uses the cash to buy CELO on-balance-sheet

• Celo Bond or Treasury Note (CeNote):
  Fixed-income instrument backed by validator yield or on-chain fees; denominated in CELO to create predictable CELO-denominated cash flows

A few supply ideas:

• Rebalance incentives:
  Replace CELO emissions to validators with MENTO-denominated rewards

• Liquid Staking:
  We had this a while back with stCELO but it should be reintroduced

• veCELO with Expiry Decay & Auto-Burn:
  Introduce a voting-escrow system, but once the lock expires, only 95% of CELO unlocks. The remaining 5% auto-burns as a “commitment tax.”

• Burn flex:
  How do we make burning CELO the ultimate flex?

[LuukDAO]

@Patrick Love these concrete suggestions, we shared some thoughts about increasing stCELO usage and impact here.

We’ve also made meaningful progress toward veCELO

- Digital Asset Treasury: I’m actively involved in some Eco / Investment Fund set-ups and keen to start something for Celo in this direction.

- veCELO: We’ve run some early pilots of this with Support Streams Season 0 and now Support Streams Season 1, where we use locked stCELO to decide where a portion of CELO / OP incentives are pointed. We could expand this setup to include a ve/time-based lock element and incorporate some mechanisms that allow projects to burn an x amount of CELO and/or provide native-token incentives to attract veCELO votes.

- Burn flex: Yes, I’ve been closely following the ETH Community Foundation, which is built around ETH Burning. They are starting to allocate budget soon, and as soon as they show signs of figuring out a model that works, we’re keen to replicate some of it for Celo through CeloPG.

[alex_Verda]

@yomfana

Mechanically, minting ~9,041 cUSD per epoch is collateralized by an equivalent USD value of CELO being transferred into the Mento Reserve; validators receive the cUSD. That part is clear. What’s not clear is whether the reserve later dumps that CELO for either rebalancing or any other purpose.

You’re correct there is no guarantee of if/when Mento will sell. My main point here being that, according to the passed governance proposal, CELO is not in their target collateral, meaning if/when collateral becomes tight due to additional issuance or adverse foreign exchange movements, CELO seems first on the chopping board unless I’m mis-reading this approved governance proposal.

Also, the epoch rewards doc you quoted earlier was superseded by the “Great Celo Halvening” proposal; have you factored it into your arguments?

Yes, I’ve considered the Great Celo Halvening before my comments above.

Nevertheless, I still believe post L2 transition, we simply don’t need 100+ validators. I can imagine something like 50-60 with max validators per group going slightly down to 4 to still promote having at least 20-30 independent groups, which seems sufficient to me. It doesn’t have to be 55, but I believe a reduction in the number of validators to 50-60 would not materially undermine the network security.

[Dee]

I am a genesis validator. I’ve followed Celo since early 2019 when it joined WFP’s for their Programme Innovation Accelerator. When I heard about the Baklava Stake Off, I immediately decided to participate in Q4 2019. Since then, I’ve been with Celo and I do enjoy a bit of bragging rights for having proposed the first mainnet block back in April 2020.

Celo set out to serve the first billion, that ambition still matters. We should absolutely debate tokenomics, but cutting validators is the wrong first move. Let’s keep the set intact (and be ready to expand as sequencing decentralizes) and fix the real issue: rebuild sustainable demand for CELO without taxing users with high fees.

Celo tokenomic is an important conversation to have but going directly on cutting validators is quite a poor choice as a starting point. Most of the raised points are difficult to comprehend and I wish to thank @yomfana for voicing this. There was recently a Governance proposal from Mento that showed that since the transition to L2 in March 2025, only 565k Celo were transferred to Mento instead of 4.71m Celo. Do you honestly think that price went down since March because Mento may have sold 565k Celo? Where are you seeing this structural selling?

There is another important concern with the Celo Community Fund. Have you checked its runway? The way things are going, it looks way less sustainable then the validators rewards.

I’ve been thinking about Celo tokenomics for a while. It’s a complex topic with many stakeholders and moving parts, and it sits right on top of valuation frameworks. How do people value a chain: fixed supply, active users, TVL, popular apps, narrative, and more? Celo already checks many of these boxes, yet that hasn’t translated into price. The fundamental question remains: why should people buy and hold CELO? For me, the answer is a mix of yield and compelling narratives. Historically, CELO has had one of the lowest staking yields and lowest inflation, an implicit ceiling created by the choice of a fixed supply.

Back in 2022, when “paying the bills” came up, you noted that “transaction fees are not meant to be the primary/only lever for value accrual. This is by design because the Celo protocol is intended to be cheap for end users; other mechanisms matter, in particular stablecoin demand. In the short term, demand for Celo stablecoins increases demand for the CELO asset as 50% of the reserve is in CELO.” If the Mento link is now severed, what’s left as the other value accrual mechanism?

I don’t think playing marketing games with tokenomics is the answer. Burning more tokens, clinging to fixed supply optics, or mimicking “halvenings” hasn’t worked. I’m a strong proponent of Buybacks-and-Make over pure burns: “Stop Burning Tokens—Buyback and Make Instead.”

@Wade captured the crux perfectly: how to rebuild sustainable token demand in this new, post-Mento model. One that fits the L2 era but still honors what made Celo’s system so elegant in the first place?

If the core value-accrual system is gone and we don’t want to rely on higher fees, what else can we do?

Answer: grow durable revenues so Celo can fund the things that build real demand:

• Raise staking yield for CELO holders.

• Create sustainable yield for cUSD.

• Keep financing ecosystem activity via the Celo Community Fund.

• Expand and decentralize the sequencer set. Mobilizing highly technical contributors who’ve been with Celo for half a decade surely must have some form of value. Let’s harness it.

So how does Celo actually increase revenues?

Here are some ideas. I believe this deserves deeper reflection and the creation of focused study groups before implementation. Let’s give ourselves three months for research and design, and six to twelve months to go live with a first wave of initiatives.

1. Decentralize the Mento Reserve.
   Allow people to contribute assets to the Mento Reserve and earn yield in return.
   This would immediately create yield for CELO holders while strengthening the Mento reserve itself. Currently, there’s only about $22M in stablecoins, far from what’s needed if we truly aim to serve a billion users.
   We could add a locking mechanism (e.g. funds locked for a set number of days) and link yield levels to lock durations. This transforms the reserve into a living, yield-bearing structure that scales with participation.

2. Allocate ~⅓ of the reserve to basis trades.
   Celo could mirror the model pioneered by Ethena, which launched after Celo yet now boasts $11.4bn USDe (that’s x518 Celo’s stablecoins) and a $6.8B FDV (x28 Celo’s).
   Programmatic hedging + transparent risk limits + public reporting can turn a portion of idle assets into steady protocol income at scale.
   This creates sustainable on-chain yield; diversifying beyond pure staking or fee revenue.

3. Stand up a Celo ETH Validator Collective.
   Lido has become one of the largest fee-generating systems in crypto. As we enter the ETF and DATs era, staking ETH remains a key opportunity but it’s also centralizing around Lido.
   Why can’t Celo create its own set of Ethereum validators? Celo validators could run ETH validators too, giving us a triple advantage:

   1. Strengthen Celo’s voice within the Ethereum community
   2. Generate ETH staking yield for bridged ETH on Celo
   3. Create a new recurring revenue stream for the ecosystem

4. Build a decentralized RWA & commodity exchange
   We’re entering the RWA + stablecoin era. Hyperliquid has shown the appetite for decentralized perpetuals.
   Celo could go one step further with a decentralized exchange for stocks, commodities and key global assets, powered by stablecoins.
   This would open new revenue channels, drive financial inclusion through market inclusion, and expand Celo’s reach to new categories of users and entrepreneurs.

Celo has already proven world-class engineering (the L2 transition says it all). The vision, community and technical capacity are here. The next step is to channel this capability toward new economic engines inspired by the most successful, fee-generating dApps and chains.

How to finance this?

How can these initiatives be funded, venture capital, ecosystem reinvestment or new mechanisms altogether? A few ideas:

1. Public-private reciprocity.
   In Q4 2023, Minipay requested $5.6M cUSD (~10M CELO) and received an additional $3M from Mento: $8.6M in total.
   Could Opera, in return, contribute to the Mento reserve? Or allocate equity or resources to seed Celo’s next growth phase?
   Opera has a $1.47B market cap, $126M in cash and $269M in long-term investments without long-term debt. There’s alignment potential here.

2. Leverage Celo’s real-world credibility.
   Projects like Sarafu Wallet embody real-world impact. MiniPay has an active and growing user base in many different parts of the world.
   This has drawn recognition from Vitalik, Tether’s founders and majors figures in web3. Could these ecosystem leaders co-fund the next wave of impact-driven tokenomics innovation?

3. Create a dedicated Celo DAO for growth and mix it with external grants
   Rather than relying solely on external funding, Celo could establish a purpose-built DAO to incubate new yield-generating mechanisms potentially with matching grants from Ethereum or Optimism.

Call to action

As a former CFO of the Celo Foundation, I fully understand where this proposal comes from, the instinct to focus on cost efficiency makes sense.
But I think the framing here oversimplifies the problem and risks undermining the network’s long-term credibility. Reducing the validator set might bring short-term relief, but it sacrifices one of Celo’s few remaining differentiators: being a L2 with a genuinely decentralized sequencer set and a group of long-standing, mission-aligned validators who have been part of Celo since the beginning.

Celo has always been more than just a blockchain, it’s a mission to bring prosperity to all. Now is the moment to reimagine value creation, not by cutting or shrinking but by building and rewarding participation through new sources of protocol revenue.

@alex_Verda, as you’ve started this important conversation around tokenomics, can you help create a Celo Tokenomics Working Group to study, prototype and refine these ideas?

Together, let’s publish a “Celo Revenue 2.0” blueprint within three months, outlining clear paths for sustainability and long-term alignment.

If we do this right, we can prove that Celo can pair inclusive finance with sustainable protocol income and ship a token model worthy of a billion users.

[annaalexa]

This topic is scheduled for discussion on the upcoming Celo Governance Call #79 | Oct 23rd, 2025 today at 4pm UTC. We invite everyone here to join the call.

[Dee]

I want to bounce back on some of the comments made during the last governance call. A few key points were raised:

• Validator rewards are a large portion of the current epoch rewards → this portion would naturally be smaller if the Celo price were higher.
• This proposal is about cost-cutting → but it doesn’t address the core issue of value accrual to CELO holders.
• $3M going to (former?) validators is a high cost that could be spent elsewhere, on infrastructure or to even accelerate the transition to decentralized sequencers. Yet ironically, that might accelerate the downward spiral, by increasing selling pressure instead of creating demand.

But I think all of these arguments miss the main point.
They don’t answer the fundamental question: How does value accrue to CELO holders? Why should anyone buy and hold CELO today?

It’s a dangerous mindset to think “Celo could be better spent elsewhere.” Most projects or initiatives funded in CELO end up selling it to cover costs, adding to sell pressure without creating sustained demand. So who’s the counterparty? Who is buying Celo, and why should they?

In fact, one of the few remaining natural demand sinks for CELO today are the validators. They’re paid in cUSD, and their CELO equivalent stays locked in the Mento reserve. Many validators, myself included, actively buy back CELO. I participated in the Celo ICO and I’ve continued to buy at $4, $2, $1, $0.9, $0.4, $0.3 etc.

After the ICO, CELO was distributed to different stakeholders including stake-off participants (future validators). Yet among all these stakeholders, validators are among the very few who have consistently increased their CELO holdings. Most others have either sold or reduced exposure.

It’s easy to dismiss what I’m saying as unrealistic or idealistic. But if we are serious about Celo’s mission, we need to accept a hard truth: for Celo to fulfill its vision, CELO must become more valuable.
And that doesn’t happen through cost-cutting, it happens through creating yield and new income streams for the token.

If Mento were holding $1B in Celo stablecoins, it would be hard to see Celo’s FDV sit at $250M; a quarter of its 2020 ICO valuation. Something has to change. And it’s far more complex than tweaking a parameter to reduce the validator count.

Yesterday, I came across a story about Steve Jobs and Corning’s Wendell Weeks, when building the first iPhone. Jobs asked for Gorilla Glass to be ready for mass production in six months. Weeks initial reply was it’s impossible but we know the history.

“Fundamentally, every act of creation is an act of passion,” Weeks said. “It’s not an act of cold logic.”

That’s exactly what Celo needs now, vision and execution to continue building. Not austerity.

Proposal: let’s spin up a Tokenomics Working Group and do the work.
@alex_Verda, would you help organize the first session? Many of us deeply care about Celo’s future and will show up.

[yomfana]

Having reviewed the discussions from the governance call, the trajectory of this proposal has become increasingly clear, and it is a concerning one.

At its core, this proposal now exhibits a classic principal-agent problem. The agents (the proposers and their allies) are advocating for a policy under the banner of “strengthening tokenomics”. However their solution does not serve the best long-term interests of their principals (the Celo network and its broad stakeholder base). Instead, it serves a narrower interest at the expense of a foundational ecosystem cohort: the validators.

Let’s me correct a critical and repeated misconception: The proposed “savings” i.e. reducing validator payouts does NOT magically free up CELO for the Community Fund or other grants. The mechanics are clear: validator rewards are collateralized by CELO sent to the Mento reserve from the UnreleasedProxy. These are not liquid community treasury assets. To reallocate these funds would require a separate, likely contentious, governance proposal to drain collateral from the system. The whole argument reeks of extraction disguised as fiscal responsibility.

Therefore, we must treat this move for what it is: one operational group’s funding (validators) is being targeted, which implicitly improves the relative standing and potential claim to future resources of other groups. In the interest of transparency and accountability, we must ask:

1. Who benefits directly if validator payouts shrink?
2. Does this proposal consolidate influence or control? Remember that dismantled groups equate to some propotion of lost active governance votes.

If the answers suggest concentrated beneficiaries, this proposal must be held to a far higher standard of justification, with clear transparency on the ultimate economic winners and losers.

Furthermore, the time and time again framing of validators as a simple “cost center” to be optimized is not just short-sighted; it is a fundamental mischaracterization of their role. Validators are providers of critical public goods: decentralized high-quality RPC infrastructure, deep technical expertise, and the operational readiness required for future network transitions (like decentralized sequencing). To dismantle this cohort is to invite a “Tragedy of the Commons” where we systematically defund a shared resource until the entire ecosystem is degraded.

I find it deeply ironic that the entity ostensibly dedicated to public goods (“CeloPG”) are allying with a proposal that would gut one of the ecosystem’s most tangible public good providers. This forces a necessary question: What is the definition of a “Public Good” in the Celo ecosystem if not the entities that previously and potentially would secure, maintain, and scale its core infrastructure?

To the community, I urge you to consider the alignment of interests. Validators have for years locked capital, invested in infrastructure, and operated the network through its evolution. Their skin in the game is direct and substantial; their prosperity is inextricably linked to Celo’s long-term health. The proposers, by contrast, advocate for a change that reduces their own operational exposure, advances a weak and misleading (speculative, unproven and without a quantitative model) tokenomics argument, and potentially redirects the ecosystem’s focus (and future resources) toward their preferred domains.