The Great Celo Halvening - Temperature Check

Governance Governance Proposals
1

Proposal Key Aspects

  • Receiver Entity: Celo Governance
  • Status: DRAFT
  • Title: Celo L2 Tokenomics Adjustment Proposal
  • Author(s): cLabs Team
  • Type of Request: Network Decisions & Protocol Improvements
  • Funding Request: N/A - This proposal outlines tokenomics changes rather than requesting funding
  1. Summary
    This proposal outlines significant adjustments to Celo’s tokenomics in preparation for the transition to L2. The key changes include halving the network’s inflation rate from 2% to 1%, realigning staking rewards, adjusting validator RPC provider rewards, and modifying the transaction fee allocation structure. These changes are designed to ensure long-term sustainability while adapting to the new L2 architecture that leverages Ethereum for base security.

This proposal was originally proposed by Marek here.

  1. Motivation

The transition to Celo L2 necessitates a fundamental reevaluation of the network’s economic model. With Ethereum providing base security in the L2 architecture, the current tokenomics structure needs to be adapted to reflect new operational requirements while maintaining the network’s commitment to sustainability, decentralization, and economic resilience.

  1. Specification

Key changes include:
- Reduction of inflation rate from 2% to 1% (“The Great Celo Halvening”)
- Staking rewards adjustment from 3.77% to 1.8-2%
- Validator RPC provider rewards reduction from 58K cUSD to 30K cUSD annually
- Transaction fee reallocation:
- 10% to carbon offset fund (reduced from 20%)
- 90% to network operations (including Data Availability, L1 Fees, Sequencer and Batcher Operations)
- 50% reduction in carbon offset fund contributions while maintaining carbon-negative status

  1. Metrics and KPIs

    • Maintenance of network inflation rate at approximately 1%
    • Staking participation rates
    • Validator performance and uptime
    • Carbon offset levels (maintaining carbon-negative status)
    • Network operational efficiency in L2 environment

  2. Current Status

This is a new proposal for the upcoming L2 transition. The current tokenomics model is operational but requires adjustment for the L2 architecture.

  1. Timeline and Milestones

After the L2 transition.

  1. Detailed Budget

N/A

N/A

  1. Payment Terms

N/A

  1. Team

N/A

  1. Additional Support/Resources

N/A

Full body of the proposal can be found here.

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