We Need To Talk About Governance

[nirvaan]

Hi all - I’m a bit late to the party, have been mulling over this since it was posted in August. @Thylacine I have great respect for your candor and confidence to get the ball rolling here.

I understand certain changes have already taken place driven by @tim on the last governance call, but expect it will be an iterative process to evolve Celo governance to keep up with the rapidly growing community, as @rene_celo @Xochitl and @0xZakk highlighted. I will try to not repeat points that have already been discussed at length, but rather provide my perspective from the operational side of administering allocations from the community fund.

Views expressed below are entirely my own and not reflective of organizations with which I am associated.

TLDR (my suggestions):

• Formalize framework for Permanent vs. Temporary use of funds (as @rene_celo outlined here); require CELO monetization schedule for grants and other permanent uses of funds / provide clear guidance for temporary uses of funds
• Document standard operating procedures for treasury management & administrators
• Prepare for Allo Protocol launch on Celo by establishing “Prezenti for Infrastructure” (as @tim outlined here)
• Distill this excellent thread into quantitative assessment of governance, and set tangible targets for improvement

About me:

I’ve been following Celo from inception, since a close family member worked at Celo Foundation. I initially entered the ecosystem as a developer in fall 2021 around the “DeFi for the People” hackathon, but stumbled upon @sep’s “Celo and Regenerative Finance” thread and, well, haven’t looked back since.

As employee #1 at Climate Collective - with tremendous support from @edward - I helped build CC from a loose coalition with a landing page, into a collaborative impact network dedicated to building out ReFi on Celo. I drove two CGPs for Climate Collective to establish & sustain a grants program for robust climate projects on Celo. With guidance from the multisig advisory team, I then selected and administered 40+ grants between Q1 2022 - Q3 2023. However, I have transitioned into an advisory role at Climate Collective and am no longer actively involved in new grant decisions; I am now working full-time at Flowcarbon.

Governance CV

1. Uniswap on Celo: Tally | Uniswap Proposal
2. Climate Collective 2022 Treasury: Celo Governance by Staking Fund
3. Chainlink on Celo: Celo Governance by Staking Fund
4. On-chain Offsetting: Celo Governance by Staking Fund
5. Credit Collective: Celo Governance by Staking Fund
6. Climate Collective 2023 Treasury: Celo Governance by Staking Fund
7. Centrifuge on Celo: Celo Governance by Staking Fund

What I want to talk about for Governance:

1. Nature of community fund - CELO monetized for dollars

@LuukDAO

It scares me that the majority of the Community Fund consists of CELO. As it feels, every time we spend, we’re cannibalizing our treasury value by putting sales pressure on CELO.

I echo @LuukDAO’s concerns: the community fund by nature adds considerable sell pressure on CELO token. A lower token price means that more CELO tokens are requested in proposals, which causes a vicious cycle. I see a few possible paths forward:

• Formalize rules around “Temporary” usage of funds, to encourage CELO tokens and TVL to remain on-chain (building on Rene’s comment linked in the TLDR). From what I’ve heard, the main rule is that the celo community fund cannot receive profits, but this isn’t documented and I am far from certain. If questions around temporary usage of funds are still unanswered, it will be difficult for the community to level up governance without guidance of what’s possible.
• Recipients should clearly include in proposals if/how they plan to monetize CELO tokens (“CELO Monetization Schedule” - preference for small clips over extended duration rather than large sell orders)
• [thinking out loud here] is it possible/feasible for the community vote for an OTC swap with Mento (ie. X amount of CELO for Y amount of cUSD/USDC)? this would help diversify the community fund holdings and reduce some sell pressure from the token. cc @roman for viz

2. Standard operating procedure for fund administrators

@tim

My second concern has been: many of the recent proposals have not been deeply rigorous, and have had gaps in terms of things like – asking for cUSD but the proposal being in CELO (approximately), asking for a buffer, asking for it all up-front without milestones

Treasury management is tough - particularly when grant agreements are denominated in cUSD while budget is denominated in CELO. Further, the convention with community fund disbursements is similar to “capital calls” (‘just-in-time monetization’) where fund administrators only withdraw & sell CELO when required (ie. after grantee milestone completion).

During periods of volatility, which characterized much of 2022, this leads to situations where the same cUSD-denominated grant commitment requires considerably more CELO tokens to cover. I gained a lot of experience last year gracefully renegotiating grant agreements while preserving relationships, but I don’t wish anybody to repeat this painful process.

This is why I think it’s reasonable to request a dollar-denominated amount of funding with a maximum CELO cap based on conservative but reasonable price assumptions. However I fully agree that no proposal should have 100% upfront disbursement, come what may.

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Beyond budgeting, from my experience it is virtually impossible to withdraw from the community fund without guidance from a human who has done it before, as there is no documentation. Building the transaction on Safe - specifically, manually copy-paste the correct GoldToken ABI to access the “transferFrom” method - is unintuitive and scary. I also think security guidelines should be on the Github repo or verified by approvers for eg. a multisig wallet with spend permit on the community fund should not be connected to Defi or the outside world.

Lastly, governance documentation should be kept up to date. For eg. after Celo Core Contracts Release 9 where the Upvoting phase is now concurrent with Referendum, this page should have been updated. Without it there is no indication of the governance timeline, and I don’t think these are adequate release notes for Core Contracts Release 9: Release core-contracts.v9 · celo-org/celo-monorepo · GitHub)

3. Roadmap with Allo Protocol

I had the pleasure of speaking with @0xZakk about all things grants and governance, and find it tremendously encouraging that Gitcoin & Allo Protocol have prioritized Celo to this extent. I only wish Allo were on Celo last summer which would have made my life considerably less stressful!

I think it behooves us to establish the “Prezenti for Infrastructure” ASAP (building on Tim’s comment linked in the TLDR) ahead of Allo Protocol launch - possibly with a few tech folks you’re proposing to add to the governance approvers list?

I’m expecting Allo to solve for:

1. Domain-specific vs. Protocol level decisions
2. Auditability (at least until grantee receipt; impossible if off-ramped)

I don’t think Allo can reasonably solve for:

@Thylacine

thought-leaders who are deeply embedded in the community in various ways, and have a really good sense of what Celo the protocol (and ethos) really needs to be funding at any point in time

Context is everything, and it’s impractical to expect consistently good decisions from folks who have limited day-to-day exposure to organizational priorities. We’ve experience this at Climate Collective and I imagine other ecosystem funds have as well.

@0xZakk

The project registry is where groups receiving and/or distributing capital create a profile. Each profile has a unique id pointing to some offchain metadata and an address, called an anchor, that is used for accruing reputation and tracking performance. Projects only need one profile across Allo. For example, Prezenti would have a profile in the registry, with metadata offchain for things like their name, website, and Twitter handle. As would any of the projects that they issue grants to. This makes it easy to review how much funding has been distributed and to which projects, per pool and across pools.

Ahead of the Allo launch, I think we should have a clear sense of which projects/individuals will be on this registry - which could very well be in the works and I may have missed it.

4. Quantitative Assessment of Governance Process

Overall I feel there are a plethora of excellent suggestions in this thread, and think it’s worth distilling this into cold hard numbers we can strive for in order to measurably improve Celo’s governance process.

@PierreN mentioned the Nakamoto coefficient, which I too am very curious about, and I think we would be well served by broader governance analytics (eg. historical funding sizes for different types of grants to anchor future proposals; graph with community fund balance & CELO price over time to understand withdrawal patterns, etc.)

@PierreN

• What is the minimum number of whales that need to collude before they achieved a guaranteed control over the decentralized governance mechanism?
  And in Celo’s specific case, what is the distribution of locked Celo? What is the impact of the possibility to vote with stCelo on this coefficient? Do validators actually use that feature?

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I hope this post provides some useful perspectives and suggestions that can help us collectively grow Celo governance to keep up with the rapidly growing ecosystem!