feat: add Mento spin-off and launch proposal (#443)

* feat: add Mento spin-off and launch proposal

* fix: rename it to 138 because there's already a PR for 137

* fix: change wording on scope

* fix: typo and CGP number

* fix: fix list of owned contracts

CGPs/cgp-0139.md

@@ -0,0 +1,296 @@
+---
+cgp: 139
+title: Mento Spin-off and Launch of the MENTO token
+date-created: 2024-05-23
+author: "Bogdan Dumitru <[email protected]>, Roman Croessmann <[email protected]>, Markus Franke <[email protected]>, Oleksiy Novykov <[email protected]>"
+status: DRAFT
+discussions-to: https://forum.celo.org/t/mento-spin-off-and-launch-of-the-mento-token/7747
+governance-proposal-id:
+date-executed:
+---
+
+## Summary
+
+This proposal aims to spin-off Mento Governance and launch a MENTO token to further support the development of the
+Mento Protocol. The MENTO token breakdown, which includes an airdrop to the Celo Community Treasury, CELO holders,
+and early Mento stablecoin users, is included. If this proposal passes, Mento Governance will be established.
+In the future, a follow-up proposal will be submitted to hand over the control of all Mento smart contracts
+from Celo Governance to Mento Governance.
+
+## Motivation
+
+In recent years, Mento has cemented its role as the largest Celo-native project, with four stablecoins issued
+and over 2.4M active users, as of March 2024. To further propel Mento towards its vision of onboarding a billion
+Web3 users through adopting digital assets worldwide, it is essential to further evolve the Mento Protocol and
+establish an ecosystem of Mento builders, dApps, and service providers.
+
+This CGP proposes to launch the MENTO token and separate Mento Governance to accelerate the development and
+increase the resilience of the Mento Protocol. This transition will allow Mento stakeholders to focus even
+more on its development and create pathways toward self-sustainability. The community discussion around the
+launch of a Mento-specific governance token was kicked off in Nov. 2023 (link 3), and the topic has already
+been discussed in previous community calls.
+
+If Celo Governance votes in favor of this proposal, the MENTO token will be deployed and distributed to
+stakeholders of the Celo and Mento ecosystems.
+
+## High-Level Design Components
+
+1. MENTO Token: An ERC-20 token on Celo is the core of the system. It can be locked in exchange for
+   veMENTO to participate in voting on Mento Governance proposals.
+2. veMENTO locker: A locking contract where users can lock their MENTO tokens, in exchange for Mento
+   Governance tokens (veMENTO).
+3. Governor: A contract that allows any user to create new Mento Governance proposals.
+4. Governance Executor: The main governance contract serves two functions:
+   - Executing queued proposals that have passed governance voting
+   - Community treasury that stores the governance allocation for future initiatives. It is time-locked
+     to allow the Mento Watchdog Multisig to veto proposals that are deemed malicious. It will also hold
+     Mento Community Treasury funds.
+   - Emission Contract: A contract that emits MENTO tokens from its allocation to the Mento Governance
+     Executor on a predefined schedule. It follows an exponential decay function, which means that new
+     emissions will get smaller and smaller until the entire allocation has been emitted around the year 2060.
+5. Governance Factory: The smart contract that deploys the entire governance system with all relevant contracts.
+   It is used only once to set up the system and can’t be used again after governance exists.
+6. Watchdog Multisig: a multisig that consists of technical community members responsible for making sure that
+   the execution code of the proposals matches their description (described further in this proposal below).
+7. Proxy Admin: An admin contract owned by the Mento Governance Executor that can upgrade the following contracts in the system:
+   - Mento Governance Executor
+   - Mento Governor
+   - Mento Token
+   - Emissions contract
+   - veMENTO Locking
+
+## Governance Scope
+
+The Mento Protocol consists of the following elements:
+
+- A suite of Smart Contracts deployed on the Celo Mainnet:
+  - StableTokenXXXProxy (for all Mento Stables)
+  - ReserveProxy
+  - BrokerProxy
+  - BiPoolManagerProxy
+  - BreakerBoxProxy
+  - MedianDeltaBreaker
+  - ValueDeltaBreaker
+- Reserve funds which are held on Celo, Ethereum, and Bitcoin blockchains in a variety of ways:
+  - Custodians;
+  - Multi-signature wallets;
+  - LP tokens on Reserve positions in various pools;
+  - ReserveSpenderMultisig rights
+
+Mento Governance will receive control over all of the pieces mentioned above as part of the governance transition process.
+This proposal will only create the token and governance system, so we can test it before we fully transition.
+
+## Initial Token distribution
+
+MENTO token will have a maximum total supply of 1,000,000,000 (one billion) tokens.
+Overall distribution was defined by the Mento Community and will be as follows:
+
+- 45% for: Mento Community Treasury (5% upfront, 40% emissions over a schedule)
+- 30% for: Mento Labs Team, Investors, Future Hires, and Advisors
+- 10% for: Mento Liquidity Support
+- 5% for: Airdrop to Celo and Mento Stable Asset users
+- 5% for: Airdrop to Celo Community Treasury
+- 5% for: Mento Reserve Safety fund
+
+### Mento Community Treasury
+
+Purpose: The Mento community can spend tokens from the treasury to foster the Mento Platform’s development.
+The tokens can be spent on grants, liquidity incentivization programs, etc. The decision to spend tokens from
+the Treasury is always subject to Governance. To incorporate the will of the community the
+Mento Protocol Foundation will be set up.
+
+Distribution: 450M tokens (45% of total supply) with 50M available at Genesis Block. The tokens will be
+emitted to the Treasury via exponential decay with a half-life of 10 years.
+
+Voting rights: No
+
+### Mento Labs Team, Investors, Future Hires, Advisors
+
+Purpose: Reward core contributors, investors, and advisors. Get the best talent to contribute to the Mento Protocol in the future.
+
+Distribution: 300M tokens (30% of total supply). Existing Mento Labs employees, investors, and advisors will receive their MENTO tokens split into two parts:
+
+1. veMENTO portion (25% of the allocation)
+   To seed voting power to the team and investors, 25% of the allocation will be distributed as veMENTO locked for
+   1 year starting at the token distribution event. The allocation will allow team members to vote from day one using delegation.
+   However, the beneficiary will only get full control of the lock after their cliff period has passed.
+2. MENTO portion (75% of the allocation) 75% as MENTO with a 1-year delay and 3 years linear vesting starting
+   at the token distribution event. This means the plan will kick in 1 year later, and linearly unlock for the subsequent years.
+
+Voting rights: Yes, with the veMENTO portion.
+
+### Mento Liquidity Support
+
+Purpose: The purpose of the Mento Liquidity Support is to support the Mento ecosystem through funding mission-aligned initiatives.
+The focus of this allocation is to support the liquidity of the MENTO token and the Mento Platform stablecoins.
+
+Distribution: 100M (10% of fully diluted supply)
+
+Voting rights: No
+
+### Initial Airdrop to CELO holders and Mento stable assets users
+
+Purpose: Reward existing community members and users for their past contributions to developing and using Mento stable assets and the Celo ecosystem.
+
+Distribution: 50M tokens (5% of the fully diluted supply). Eligible address owners can claim their allocation,
+which they will receive as a veMENTO locked for 2 years with linear unlock. Further details about the eligibility criteria are provided below.
+
+Voting rights: Yes.
+
+### Airdrop to Celo Community Treasury
+
+Purpose: Long-term incentive alignment between the Celo and Mento communities.
+
+Distribution: 50M (5% of fully diluted supply) with a 2-year delay followed by a 6-year linear vesting period via Hedgey 5 token vesting platform.
+
+Voting rights: No
+
+### Mento Reserve Safety Fund
+
+Purpose: An allocation to the Mento Reserve will be used as stablecoin collateral in the worst-case scenario of a loss-of-value
+in primary collateral (USDC, DAI, etc.) through credit default events, hacks, etc.
+
+Distribution: 50M (5% of fully diluted supply)
+
+Voting rights: No
+
+## Transferability
+
+The MENTO token will be non-transferable at the genesis block (token and governance deployment block).
+Holders can claim their allocation, lock it as veMENTO, and participate in governance, but not transfer the token.
+At some point in the future, when certain milestones to be decided by the community are reached,
+the transferability of the token can be turned on through a Mento governance proposal.
+
+## What’s in it for CELO stakeholders
+
+Having been incubated primarily by the Celo ecosystem, Mento recognizes this support and aims to reward CELO stakeholders
+to keep them involved and continue to have a strong relationship with Celo.
+
+A total of 100M (10% of the total supply) Mento Tokens, equivalent to 16.67% of the initial supply, is allocated for
+Celo stakeholders between the Celo Community Treasury allocation and the CELO holders and cStables user airdrop.
+
+### Airdrop to Celo Community Treasury
+
+At Genesis, 50M MENTO will be allocated to the Celo Community Treasury (unlocking over 8 years).
+This allocation aims to provide the Celo ecosystem with long-term upside and influence in the Mento Protocol.
+It can also be used to support cStable and other Mento stable token utilities further on the Celo network.
+
+### CELO Holders and cStables user airdrop eligibility criteria
+
+The distribution of the MENTO token will start with an airdrop to CELO holders and early cStable users.
+Mento recognizes that their early support has been pivotal for the protocol, and these users are well-suited to govern it,
+given the history of Mento Improvement Proposals that have been voted on in Celo Governance.
+
+50M MENTO will be distributed in the initial airdrop to users based on the following criteria:
+
+- Staked at least $10 (US dollars) worth of CELO (amount based on avg. over 16 monthly snapshots,
+  taken between November 15th, 2022, and February 15th, 2024);
+- Held more than $10 (US dollars) worth of any of Mento’s decentralized stable assets (amount based on avg. over 16 monthly snapshots,
+  taken between November 15th, 2022, and February 15th, 2024);
+- Transacted in any of Mento’s decentralized stable assets with a volume greater than $100 (US dollars)
+  (volume calculated as the cumulative sum over the 16 monthly snapshots between November 15th, 2022, and February 15th, 2024).
+
+Claimable amounts are concave (think square root) in the balances of locked CELO and Mento stablecoins, as well as the Mento stablecoin volumes:
+
+- 50% allocated to locked CELO holders
+- 50% allocated to Mento stablecoin holders
+
+The airdrop period will last for 8 weeks. After it finishes, an unclaimed part of community allocation will be returned to Mento Treasury for future airdrops.
+
+## Watchdog
+
+At the start, the Mento protocol will establish a watchdog group to oversee the protocol’s governance process and ensure technical
+parts of the governance proposals (execution code) match what’s written in the proposal.
+
+The group is controlled by a 3 out of 9 SAFE multi-signature wallet (multisig) with a special right to veto
+(meaning to cancel the execution of) any governance proposal within 48 hours after it passes.
+
+The following criteria are considered for the first proposal of watchdog members. A watchdog committee member should:
+
+- be mission-aligned with Mento Protocol and Celo community;
+- be an active contributor to one of the projects in the Celo ecosystem;
+- have a technical background, given that the one and only responsibility is to review the proposal’s execution code.
+
+List of proposed members of the Mento watchdog committee:
+
+- Bogdan Dumitru (CTO, Mento Labs).
+- Bayo Sodimu (Head of Engineering, Mento Labs).
+- Phillip Paetz (Software Engineer, Mento Labs).
+- Baransel Tekin (Software Engineer, Mento Labs).
+- Luuk Weber (Founder, Kolektivo Labs).
+- Martin Chrzanowski (Software Engineer, cLabs).
+- Martin Volpe (Software Engineer, cLabs).
+- Silas Boyd-Wiziker (CTO, Valora).
+- Marek Olszewski (CTO, cLabs).
+
+The watchdog multisig was deployed with address 0xE6951C4176aaB41097C6f5fE11e9c515B7108acd.
+
+## Proposal details
+
+### Mento Protocol Governance Creation
+
+The spin-off and Governance transition plan will be executed in two steps:
+
+1. This proposal spins up the MENTO token, governance, locking, and airdrop contracts.
+2. A follow-up proposal will come later, and governance rights will be transferred over the above-mentioned contracts.
+
+This allows the system to spin up and allows us to test governance in isolation before executing the full transfer.
+
+The governance spin-off, which is the subject of this proposal, happens through the factory contract, which can be found [here](https://github.com/mento-protocol/mento-core/blob/develop/contracts/governance/GovernanceFactory.sol).
+
+Through the `createGovernance` method, the factory contract does the following:
+
+1. Deploys an OpenZeppelin ProxyAdmin.
+2. Deploys the Mento Token 2 which during construction mints the initial allocation following the distribution above.
+3. Deploys the Emissions contract which will be responsible for the minting of the MENTO tokens to the Treasury according to the minting schedule.
+4. Deploys the Airdrop contract 3 which community members will be able to redeem against.
+5. Deploys the Locking contract which will be used to lock MENTO for veMENTO to participate in the Governance.
+6. Deploys the OpenZeppelin TimelockController which will manage the timelock for the Governance proposals and ultimately act as the ProxyAdmin controller and treasury for the protocol.
+7. Deploys the MentoGovernor, an instance of OpenZeppelin’s Governor configured for our needs. It will use the TimelockController from step (6).
+8. Sets ownership of all the contracts deployed in steps 1-5 to the TimelockController from step (6).
+
+### Mento Protocol Foundation Setup
+
+To support the on-chain Mento Protocol DAO a Mento Protocol Foundation is being established which is supposed to support Mento ecosystem
+growth - a foundation that is helping to execute the will of the community. To finance this foundation during times in which the MENTO
+token is non-transferable, this proposal suggests that a loan of 800k USD and a maturity of 1 year is provided by the Mento Reserve to
+the Mento Protocol Foundation. The loan amount is to be financed from the BTC and ETH part of the Mento Reserve and will be used to cover
+entity setup costs, legal costs as well as early foundation expenses required for fostering Mento ecosystem growth. It is expected that
+the foundation will receive funding from the Mento Community Fund going forward to repay the loan and to cover future expenses.
+
+## Verification
+
+The whole deployment code has been audited, intent can be verified by reading the code. There is a single function call in the proposal:
+
+**createGovernance**:
+
+- watchdogMultisig\_: address == 0xE6951C4176aaB41097C6f5fE11e9c515B7108acd
+- airgrabRoot: bytes32 can be verified here: https://github.com/mento-protocol/mento-deployment/blob/main/data/airgrab.celo.root.json
+- fractalSigner: address can be verified here: https://docs.developer.fractal.id/legacy-integrations/fractal-credentials-api#environments
+- allocationParams: MentoAllocationParams: should match the allocation description in the proposal.
+
+There are additional parameters that are staticially defined in the GovernanceFactory contract:
+
+```
+// Airgrab configuration
+uint32 public constant AIRGRAB_LOCK_SLOPE = 104; // Slope duration for the airgrabbed tokens in weeks
+uint32 public constant AIRGRAB_LOCK_CLIFF = 0; // Cliff duration for the airgrabbed tokens in weeks
+uint256 public constant AIRGRAB_DURATION = 10 weeks;
+uint256 public constant FRACTAL_MAX_AGE = 180 days; // Maximum age of the kyc for the airgrab
+uint256 public airgrabEnds;
+
+// Governance Timelock configuration
+uint256 public constant GOVERNANCE_TIMELOCK_DELAY = 2 days;
+
+// Governor configuration
+uint256 public constant GOVERNOR_VOTING_DELAY = 0; // Delay time in blocks between proposal creation and the start of voting.
+uint256 public constant GOVERNOR_VOTING_PERIOD = 120_960; // Voting period in blocks for the governor (7 days in blocks CELO)
+uint256 public constant GOVERNOR_PROPOSAL_THRESHOLD = 10_000e18;
+uint256 public constant GOVERNOR_QUORUM = 2; // Quorum percentage for the governor
+```
+
+## Risk
+
+This proposal doesn't change anything in the Celo Protocol, it just seeds Mento Protocol Governance, therefore it currently poses no risk.
+After the proposal passes and the airdrop starts, we will do more testing to ensure that the governance system works as intended and reaches
+equilibrium before transfering Mento Protocol ownership as described in the Governance scope section.

CGPs/cgp-0139/mainnet.json

@@ -0,0 +1,29 @@
+[
+  {
+    "contract": "GovernanceFactory",
+    "address": "0xee6CE2dbe788dFC38b8F583Da86cB9caf2C8cF5A",
+    "function": "createGovernance",
+    "args": [
+      "0xE6951C4176aaB41097C6f5fE11e9c515B7108acd",
+      "0x1c598bb5ad0b99c0f07235c1bd7327884bf9a74c9454c3d2a937fbe8336d071b",
+      "0xacD08d6714ADba531beFF582e6FD5DA1AFD6bc65",
+      [
+        "50",
+        "50",
+        [
+          "0x655133d8E90F8190ed5c1F0f3710F602800C0150",
+          "0xA74Ac93de1A209957E62391B01E09161277a9ffC",
+          "0x3468D23A0B1aB3Ab9A537813166A8f7ff1947014",
+          "0x87647780180B8f55980C7D3fFeFe08a9B29e9aE1"
+        ],
+        [
+          "300",
+          "100",
+          "50",
+          "50"
+        ]
+      ]
+    ],
+    "value": "0"
+  }
+]