Celo has made significant progress in local stablecoin adoption (cCOP, cREAL, BRLA), but its FX markets remain inefficient. Price gaps between CEXs and CELO DeFi remain largely unexploited due to a lack of deep liquidity for fundamental assets and arbitrage infrastructure. This proposal leverages MEV to align incentives between market makers, the sequencer (later leading to the validators), and searchers, aiming to make it profitable for arbitrageurs and market makers to interact with Celo. This will drive activity, increase sequencer fees, and ultimately improve validator rewards and CELO demand.
As outlined in our March report, we’ve been running experiments with arbitrage strategies and local stablecoin providers, resulting in consistent monthly volumes and tighter conversion spreads across multiple markets.
So far, Credit Collective has processed over 1.85 million transactions across Carbon DeFi, Aave, and Uniswap, representing a cumulative volume of more than $35 million. We believe there’s a clear path to scaling this activity 10x over the next 12 months.
We propose:
Celo has laid the groundwork for real-world adoption of stablecoins, assets like cCOP, cREAL, cKES, BRLA, and COPM are already gaining traction in payments, savings, and DeFi. But there’s a basic component still missing to bring the Celo market to the efficiency needed. In traditional FX markets, liquidity and arbitrage form a flywheel: deep liquidity enables arbitrage opportunities, arbitrage tightens spreads and aligns prices, tighter spreads bring more volume, and higher volume incentivizes market makers and LPs to deepen liquidity even further. It’s self-reinforcing.
Depth → Arbitrage → Efficiency → Volume → More Depth
In crypto, this function is typically driven by bot searchers. However, fragmented liquidity and relatively shallow pools have limited the full activation of this dynamic on Celo. We’re facing a classic chicken-and-egg problem: you need liquidity to have arbitrage, and efficient arbitrage to attract liquidity.
So far, players like Credit Collective have focused on growing transaction volume, using multiple cheap liquidity pools (low fees), while significantly increasing volumes, but it hasn’t broken the chicken and egg cycle. We propose shifting the focus to kickstarting the Liquidity <> Arbitrage cycle as the coordination layer between validators, liquidity providers, and searchers Let’s also be clear: this can’t be solved just by the community recycling its own liquidity. We need external capital. And to attract that capital, we need to create an ecosystem where it’s profitable to participate.
MEV arbitrage isn’t just a trading strategy; it’s the coordination layer that orchestrates LPs and validator revenue.
There’s an unspoken agreement between LPs and validators:
The result? Healthy, recurring returns on the three sides.
We think of MEV in three categories:
We acknowledge these risks and plan to address them in future discussions. But for now, the key insight is:
Bots, not humans, do most blockchain transactions. These bots keep the system efficient. And the truth is:
On Proof-of-Stake chains, arbitrage is not just a trading game; it’s a key driver of sequencer revenue, validator rewards, and ultimately network security.
Every swap generates a fee, and arbitrage bots are often the most active source of this volume. They continuously scan for price gaps between DEXs and CEXs, execute profitable trades, and in doing so, generate high-frequency flow that sustains the system.
This creates a flywheel:
But again, it only works if deep liquidity exists to support it.
Arbitrage isn’t just about validator rewards; it’s also the mechanism that makes providing liquidity profitable and sustainable.
In an ideal world, LPs earn fees from organic trading activity. But in early or fragmented markets, that volume doesn’t appear out of thin air. Bot searchers create the volume.
When arbitrage bots actively trade across pools:
This sets off its own flywheel:
But again, this flywheel only spins if the infrastructure exists to support searchers.
In ecosystems like Ethereum, Curve, and Uniswap, the top LPs are sustained not by casual traders but by arbitrage flows. Bots are their best customers.
So if we want to attract liquidity to Celo, we need to:
Deploy $3M across three actively evergreen managed pools (to where most needed) to build liquidity:
Why these pools?
Why these sizes?
Once searchers build infrastructure for these pairs, expanding to other assets becomes easier.
Support this with:
This is a 24-month initiative focused on building and testing arbitrage infrastructure, growing liquidity participation, and onboarding new stablecoin providers to Celo. We expect to work iteratively, with multiple feedback cycles, and publish progress updates throughout.
| Phase | Timeline | Milestone |
|---|---|---|
| Phase 1 | Months 0–3 | Deploy initial liquidity pools (CELO/BTC, CELO/ETH, CELO/USDT). Begin internal development of arbitrage bot architecture. |
| Phase 2 | Months 4–6 | Run first internal arbitrage transactions. Build basic monitoring and analytics tooling. Evaluate pool performance and spreads. |
| Phase 3 | Months 7–12 | Release open-source bot infrastructure. Establish feedback loop with LPs and searchers. |
| Phase 4 | Months 13–18 | Expand searcher adoption. Improve routing logic, performance, and error handling. Begin active outreach to new stablecoin issuers. |
| Phase 5 | Months 19–24 | Support on-chain onboarding of new regional stablecoins. Evaluate impact on FX spreads and liquidity depth. Publish full-cycle report and recommendations. |
Requested Allocation:
| Category | Allocation | Description |
|---|---|---|
| Liquidity Provision | 9,147,160 CELO | Deployed across CELO/BTC, CELO/ETH, and CELO/USDT pools to enable base liquidity and tighter FX spreads |
| Arbitrage Liquidity | 80,000 cUSD | Operational capital for executing arbitrage trades and validating bot performance |
| Infrastructure and Operations | 154,000 cUSD | Infrastructure to build, run, and monitor arbitrage bots: trade logic, servers, dashboards, analytics |
| Open-Source Development | 30,000 cUSD | Documenting and maintaining public tooling |
| Legal and Accountability | 36,000 cUSD | Legal review, compliance, governance reporting |
| Total | 3.3M cUSD | Equivalent to 300,000 cUSD + 9,147,160 CELO (based on 90-day avg of $0.3279) |
To assess the effectiveness and sustainability of the FX infrastructure initiative, we will track and report on the following indicators:
By aligning incentives between validators, LPs, and arbitrage operators, we can build a robust efficiency layer on Celo. This is how we turn fragmented, underused markets into seamless, efficient FX rails. This is how we external idle capital into productive liquidity on Celo. And this is how we position Celo as the chain where the FX market flows across borders, cheaply, transparently, and at speed.
We believe this proposal marks the next evolution of Credit Collective: from a grant-supported initiative to a self-sustaining, evergreen engine powering Celo’s FX layer.
As part of this transition, we’re exploring a new name that reflects this chapter. If you have ideas, we’d love to hear them.
This is intended for public discussion, and we warmly welcome any feedback from the community. If you have specific recommendations or require any clarification, please don’t hesitate to contact me on Telegram: @tomeriko_textile
The multisig responsible for managing Credit Collective strategy has a 3-of-5 multisig.
Current Signers:
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An explanation of how voters can verify that this CGP does what it intends to do. Can be left as “TODO” until the proposal is made. Include things like CLI commands to run and pointers to code.