The non-profit behind Sarafu Network and many other community inclusion currencies has found a new home on the Celo blockchain.
On Thursday 1 December, Grassroots Economics (GE) – the non-profit behind Sarafu Network – announced that it is moving to Celo. The move means that tokens issued by communities in GE’s ecosystem will now be issued on the Celo blockchain.
What is Grassroots Economics?
Founded in Kenya, GE is a non-profit that has been conducting research on Community Inclusion Currencies (CICs) for over a decade. CICs are a medium of exchange that can only be used within a certain community or network. They are typically designed with certain incentive structures that encourage holders to spend the currency instead of hoarding it.
In a world already awash with tokens, one might ask, why is a non-profit like GE focused on setting up infrastructure to help marginalised communities issue their own currencies?
The theory goes like this: A key challenge with humanitarian and development aid is that cash injections do not circulate for long in the targeted community. This raises questions about the sustainability of this approach.
To overcome this problem, CIC designers turned to issuing cash injections in the form of vouchers, and then such vouchers function as a currency in the targeted community.
Given it’s only businesses and individuals signed up to the program that will accept the vouchers as payment, this locks the injected value into that network.
The end result is the value circulates for longer in the targeted community, thus giving the businesses a better chance to flourish and start providing jobs and other types of services in that community.
In 2018, GE began issuing its vouchers in the form of blockchain-based tokens. Once users register for a CIC program, tokens are deposited to a blockchain wallet which is tied to their phone number and transferable via USSD, meaning users don’t need internet access.
As of July 2022, GE had helped 47 communities in Kenya and South Africa to develop their own CIC programs, the most well-known being Sarafu. In March 2021, the Kenyan Red Cross announced that it would begin distributing blockchain-based Sarafu tokens to anyone who registered for its new nationwide basic income system.
Among its partners, GE counts leading aid organisations that include the Red Cross, UNICEF and the World Food Program.
Why Did Grassroots Economics Move to Celo?
Prior to the Celo move, GE’s CICs were issued on its own self-hosted EVM sidechain called Kitabu. Before Kitabu, GE had run on the PoA blockchain in 2018, followed by a move to Gnosis chain (formerly xDai) in 2019, until Kitabu launched in 2021.
GE’s search for the ideal blockchain platform was driven by two competing needs: the benefits of a public blockchain, like security, decentralisation and liquidity, and the need for extremely low gas fees, given the income profile of the communities that GE works with. With the move to Celo, it appears GE has finally found an arrangement that meets both these needs adequately.
In a post titled Why Celo, GE founder Will Ruddick shared a list of nine reasons why GE is moving to Celo. A key reason is that Celo agreed to provide GE with enough stake to run a validator node. This will allow GE to cover user gas fees for CIC transactions using rewards that the Celo protocol provides to validators.
Celo has a PoS consensus mechanism which requires 10,000 CELO ($6,700 as of writing) to be locked up in order to qualify as a validator. Ruddick wrote that GE has been asking blockchain foundations for such support for some time and that it’s a “dream come true” that the Celo Foundation agreed.
Other reasons for why GE chose Celo include its physical presence in Kenya, its EVM compatibility, on-chain liquidity, mobile-first approach and humanitarian focus.
In his post, Ruddick also addressed criticisms of the move to Celo, including a perception that GE “sold out” by moving to a “VC Chain.” Responding to this criticism, Ruddick highlighted that the support from Celo meant that GE was now independent as it doesn’t need Celo’s help for gas fees, while at the same time the GE ecosystem will be enhanced by the benefits of being part of an established public blockchain.
Final Remarks
The move by GE to Celo makes a lot of sense, and frankly, it’s surprising this partnership didn’t happen sooner. Based on its ground game in Africa, it’s clear that Celo has a genuine commitment to the humanitarian applications of blockchain. At the same time, GE has a decade-plus track record of exploring how currency – as a technology – can be engineered to uplift marginalised communities.
Ruddick has previously shared a vision where networks of CICs are joined together via liquidity pools, allowing CIC holders to hop between communities with their value via decentralised exchanges. In his latest post, Ruddick confirmed that this plan is still on GE’s roadmap. The prospect of such an approach being tested on a major public blockchain marks GE as a project that we should continue to keep on our radar.
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