A Defi Mobile-First Platform for Fast, Secure and Cheap Digital Payments
Celo is a blockchain-based ecosystem created to drive crypto adoption among smartphone users. It was launched in a fully functional state in April 2020 by Rene Reinsberg and Marek Olszewski, two ex-executives of web hosting platform GoDaddy, along with Sep Kamvar and Marek Olszewski. What sets it apart from other platforms is that transactions in CELO and its stablecoins take only 5 seconds, incur fees as low as $0.001, and allow users to pay fees in the Celo asset that ‘they use.
The Celo platform offers ultra-fast mobile synchronization with the network and claims to be hyper-efficient thanks to thin clients on the devices. It is also compatible with dApp and allows developers to code decentralized applications on its blockchain. It even offers interoperability with MetaMask as well as Ethereum-based developer tools.
How does Celo work?
By replacing public keys (the addresses of crypto wallets) with unique mobile numbers, the Celo project aims to include everyone who does not have banking access within the framework of decentralized finance. Thus, it acts as a facilitator for global crypto payments by connecting all mobile phones in the world.
The Celo project can be broken down into four essential components:
1. Celo Platform: the decentralized blockchain and proof-of-stake protocol
The Celo platform has 100 network validators (or nodes) that perform blockchain proof-of-stake (PoS) operations. It uses the Byzantine Fault Tolerance (BFT) mechanism, which interconnects all nodes in the network in real time. A node must “bet” at least 10,000 CELO coins in order to gain the right to vote on the proposed changes. Staking involves committing tokens to the network for development purposes and gaining validator rights in the process.
The platform not only has several native stablecoins, but is also ERC-20 compatible, which means the Ethereum blockchain powers it. The platform maps individual mobile phone numbers to crypto wallet addresses, making it an enhanced peer-to-peer (P2P) mobile transaction system with dApps. Its smart contract platform can be coded from scratch and users can pay gas fees in stablecoins. These gas fees reward the validating nodes.
2. CELO: The native crypto token of the blockchain
CELO is the utility, governance and staking token of the Celo protocol. This means that owning the token allows you to transact, vote on network/protocol changes, and stake it to become a validating node and earn rewards. It is also used to maintain the Celo Reserve – a large basket of crypto assets, including various cryptocurrencies and other assets used to maintain price stability.
There is a maximum of 1 billion CELO tokens, 60% of which were released at launch. The remaining 40% will be gradually released through gas fees and staking rewards. Additionally, 120 million tokens will be used to maintain the Celo reserve. Its ERC-20 compliant nature means it can be traded on different platforms.
3. Celo stablecoins:
Celo stablecoins allow anyone to transact instantly and affordably. Celo-enabled mobile apps or browser clients allow users to buy and sell these coins. There are three such stablecoins today – cUSD, cEUR and cREAL.
Here are some features of Celo stablecoins:
Low risk: Fiat-based tokens (tokens linked to physical currency) rely heavily on banks for verification of available collateral. Since the agents do not involve themselves in the activity, complete trust in the central authority must be maintained.
Stability: Since the Celo protocol uses an algorithmic stability mechanism, the supply and demand for stablecoins is controlled by the protocol itself. Through various simulations, the developers were able to prove that the algorithm is extremely reliable and powerful.
Transparency: Since stablecoins are powered by the blockchain, all transactions occur on-chain and are secure and traceable.
4. Celo Alliance: The platform that encourages community building
The Celo Alliance is built on the belief that the best way to learn and solve real-world problems is through collaboration, which should be encouraged. The Celo Alliance connects users with people with similar interests and thoughts, so ideas can come together as a team. One can even participate in the development of the CELO platform itself through the alliance.
Celo use cases:
1. Payments: Cross-border transactions on Celo are cheaper and safer. It therefore stimulates cross-border exchanges and commercial activities.
2. Savings: The Celo platform incentivizes users to hold and transact Celo stablecoins.
3. Decentralized Finance (DeFi): There are 4K+ DeFi solutions built on the Celo platform, including Ubeswap and Moola, which are gateways to DeFi enabling pooling, lending, and borrowing.
4. Staking: One can earn passive income by pledging their CELO coins to the network for development purposes.
Climate Collective: In a one-of-a-kind initiative, numerous organizations have come together to “tokenize the natural assets” that will support Celo stablecoins. Over the next four years, the Climate Collective will work to sustain 40% of the Celo Preserve with carbon-limiting resources like rainforests.
The CO gift: