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Celo ($CELO) surged over 20% on Wednesday after Ethereum co-founder Vitalik Buterin highlighted the blockchain project’s increased adoption for stablecoin usage.
At the time of writing, only Tron (TRX) had more daily active stablecoin addresses than Celo, data on Artemis showed.
Are you wondering whether Celo crypto is a good investment? In this article, we analyze the Celo blockchain and explain why it plans to transition to an Ethereum layer two (L2) chain.
What is Celo Crypto?
Celo is a blockchain network that aims to simplify cryptocurrency usage by making crypto payments “as easy as sending a text message.”
According to its whitepaper, Celo uses an address-based encryption protocol that allows users to use a phone number or email address as a public key for crypto transfers.
The project launched in 2020 as a proof-of-stake (PoS) layer one (L1) blockchain. Here are some key features of the Celo blockchain that make it different from the competition:
- Stablecoin Ecosystem
- Mobile-First
- Carbon Negative
- Fee Abstraction
- Block Rewards
Stablecoin Ecosystem
Celo has an ecosystem of stablecoins pegged to various fiat currencies including the US dollar, Euro, and Reals. Celo stablecoins are backed by its native token CELO and other cryptocurrencies. The Mento platform on Celo is dedicated to “launching a stablecoin for every currency in the world.”
Mobile-First
Celo is designed to be a mobile-first blockchain that allows phone numbers to be used as wallet addresses. The Cello Wallet also allows users to send crypto to people who are not yet onboarded to the network. In such cases, the crypto is held in an escrow account until the recipient maps their phone number with the Celo blockchain.
Carbon Negative
Celo is a carbon-negative blockchain that allocates a portion of every transaction fee paid on the network towards carbon offsetting and sustainability projects. According to climate platform Wren, Celo has offset 4,177 tons of carbon emissions, equivalent to avoiding over 4,300 flights from Los Angeles to Paris.
Celo simplifies crypto transactions by allowing users to pay gas fees in stablecoins and various ERC-20 tokens.
Validators on Celo are paid in a stablecoin called Celo Dollars (cUSD). The protocol also rewards users who lock up their CELO tokens and vote for validators to earn CELO for participation in governance.
Why Does Celo Want to Become an Ethereum L2 Chain?
In July 2023, Celo’s core development team, cLabs, proposed transitioning Celo from an independent L1 chain to an Ethereum-based L2.
The proposal said that Celo would use the OP Stack to transition to an Ethereum L2. Celo L2 would also use EigenDA as an off-chain data availability layer.
cLabs argued that the move would result in the following advantages:
- Cross-Community Collaboration – As an EVM-compatible blockchain, Celo has always been close to the Ethereum ecosystem. cLabs noted that adopted Ethereum improvement proposals (EIP) such as EIP-1559 (gas fee reductions) and EIP-4337 (account abstraction) aligned with Celo’s mission of addressing “the biggest barriers to global crypto adoption as a means of payment.”
- Enhanced Compatibility – cLabs argued that Celo as an L2 chain will eliminate the need to monitor compatibility and will make it easier for Celo developers to use Ethereum tools and code libraries.
- Increased Security – According to cLabs, Celo’s transition to an L2 will improve its security threshold “multifold” by anchoring its state on the Ethereum mainnet.
- Low Gas Fees – As an Ethereum L2, Celo can maintain its low gas fee. The use of off-chain data availability will allow gas fees to be much lower compared to other L2s, said cLabs.
In July 2023, a temperature check vote passed, with nearly 100% of the Celo community voting in support of the Ethereum L2 transition proposal.
“I’m incredibly happy that Ethereum chose to adopt its current Layer 2-based scaling roadmap instead of the original sharding design. Not only does it address the scalability trilemma more effectively, but as Vitalik points out, it is more pluralistic — better suited to fostering diverse approaches and cultures,” said Marek Olszewski, CEO of cLabs.
“I suspect this pluralism was key to the Celo community’s governance decision to transition to a Layer 2 and why the Ethereum community has welcomed us so warmly,” added Olszewski.
CELO Tokenomics
CELO is the native token of the Celo blockchain.
The token has a maximum supply of 1 billion tokens. As of September 26, 2024, over 548.1 million CELO tokens, or 54.8% of max supply were in circulation.
The CELO token was the 157th largest crypto in the world with a market cap of $354.5 million, at the time of writing.
Here is what the CELO token is used for:
- Reserve asset for Celo stablecoins.
- To maintain fiat pegs of Celo stablecoins by algorithmically balancing demand excess or shortage.
- Staking.
- Governance.
CELO Crypto News & Price Analysis
In this section, we take you through the latest Celo crypto news and look at how they have affected CELO’s price.
Early Rise to CELO ATH
The CELO token debuted in the first half of 2020. It reached an all-time high of $10.66 in late August 2021, when L1s such as Cardano (ADA), Avalanche (AVAX), and Solana (SOL) were growing in popularity as alternatives to smart contract platform leader Ethereum.
As the crypto bull run of 2021 wore off, CELO prices slumped to below $1 within 12 months of hitting their record high.
After seeing five straight months of losses, CELO investors found respite as the token spiked over 54% in January 2023 following cLabs’ announced plans to improve Celo’s compatibility with Ethereum.
CELO Catalysts & A Volatile 2024
Ethereum-related announcements proved to be a catalyst for CELO again in July 2023, as the token broke a four-month losing streak following cLabs’ proposal to transition Celo from an independent L1 blockchain to an Ethereum L2.
CELO coin price has been volatile throughout 2024. At the time of writing, CELO was down about 20% in year-to-date terms.
On August 5, 2024, CELO hit an all-time low of $0.3617.
Occasional price spikes have been triggered by positive CELO crypto news, such as the Eigen Foundation awarding a strategic grant to the Celo Foundation after cLabs proposed EigenDA as its data availability partner.
On July 7, 2024, Celo’s L2 testnet went live on the Ethereum blockchain.
On September 25, 2024, CELO token surged over 20% after Buterin highlighted the growing adoption of Celo’s stablecoins.
This is amazing to see. Improving worldwide access to basic payments/finance has always been a key way that ethereum can be good for the world, and it's great to see @Celo getting traction.
See also their recent posts:
* @Celo becoming an Ethereum L2: https://t.co/08U7G7q69s
*… https://t.co/Qq7vcmZ6e3— vitalik.eth (@VitalikButerin) September 25, 2024
The introduction of native UDST and native USDC – the two most popular stablecoins in the world – on Celo in 2024 and the growing popularity of Celo wallets MiniPay and Valora helped Celo briefly surpass Tron in daily active users transacting with stablecoins.
At the Stablecoin Summit 2024, Olszewski laid out plans for Celo:
“Celo is positioning itself as a leading platform for stablecoins and forex trading on the blockchain, with a focus on real-world use cases such as savings, remittances, lending, and payments.”
The Bottom Line
Celo’s Ethereum L2 chain is expected to see its mainnet launch in late 2024. So far, Celo has nurtured a rich stablecoin ecosystem with growing adoption in Nigeria, Kenya, Ghana, and South Africa.
Buterin is excited about Celo joining the Ethereum community. On X, he spoke about how Celo is “improving worldwide access to basic payments/finance.”
