Deep Dive: Celo – A Mobile-First Blockchain
Celo is a blockchain focused on making financial DAPPs and crypto payments accessible to anyone with a mobile phone. Celo uses phone numbers as public keys, so sending money to phone numbers becomes easy and the unbanked population can get benefitted. The smartphone user base is growing exponentially all over the world but cryptocurrency adoption is still slow in several parts of the world. Celo wants to bridge the gap. The project was founded by industry-academic collaboration and the backers include the names like Jack Dorsey, Naval Ravikant, Coinbase Ventures etc. CELO, the native token of Celo blockchain, started to trade in the market from May 2020 onwards and the mainnet was launched in April 2020.
Mobile phone payments
Celo enables mobile phone payments using ‘address-based encryption’. This encryption technology ties a phone number to a Celo address and when a payment is initiated, the phone number can be used as the public address to provide a simple user experience. Privacy is never affected as the blockchain stores a hash of the phone number but never discloses the number. There is a ‘credit score’ like system also which is very unique.
Image Source - Celo uses “address-based” encryption to map phone numbers to cryptographic addresses
Green blockchain & stable value currencies
Celo is a proof-of-stake (PoS) blockchain with a block time of 5 seconds (Ethereum has a 12 seconds block time). As Celo uses PoS consensus, the blockchain consumes less energy and it is an environment-friendly blockchain. The transaction fees on Celo can be paid by the native cryptocurrency CELO or stablecoins like cUSD and cEUR and the transaction fees are quite cheap. The whitepaper says. “CELO and a basket of other assets including BTC and ETH serve as the collateral for these stablecoins. These stablecoins are redeemable for CELO, ensuring that transactions can occur quickly, cheaply and reliably on-chain.”
Ethereum compatibility
Celo is a fork of Go Ethereum (GETH) protocol like the Binance Smart Chain (BSC). Celo blockchain assets have ERC-20 compliant interfaces i.e. Solidity can be used by the developers for building on Celo. From the developer’s perspective, Celo is compatible with Ethereum. DAPP developers can easily port their applications from Ethereum to Celo blockchain.
Image Source - Difference between Celo and Ethereum
“The Celo team are big fans of Ethereum. As is the case for many other blockchains, we wouldn’t be where we are without Ethereum.” – Celo blog post
Optics – Cross-chain communication
Cross-chain communication and blockchain interoperability is a key focus area of blockchain technology now. Different blockchains must talk to each other for mass adoption and this is a complicated process. Ethereum and Celo share many similarities but they have isolated self-sustained platforms. A connection between the blockchains will be very helpful but the connection cost must be affordable also. Celo aims to solve the issue with yet to be launched Optics (OPTimistic Interchain Communication). As per the official Celo document, “Optics is a new design for radically cheaper cross-chain communication without header verification”. The team took inspiration from Optimistic Rollups to build this. Optics will act as the trustless base layer of cross-chain communication to provide fast and cost-effective communication for all smart contract chains and rollups.
Image Source – blockchains should talk to each other
DeFi or decentralized finance originated on Ethereum but the high gas fee of Ethereum is a real problem to conduct transactions. It is really painful to pay a 40-50$ fee for a simple decentralized swap. EIP-1559 has solved the arbitrary gas fee problem of Ethereum to some extent but the network is often not usable for a retail investor. Ethereum 2.0 is going to solve many problems of Ethereum but the roadmap is not very clear due to the complex technical process. EVM (Ethereum Virtual Machine) compatible chains are getting investor assiduity due to this situation and DeFi activity is flourishing on many such blockchains. Celo is fully compatible with Ethereum wallets like Metamask after its recent Donut Hardfork and so it easily gets the opportunity to capture the attention of the Ethereum community and investor base. Ethereum has established itself as the undisputed global value settlement layer and it may remain so but Celo has the potential to make DeFi accessible to anyone and everyone for being the ‘mobile-first blockchain’. The eminent backers of the project are going to help it anyway and the native cryptocurrency is already listed on tier-I exchanges like Coinbase and Binance. Keep a close watch on the future developments of this new generation blockchain.
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The support of the Celo blockchain by Jack Dorsey, Naval Ravikant, Coinbase Ventures is a sign of how positive the impact this project will have going forward.
I think Celo will be a big network.
Celo is important to many blockchain networks.
Celo is coming to the fore with the idea of mobile-first blockchain, and I'm curious how it will work.
Thanks for the article.
Now, I am surprised to hear about the conveniences technology provides to our lives. I've heard of transferring money by phone number, but crypto transfer will be really interesting.
Celo makes our life easier, and it is faster and consumes less energy than competing networks, but the point that comes to my mind is whether the transfer method we use now or celo is more reliable. Also, if a person has more than one account, will they all use the same phone number? If so, confusion may occur.
I spend most of my life on the phone, not only me, but the whole world is like that, so combining mobile phone and blockchain will be a great convenience.