Celo is a payments platform attempting to make crypto payments as easy as possible to support communities around the world who are still left without critical financial services.
Key Takeaways
- Celo is a blockchain project focusing on improving the lives of communities around the world via swift and easy payments infrastructure.
- The PoS network offers multiple tiers for participants: An application that doubles as a light client, full nodes, and validators.
- The system offers a stablecoin called Celo Dollars and a governance token called Celo Gold.
- Mainnet launch is slated for next Monday.
As Celo concludes its latest $10 million token sale, many may still be wondering what the payments platform is all about. In the following guide, Crypto Briefing will dig into the technology, the native cryptocurrencies, and the project’s broader mission.
What Is Celo?
Celo is a blockchain project focused on making crypto payments as easy as possible. Instead of having to manage complex crypto addresses, users can send cryptocurrencies using mobile phone numbers.
Sending the platform’s stablecoin, Celo Dollars, is even possible for users who do not have the Celo app. Users can send value via WhatsApp too. To access this value, however, recipients would eventually need to download the application.
When a user opens a Celo account, they link their telephone numbers to a specific address. A cryptographic hash of the phone number is then stored on the blockchain. To get a better understanding of how to open a Celo account, Crypto Briefing experimented with Celo’s Alfajores Testnet.
The process is straightforward.
Once users connect their mobile number with the app, the app sends an invite code via SMS which users must input to synchronize their number. After that, the app sends three SMS messages to verify the synchronization.
According to a company blog post, users can connect multiple phone numbers to the same Celo address.
There is also a small fee to verify the phone number. From there, the testnet gives users a small amount of Celo Dollars with which to experiment. There is a related faucet that developers and early adopters can use to replenish their Celo accounts. These are all testnet tokens and hold no real value.
There will be more discussion on the purpose of Celo Dollars and Celo Gold further along in this article.
The simplicity of the app has led Polychain Capital CEO to describe the project as “the WhatsApp for money.”
Along with Polychain, Celo has attracted an army of notable investors to the project. Coinbase Ventures, Andreessen Horowitz’s a16z, 9YardCapital, and several well-known angel investors have contributed over $36.5 million in support.
Adding the token offering, Celo’s coffers now hold roughly $46.5 million. Co-founder of Celo, Rene Reinsberg, told Crypto Briefing that the proceeds from the latest raise “will be used to fund ongoing development work and for community grants supporting the ecosystem.”
The team behind the project comes from an impressive tech and finance background.
There are three co-founders, Sep Kamvar, Rene Reinsberg, and Marek Olszewski. Kamvar is the inventor of a digital reputation system called EigenTrust. Reinsberg and Olszewski sold their machine learning startup to GoDaddy.
Other members come from other notable internet companies.
How Does Celo Work?
On the technical side, Celo is built using the Go implementation of Ethereum and leverages a Proof-of-Stake (PoS) consensus algorithm. There are validators and nodes which help verify transactions and secure the network.
But insofar as Celo is focused on a mobile-first user base, operating hefty and expensive validators is problematic. Once Ethereum finally transitions to a PoS network, the financial barrier of operating an Ethereum node would be 32 ether, or ~$6,344 at time of press.
Readers should also refer to Algorand, Tezos, and Cosmos for examples of successful PoS networks currently operating in the wild.
It currently costs users more than $20,000 in equipment, $2,100 in fees per month, and a stake of 10,000 ATOM (~$25,000) tokens to run a competitive Cosmos validator. According to Reinsberg, the price is less to operate a Celo validator:
“Each validator requires 10,000 cGLD locked up, and validator groups require 10,000 cGLD per validator affiliated with it. So, if someone wants to run 1 validator in their own validator group, they will need 20,000 locked cGLD (10k for the group, and 10k for the validator). Interestingly, this amount aligns with the average amount purchased per person in the auction, $19,646.37.”
Though this may be prohibitive to some, Celo is looking to include as many users as possible through a multi-tiered system of light clients, validators, and nodes.
The Celo mobile application doubles as a light client. Each time a user makes a payment using the application, the light client selects the cheapest, highest latency full-node in the area to confirm its transactions.
As with any blockchain-based network there are fees for transacting. In the Celo scheme, the fees are included in the transactions sent to full nodes. Each full node can choose their lowest minimum fee to process the transaction.
The more full nodes that exist, the more efficient a network will operate. And once users recognize that they can earn money for running a full node, they too will be incentivized to launch a full node.
There are no fees or costs for joining the network at this tier; simply run a node on a computer and begin earning.
The third tier, validators, must be much more robust than the full node group. This is because the number of validators is limited and also because validators wield much more power in the network. This level of the network is responsible for protocol changes, providing security audits, as well as supplying hardware and software to keep the network running.
They are compensated for these contributions, much in the same way Tezos and Cosmos validators are. Like these two networks, Celo validators also hold governance properties to help steer the direction of the protocol.
Validators that fail to operate in the best interests of the network are penalized.
What Are the Celo Assets?
Celo offers users two native crypto assets, Celo Dollars (cUSD) and Celo Gold (cGLD).
Celo Dollars help facilitate the stable transfer of digital value between users. It is an ERC-20 stablecoin backed by reserves and pegged to the price of the U.S. dollar.
The team has said that they will expand this offering to cover other fiat currencies.
Unlike Celo Dollars, there is a fixed supply of Celo Gold. It is in this fixed cryptocurrency that Celo is able to manage price stability as well as much of its governance operations. Users can create cUSD by sending $1 worth of cGLD to the Celo Foundation reserve. They can also destroy cUSD by converting it back into cGLD.
A portion of this fixed supply will be sold upon the network’s launch with the rest being created throughout the network’s life.
Users holding cGLD can join the network as a validator or validator group, as well as propose and vote on protocol changes. They must first send some cGLD to a smart contract where the funds are locked in. The events that users can participate in are not mutually exclusive either.
One can vote on a protocol change as well as select a validator using the same locked cGLD. For a deeper dive into the details of the governance structure, readers are invited to explore Celo’s documentation on the subject.
Users who frequently vote and are active throughout the governance process, are eligible for various rewards. The ultimate goal behind the network’s design is to entice as much participation as possible regardless of technical knowledge and financial standing.
This in part due to the project’s grander mission.
What Is the Alliance for Prosperity?
There are clear reasons that Celo wants to be one of the first mobile-friendly, highly-secured blockchain networks.
They are focused on improving financial inclusion in parts of the world that have been traditionally neglected. It is for this reason that the mobile application plays such a critical role in this network.
For the uninitiated, it is well known that many of the poorest regions in the world have turned to mobile phones to “leapfrog” technologically.
Although they may have never experienced fixed-lines, for instance, cellphones are found throughout. Not just that, but the amount of value now being passed using mobile devices is growing every year.
A report from the Global System for Mobile Communications (GSMA) indicates that “in 2018, $136 billion (the total value of cash-in transactions) were digitized by mobile money agents globally.”
The number of mobile money agents even exceeds that of commercial banking infrastructure.
To continue building on this mission, the Celo Foundation has created a so-called “Alliance for Prosperity.” This group of projects, investment funds, and service providers are all committed to improving the financial conditions where it is needed most.
This could be in the way of payments, but also includes a number of other use cases that Celo has defined as follows: Accept, Acquire, Build, Earn, Educate, Give, Grow, Lend, Preserve, Send, Save, and Secure.
UABA has joined the @CeloOrg Alliance for Prosperity and will contribute to the Celo Ecosystem through education, community management and ecosystem support of the Celo platform.
. pic.twitter.com/P9AZ1xpmR2— United Africa Blockchain Association (@UABA_Africa) May 7, 2020
This Alliance has grown leaps and bounds since its formation and has even attracted a similar audience as that of Facebook’s Libra project. It is for this reason that there have been so many comparisons drawn between the two ventures.
The Giving Block, a member of the Alliance and a project that helps nonprofits accept crypto donations, is exemplary of the Celo mission.
Alex Wilson, a co-founder, told Crypto Briefing:
“Celo is the first major blockchain project to put social impact at its core which makes it a great fit for us. We’re excited to help bring prosperity to all.”
Companies within the Alliance will also be able to collaborate with one another. uTrust, a crypto company helping to onboard businesses to the world of digital assets, is hoping to do exactly this.
CEO Sanja Kon, said:
“With our Payment platform and B2B solutions, we are ready to help people worldwide to open their business to millions of new users worldwide. Anyone in Africa or Latin America, can open their online business and start accepting digital currencies as a means of payment for their goods and services from anyone in the world, with truly borderless payments with low fees and no chargebacks. The fact that this is an Alliance with other amazing companies will enable synergies between Alliance members for innovative solutions worldwide.”
Concluding, Celo is one of the more ambitious projects in the cryptocurrency space. It is tackling a major social issue by delivering new technology at scale. The design is built from the bottom up for ease-of-use and ease-of-access.
Interested parties need only download the app. If the network gains traction, there will be further incentive to participate at the full node tier or even the validator tier. With any blockchain-based network, overcoming this critical adoption chasm is the ultimate challenge.
The mainnet launch is slated for launch on May 18, with users voting to unfreeze cGLD for Monday, according to Reinsberg.
By Liam Kelly