What is Celo? (All About Celo)
Published December 3rd, 2022
There are many blockchains and cryptocurrencies in the world. New or experianced crypto enthusiasts often stumble upon cryptocurrencies such as Celo. What exactly are the characteristics of Celo?
Celo is a layer 1 blockchain network that allows users to send and receive crypto using phone numbers. People can transfer money using cUSD, and cEuro, which are fiat pegged currencies, as well as Celo Gold, their native currency.
There is plenty more to know about Celo! In this article, we go over everything about the Celo Network.
Let’s get started!
The Mission and Purpose of Celo
The purpose of Celo is to bring financial services to people with mobile devices. It is a blockchain network intended for mobile users. People with mobile devices can transfer assets like cUSD, and cEuro which are pegs of the real currency without having CELO. One of the main features of Celo is that People can transfer currencies on Celo using phone numbers.
Is Celo a Layer 1 Blockchain?
Celo is a layer 1 blockchain network. It operates on the Proof of Stake consensus protocol, which we will discuss later. Celo is a network that operates independently of other cryptocurrency networks, such as Ethereum and Bitcoin. The Celo network handles all of its security concerns by itself using its proprietary validators.
Is Celo EVM Compatible?
Celo is actually EVM compatible. The aim of the Celo Foundation was to make Celo fully EVM compatible so that developers from Ethereum can seamlessly transition from Ethereum to Celo. Celo has low transaction fees and quick transaction confirmation times, which users and developers can take advantage of.
By making Celo EVM compatible, developers on Ethereum can deploy their applications on Celo with little modifications to their Applications’ code.
Moving from Ethereum to Celo then makes it attractive for developers to take advantage of low transaction times if the code doesn’t require modification.
Learning a new programming language can potentially expose projects to critical bugs, leading to large financial losses. It is more convenient for developers and the Celo ecosystem if smart contracts are deployable in the same language as in Ethereum.
EVM compatibility is a set of rules on how a blockchain virtual machine should act. These include address types, smart contract languages, and how data is stored in blocks.
It also provides information on how the virtual machine handles RPCs, transactions, and its machine state. Many other blockchains have different virtual machines, which have different rules on addresses, and how information is stored.
The Technology of Celo
Celo is somewhat similar to other blockchains like Ethereum, which is now running on Proof of Stake. However, it has its own features that make it different. Celo also implements a deeper level of governance on its platform through its custom consensus mechanism.
The main currency in the Celo Network is Celo Gold, which is also referred to as just Celo. However, the Celo network also has other main currencies like cUSD, cEuro and, cReal.
These currencies are algorithmic pegs of the real fiat currencies – the USD, Euro, and the Brazilian Real. One of the features of the Celo blockchain is that people can transfer cUSD, cEuro, and cReal without owning Celo Gold in their wallet.
In contrast, in Ethereum, to send USDC, another USD pegged cryptocurrency, the user has to own Ethereum.
Another great technical feature of Celo is that it allows users to send and receive cryptocurrency with mobile phone numbers. This is a great innovation since people don’t need to understand cryptocurrency addresses.
The concept of private and public keys and wallets can be confusing to less technical people. Being able to send crypto with phone numbers is a lot easier and more convenient than with general crypto addresses.
Celo allows people to receive and send crypto with a phone number by utilizing an attestation service. An attestation service links phone numbers to crypto addresses.
To do this Celo has created a light blockchain client that can run on mobile phones. The Mobile phones use a client that acquires data from the blockchain quickly and doesn’t require much data.
It does this by executing zk-SNARK proofs which verify data on the blockchain. This enables the Mobile phone to index the blockchain without actually having access to the entire blockchain file.
The light client acquires its data from full nodes, which keep a fully recorded blockchain file on hand. Full Nodes are connected to validators within the network.
All validators have an attestation service running. The way that the attestation service works is illustrated in the next image.
The Architecture of Celo
Celo has 3 nodes in its network, a Light client node, the validator, and a full node. A light node is a node that indexes the blockchain quickly and runs on mobile phones. Due to the nature of phones, light nodes don’t require tons of computing power and data consumption.
Validators on the other hand require dedicated server systems which run 24/7 without a stop. They also have to be ultra-secure since they have private keys that keep staked crypto assets.
A compromised validator server can result in loss of assets from the owner. Validators also require lots of bandwidth due to the number of connections that they make. They connect with other validators and Full nodes.
Full nodes are nodes that connect light nodes and validator nodes. They collect transactions submitted from light mobile clients and submit them to the validator nodes.
This is done for a part of the transaction fee that transactions on mobile phones are submitted with.
The Celo Network architecture can be illustrated in the image below.
The Consensus Mechanism of Celo
Celo first implements Byzantine Fault Tolerance so that validators can agree on how to finalize blocks. Because Celo validators publish blocks on the Byzantine Fault Tolerance(BFT) consensus, there can only be a set number of validators on the network at a given time. There are 110 total validators to be exact.
Proof of Stake is implemented to select which nodes become validators. To be qualified as a validator, they must first fulfill the requirements. The first requirement to be considered a validator is for validators to join a validator group or make a validator group themselves.
Validators are chosen in groups of validators at a time. Currently, no more than 5 validators can be in one validator group.
Another one of the requirements is for each validator candidate to stake 10,000 CELO AND 10,000 CELO for every member of the validator group to register a validator group.
Validator groups are chosen through voting. Each Epoch, new validator groups are voted to be validators. An Epoch is a fancy term for a set number of blocks, in this case, it is about 1 day’ worth of blocks produced.
The Celo consensus mechanism can be illustrated in the next image.
Users lock up their Celo Gold to make sure that their votes cannot be used more than once. Additionally, users also earn rewards from voting for validators, essentially participating in keeping the network secure and decentralized.
Locked Celo Gold can be used for a variety of other purposes, like participating in governance, and general staking.
The voting is all done by mobile phone, emphasizing Celo’s commitment towards to mobile-first financial network.
There is a maximum number of votes that a validator can receive to make sure that the network is more decentralized and so that sufficient validators are chosen. It is also designed this way to make sure that the best validators are elected.
Validators also get their stake and rewards slashed if they act in negative ways or if they lower the performance of the network. For example, if a validator goes offline and potentially slows the network, its rewards may be slashed to a degree, but not completely.
Validators that attack the network and nefarious validators may get their principle staked Celo slashed or get another penalty according to governance.
Is Celo Decentralized?
Celo is decentralized but not completely because it only has a small, limited number of validators.
It isn’t as decentralized as Bitcoin and Ethereum but still decentralized to a small degree. Truly decentralized blockchains like Ethereum and Bitcoin have thousands of validators on the network.
Celo, because of its consensus mechanism, can only have 110 validators at a time. It is very easy for validators in the network to potentially censor transactions. A transaction that gets censored by one validator can get accepted by another.
Celo is also not completely decentralized since the network has gone offline before. On July 14th, 2022, the Celo Main network went offline. To get the network back up and running, Celo had to update the validator software. They published this on Twitter.
The Celo network has stalled at block 14,035,19. Validators are working to identify and resolve the issue. All funds are safe. Updates will be provided as soon as possible.
— Celo (@CeloOrg) July 14, 2022
A network that is truly decentralized should be able to keep running 24/7 from the day it’s launched. For example, Bitcoin has been online for over a decade now. It hasn’t had a single second offline since its launch.
The Tokenomics of Celo
Tokenomics of Celo is important because it may impact how well Celo as a cryptocurrency appreciates in value. Celo has a circulating supply of 478 Million coins, out of a maximum supply of 1 Billion coins.
We previously mentioned that there are Full nodes and Validator Nodes. Full Nodes are also compensated in the Celo Network for performing various functions. This is when users send transactions, they pay a transaction fee. The transaction fee gets split and goes to different parties.
Token Inflation of Celo
The current inflation of Celo is about 3.83 %. This inflation is a result of the 400 Million coins that were minted. Every Epoch, new Celo is minted and rewarded to various parties.
Epoch rewards are minted on a variable basis, though Celo’s objective is to maintain a max-supply of 1 Billion coins by 2050. However, only 400 Million coins are going to be minted. The rest of the 600 Million coins comes from a pre-mint, which gets locked up and vested.
We can see this supply being minted and the schedule in the next image:
Validator, validator groups, and holders of locked Celo get part of this reward. The rest of the rewards go to a community fund, a stable coin reserve, and a carbon Offsetting Fund. At the current moment, Epoch rewards are currently being distributed to these parties on a timely basis.
These Rewards can be split into a percentage of the total Epoch reward, Validators tend to get about 11.9%, and the community fund, on the other hand, receives about 24.6% of all Epoch rewards. This is on average and can vary.
The Token Distribution of Celo
The current circulating supply of Celo is set to reach about 1 Billion coins by 2050. This is a result of both minting Celo and unlocking vested coins by different parties.
We can see the total circulating supply of Celo in the next image below.
Of the 1 Billion maximum number of coins that Celo will have, investors are projected to get about 12.5%, protocol contributors are projected to get 18.5%, and various other parties are going to have the split rest. This can be seen in the next image.
This distribution chart model above illustrates what portion of the circulating supply different parties will have. How do these tokens get released over time? Over a few initial years, Investors will have their tokens unlocked.
They will be able to access them all. The team and protocol contributors will also have their tokens unlocked. We can see how validators and stakers get access to their tokens in the image below.
Does Celo Burn Coins?
Celo does not Burn Coins. However, in the future governance may implement a feature that burns coins. This is just speculation.
Celo Transaction Fees
Celo has low transaction fees which make it very attractive to use the platform. However, it may be convenient to know how much a transaction may cost before performing it.
We performed various transactions many times and documented how much each transaction type costs. We published this information below.
These transaction fees depend on how fast the user wants them to execute. The highest value is usually the value of transactions that were executed as a high priority.
| Celo Transaction Fees | |
|---|---|
| Transaction Type | Average Transaction Fee |
| Simple Celo Transfer | 0.0000105 to 0.000015 CELO |
| Token Transfer | 0.000015 to 0.00003 CELO |
| Deploy a Smart Contract | 0.0002 to 0.0014 CELO |
| NFT Mint | 0.000857 to 0.0075 CELO |
| DEX Token Swap | 0.000105 to 0.0003 CELO |
Celo Token Use Cases
Celo coins have many use cases. The use cases allow Celo coins to gain demand. This in turn causes fluctuations in price. To perform these operations, Celo is required.
| Celo Token Use Cases | |
|---|---|
| Use Case or Point of Demand | Number of Coins Required |
| Running a Validator | 10,000 per validator and 10,000 per member of a validator group |
| Execute transactions | - |
| Mint NFTs | - |
| Use as collateral in DeFi | - |
| Stake to earn rewards | - |
| Lock up and vote in governance cycles | - |
| Lock up and Vote for validators | - |
To participate in governance, users have to lock up Celo coins. This is also required to vote for validators. Running a validator requires that people purchase Celo coins from the market, effectively creating demand for the coin.
Team of Celo and Celo Launch
Celo was founded by 3 co-founders, Marek Olszewski, Sep Kamvar, and Rene Reinsberg. Collectively, the Celo Foundation has about 114 team members. They help with engineering, relations, marketing, and other objectives.
They launched the Celo Main net on April 22nd, 2021, after years of development. They have started development on Celo in 2019.
Total Capital Raised by Celo Foundation and Celo Ecosystem
Celo raised capital firstly in 2019. They raised about 40 Million dollars from an auction and from venture capitalists. Celo later acquired 20 million dollars in venture capital from a16z.
While Celo raised more than 60 Million, Celo projects, on the other hand, raised a collective 77.3 Million from venture capital firms and other investors. This was done to bolster interoperability, ReFi(Regenerative Finance), and other ecosystem project purposes.
Celo Network RPC
The data below can be used to add Celo on Metamask and other EVM wallets.
Network Name: Celo Main Network
NEW RPC URL: https://forno.celo.org
Chain ID: 42220
Currency Symbol: CELO
Block Explorer: https://explorer.celo.org
CELO FAQ
Is Celo A Stable Coin?
Celo is not a stable coin; It is the native currency of the Celo Network. However, there are many stable coins on Celo. USDT, USDC, cUSD, and cEUR are some of the stable coins on the Celo network.
Is Celo on Coinbase?
Yes, Celo is currently being traded on Coinbase. Its ticker symbol is $CGLD
Is Celo Built on Ethereum?
No, Celo is a layer 1 blockchain network. It is its own independent cryptocurrency network. However, people can cross-chain bridge assets from Ethereum to Celo using various cross-chain bridges. Assets are easily deployable from Ethereum on Celo since Celo is EVM compatible.
How Much Transactions per Second does Celo do?
Celo is estimated to do about 200 transactions per second. This is what Celo has been configured for. Celo Labs is working on implementing a consensus algorithm in partnership with Mysten Labs that would allow Celo to reach 140k TPS in the future. This is according to various sources.