DeFi Guides


What is Celo?

Celo is a decentralised protocol that employs a mobile-first approach in facilitating global crypto payment. In this guide, Coin Rivet explains how it intends to ease cryptocurrency payment for more than six billion smartphone users...

There are hundreds of cryptocurrency payment platforms – of which, Celo, with an ambition to serve the global market of smartphone users – is one.

The blockchain protocol is unique because of its noteworthy ambition to address some of the predominant hindrances to crypto adoption, some of which include ease of usage. 

Notably, by allowing users to convert their mobile numbers to public keys, Celo is able to facilitate a faster, cheaper, and more effective way of exchanging money among its global users. Just before we proceed to decipher what and how Celo works, let’s quickly take a look at the brief history of how it was birthed in the first place.

Brief history of Celo

Two tech enthusiasts, Rene Reinsberg and Marek Olszewski co-founded Celo in 2017. Both Rene, and Marek were former executives of a web hosting firm, GoDaddy, who formed a team alongside Sep Kamver, who is both MIT professor and an executive at Google.

Celo was inspired by the growing population of smartphone users in the world which currently sits at more than six billion, further creating a massive market for potential cryptocurrency adopters.

According to the founders, while there are barely 0.1 billion cryptocurrency users, the number of smartphone users is projected to hit seven billion by 2025, presenting a rare opportunity for their proprietary project.

Also, given that two of the major hindrances slowing down the mass adoption of cryptocurrency are usability and volatility, Celo aims to address these concerns with its mobile-first approach. 

A year after the commencement of the project, Celo was able to raise approximately $46.5 million through private and public sales of its native CELO token. Some notable inventors who contributed significantly to the Celo course include a16z Crypto, a venture capital for crypto initiatives, General Catalyst and Social Capital among others. 

What is Celo?

Celo is a decentralised protocol that facilitates cryptocurrency transactions using a phone number-based identity system. Specifically, Celo acts as a global payment infrastructure that enables the transfer of different types of stablecoins from one mobile user to another anywhere in the world.

Celo’s operation, however, is not limited to global payment as it also supports the development of other decentralised applications (dApps) on its proprietary blockchain. So far, two of Celo protocol’s dApps are focused on social causes: one allows users to contribute to a universal basic income scheme, while the other is a crowdfunding platform for social causes.

How does Celo work?

Based on blockchain technology, Celo employs a phone number-based identity system that encrypts users’ addresses in their mobile numbers. The protocol also safeguards network operations by employing an eigentrust-based reputation algorithm, which is commonly used to manage Peer-to-Peer (P2P) networks.

Technically, there are three major contributors that facilitate Celo’s network operation; the Light clients, validator’s nodes, and full nodes. The first contributor, ‘Light clients’ is made up of every user who has the network’s application (Celo’s mobile wallet, for example) downloaded and running on their devices.

The ‘validator’s nodes’ consist of users who volunteer to participate in the network’s consensus mechanism. 

However, in order to participate as a validating node, a member must have staked at least 10,000 units of CELO, the network’s native asset. By staking this amount of CELO, a validator automatically becomes eligible to vote for or against changes within the network.

‘Full nodes’ on the other hand, acts as an intermediary between the validating nodes and light clients, taking account requests made by light clients and sending them to the validating nodes for validation. 

Celo employs a variety of Proof-of-Stake (PoS) known as Byzantine Fault Tolerance (BFT) which primarily ensures that the distributed network stays connected and in sync.

Celo native asset -CELO

There are two major operational tokens within the Celo network; CELO which is the network’s native asset, and another which is a variant of different stablecoins pegged to a fiat currency. Currently, there is just one of these variants, Celo Dollars (or cUSD) which is a stable coin pegged to the fiat US Dollar.

While the CELO token is primarily used as a utility token, it facilitates native transactions within the network as well as enable holders to participate in the network’s consensus and governing processes. The cUSD, on the other hand, can be transferred among Celo’s global users.

Celo governance

Celo has its own unique governance protocol, a formal on-chain governing system to manage the network’s decision-making processes such as upgrading smart contracts, adding new stablecoins, or general modifications.

Notably, those who are eligible to participate in this system of governance are limited to the holders of the CELO token. As such, all modifications and decision-making processes are determined by CELO holders. 

Also, Celo uses a ‘quorum threshold model’ in determining the number of votes required for a change to be implemented. Once that has been achieved, the changes are subsequently implemented automatically via the network’s governing smart contracts.

Ultimately, Celo is setting a precedent for other initiatives focused on building an equitable and accessible global payment infrastructure.


Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.