Celo Plans To Be An Ethereum Layer-2; Is Arbitrum In Trouble?

cLabs, the developer behind Celo blockchain, has announced plans to transition the platform to be an Ethereum layer-2 network. The proposal, the developer said, comes after extensive research and discussions within the Celo community.

The goal is to drive the adoption of blockchain, making it accessible to users regardless of their location. A notable feature of Celo is its ability to generate public keys from unique phone numbers, setting it apart from other networks.

The proposed transition, outlined in a comprehensive architecture proposal on July 15, aims to leverage the OP Stack to become an Ethereum layer-2 while retaining its distinctive features. According to independent Ethereum advisor Sassal.eth, this transition is now feasible due to the existing Ethereum blockchain infrastructure.

Celo Exploring Ethereum Layer-2

The migration, the team observes, aligns with the network’s mission of fostering global prosperity through inclusive financial opportunities. By becoming a layer-2 platform, Celo intends to maintain its relationship with Ethereum through collaborative initiatives and the introduction of new proposals. The upgrade also aims to enhance user experience, including that of developers.

Becoming Ethereum layer-2 may introduce several improvements. One will be the implementation of a decentralized sequencer, utilizing Celo’s existing validator set running Byzantine Fault Tolerance (BFT) consensus.

Additionally, the platform plans to incorporate EigenLayer, a middleware that enables protocols to leverage Ethereum’s security and decentralization, along with EigenDA, a solution built on EigenLayer to enhance data availability.

Security is also a major advantage of migrating to an Ethereum layer-2. While the blockchain relies on a dynamic security setup with around 110 validators elected by approximately 300 million locked CELO, the transition to layer-2 architecture would further enhance security by anchoring the state on the Ethereum mainnet. This would also likely increase their reputation as a secure platform.

The upgrade also improves compatibility with the Ethereum Virtual Machine (EVM). Although Celo is already EVM-compatible, maintaining consistent compatibility requires ongoing monitoring of tools and backend processes.

Moving to layer-2 eliminates the need for such tracking, facilitates cross-community collaboration, and ensures low gas fees. Developers will likely benefit from more accessible access to Ethereum’s tools and libraries. At the same time, end users will experience minimal changes and gain the added security provided by Ethereum’s economic security.

Layer-2 Landscape On Ethereum

Ethereum layer-2s are finding adoption because of their scalability and low gas fees. With Celo’s plan to become a layer-2 platform with a decentralized sequencer, developers considering Arbitrum, Optimism, and other options now have an additional choice. According to L2Beat, Arbitrum currently holds the highest total value locked (TVL) at $6.12 billion among layer-2 networks.

As of July 16, CELO prices have remained stable and have seen a 36% increase from the lows in June 2023.

CELO price on July 16| Source: CELOUSDT on Binance, TradingView