Why can Celo move from Layer 1 to Layer 2?

Author: Jack Kubinec, Blockworks; Translator: Deng Tong, Golden Finance

After nine months of deliberation, the developers behind Celo chose OP Stack as the infrastructure for the project's migration to Ethereum.

cLabs, the software company behind Celo, said in a forum post on Monday that it would submit the OP Stack migration to a community vote. If successful, the Layer 2 testnet will be launched in the summer of 2024.

CLabs first said it would migrate to Layer-2 in July 2023.

On a day when the cryptocurrency market was largely flat, the native tokens of Celo and Optimism both rose by about 5%, according to CoinGecko.

Celo's Layer-1 went live on the mainnet on Earth Day 2020, focusing on global financial inclusion and environmental health. CLabs raised $30 million from a16z and Polychain in 2019 to develop the project. It completed another $20 million round of financing in 2021.

Layer 1 is compatible with the Ethereum Virtual Machine (EVM), which means Ethereum smart contracts can run on Celo.

cLabs CTO Marek Olszewski said on X space on Monday that Celo's implementation of EIP-1559 is slightly different from how Ethereum implemented the proposal, and the cost of maintaining compatibility with Ethereum ended up being "quite high."

Celo’s GitHub shows that users pay a base gas fee and a tip for transactions, just like Ethereum’s EIP-1559, but with some minor modifications. For example, the base fee is paid to Celo’s community fund instead of being burned as it is on Ethereum.

“We’ve been very focused on being highly consistent with Ethereum, and lessons have been learned before,” Olszewski added when discussing why Celo chose the OP Stack.

CLabs hopes that Celo’s Layer 2 will retain some of the features of Layer 1, such as single-block finality, which helps transactions settle quickly and prevents chain rollbacks or reorganizations — even if Ethereum itself undergoes a reorganization. Olszewski said some lesser-used features may disappear with the migration.

In addition to Optimism, Celo is also considering using the technology stacks of Arbitrum, Polygon, or zkSync to build its Layer 2.

If the migration is successful, Optimism will add another notable client to its so-called Layer 2 superchain, which typically pays Optimism a 2.5% revenue share. Coinbase launched Base using the OP Stack, and last week, Sam Altman-backed Worldcoin said its Layer 2 would be built using the OP Stack.

The authors of the cLabs proposal wrote that the OP Stack is "becoming an open standard for Layer 2," and that building in a superchain could lead to "positive-sum partnerships" with other chains built using the tech stack.