Celo Proposes to Ditch Own Standalone Blockchain for Layer-2 Network on Ethereum

CLabs, the developer behind the Celo blockchain, is proposing to transition from an independent layer-1 blockchain to an Ethereum layer-2 solution.

The team announced the proposed move over the weekend in a Twitter thread, saying it followed "months of research and initial discussions with Celo and Ethereum community members."

"An indicative on-chain governance proposal (or 'temperature check) will be released for the community to vote on as early as Saturday, July 22," according to the thread.

The migration would initially rely on Optimism's OP Stack, which developers can use to spin up their own layer-2 chains, according to the post. Technical features would include a "decentralized sequencer powered by Celo's existing validator set" and "a design retaining Celo's one-block finality."

"Migrating Celo to utilize the OP stack eliminates the need to monitor compatibility, making it easy for Celo developers to utilize the full gambit of Ethereum tooling / libraries," according to a detailed technical write-up on the Celo Forum, where members of the blockchain's community can discuss matters related to the project.

The existential change could simplify liquidity sharing between Celo and Ethereum while boosting security and facilitating a seamless developer experience, according to the post. Celo is already compatible with the Ethereum Virtual Machine or EVM, meaning Ethereum developers can easily port over their existing apps or can develop new ones using many of the same tools.

Ethereum currently has over $26 billion total value locked and Celo has around $99 million, according to data from DefiLlama.

Eventually, Celo might even "upgrade to a highly scalable validium-based zkEVM," according to the Celo Forum post.

The proliferation of so-called zkEVMs is one of the hottest trends of the year in the Ethereum blockchain ecosystem. They are ZK-rollups – layer-2 chains based on zero-knowledge proofs, an increasingly popular type of cryptography, with EVM compatibility.

For now, Celo's proposed design calls for an "off-chain data availability, powered by EigenLayer and EigenDA, operated by Ethereum node operators, and protected by restaked ETH," according to the Celo Forum post.

The team added in the July 16 tweet, "This would also make Celo the first major project with a restaking use case!"

"Off-chain data availability solutions like EigenDA enable this to be achieved without necessitating steep increases in Celo’s transaction fees," according to the technical write-up on the Celo Forum. "It is cLabs’ belief that these advancements in the Ethereum-based L2 stack now have the necessary pieces in place for a Celo L2 migration to add significant value to its mission."

CELO, the native token of the blockchain, jumped almost 10% on Monday, reaching a two-week high of $0.59. The token has gained just under 45% over the last month.

None other than Vitalik Buterin, founder of Ethereum, added to the comments section on the Celo Forum post, writing “Amazing, and excited to see this!,” and he offered some technical suggestions to consider.

“Would love to see the Celo ecosystem come closer to Ethereum,” Buterin wrote.

Celo has seen its transaction growth increase substantially over the past few months, though the activity is still well below levels reached in 2021 and 2022, according to data from Dune analytics.