Celo Technical Review:
What Celo Wants to Achieve?
Celo’s main motive is to make their crypto currency as a platform of payments.
These are some of the problems faced in the crypto industry now:
- Existing crypto currencies like Bitcoin are not used as payment platforms as they are considered store of value due to their deflationary nature.
- Crypto in itself is very difficult with bad UIs and very difficult for the users to manage their keys and they require the public key of the user whom they want to send payment.
- There is no concrete governance structure in crypto currencies
Celo wants to eliminate the above problems by following methods:
- They are proposing to introduce a stable coin with elastic supply backed by variable reserves
- They are using Address Based encryption to make ease of use of payments
- They are introducing Governance structure at different levels.
What is Address Based Encryption?
Address Based Encryption is a novel approach of enabling the user to use their phone number or email address as a secure way of messaging. Users generate traditional ways of public / private key and encrypt their public key with their phone number, so they can use their phone number to send / receive Celo money. This encrypted value will be stored in a database and committed by the validator. This is what Celo is mainly pitching to reduce the dependency on people to use their public keys while transferring payment to reduce user onboarding. All one has to do is a one-time setup and then you can use your phone number as an address for sending payments! As simple as that!
This is what Celo is hoping to achieve. Although this model does bring its own set up of problems, Celo addressed these issues and how they plan to resolve these in their white paper. We have some queries on these approaches which we will address at the end of this review.
What is Elastic Coin Supply?
Celo has two assets, Celo Gold and Celo Dollar.
- Celo Dollar which will be the stablecoin. Celo Dollar will be elastic in nature as it will be freshly minted if the price goes above the peg.
- Celo Gold is the utility token of the blockchain. Celo Gold will be used for governance, staking and as an incentive for developers which will be put in reserve.
Since Celo uses Proof of Stake, Celo Gold will be used for staking and also for any governance decision making. This will be done by sending the Celo Gold tokens to a smart contract with a withdrawal notice set for a duration.
White Paper Summary
Overall, a good paper presented well.
The value of Celo Gold will depend upon the usability of the Celo platform. Perhaps, something to learn from ETH where the value of ETH has risen because one can build various tokens on the ETH network.
Questions for Celo Team (White Paper)
- For the Address based encryption, it is mentioned that validators will be used to attest the signatures.
* Our Question(s): How many validators will be used and what's the slashable criteria for the validators?
- For mitigating the DDOS, a cost to attestation is required, which basically means users sending out a fee for attestation.
* Our Question(s): Wouldn't this hamper a new user, as he has to pay a fee just for registering his key? Also, what is the time overhead required for the validators to verify and attest the message?
- Regarding the Elastic Coin Supply, it is mentioned that when the Celo Dollar price is above peg, new coins will be minted and instead of distributing them to the user, they will be used to buy various other crypto assets and sell them when required.
* Our Question(s): What are the assets that will be bought is not clear/mentioned and weI really think this is not a good method as we know the value of crypto assets might decay over a period of time. Any thoughts on that? Also, who will cover for that if net value ends up as loss?
- Also, to be elected validator, it was mentioned that the users can form groups and pitch themselves to be validators.
* Our Question(s): Wouldn't this make the protocol more centralized, something akin to a DPOS system?
- What are the criteria of slashing funds of a validator?
- What about storage problems, since they are forking ETH, wouldn't they inherit the same problems ETH has with respect to speed and storage overhead?
- To make any technical improvements, anybody can make a bonded deposit and validators can vote on that. But wouldn't this pave way to the incorrect technical improvements to be made and also will the deposit be slashed if there is incorrect spec on the improvement submitted by the developer?
- What will be the function of a smart contract platform in addition to the bonded deposits and attestation of messages?
Celo Code Review
Celo Repositories and Blockchain:
Celo has 69 repositories. Initial observations are that Celo blockchain is a fork / copy of GETH with some modifications.
- Addition of BLS signatures
- Addition of Istanbul-BFT consensus in place of POW
- Introduction of Celo Gold Tokens
A simple explanation is that BLS Signatures offer a better way of aggregating signatures and reducing the storage in blocks. However, verification of these signatures still takes time.
IBFT Consensus - Istanbul BFT consensus:
A simple explanation of IBFT Consensus is that it is modified PBFT which is most suitable for permissioned networks. This consensus works well with a smaller set of validators and is fast and also offers safety for up to 2/3 of the dishonest nodes.
Celo Gold Tokens:
Celo Gold Tokens is a native token of Celo Blockchain, just like ETH for ethereum blockchain.
Having reviewed all the repositories, we feel that there are a lot of other repos which have most of the code they have mentioned in the white paper, like Governance, Slashing, Stable Coin etc. Overall, all the other repos are well maintained. We don’t see any major red flags in their repositories.
Questions for Celo Team (Code):
- Our only observation is that we are still unable to understand why they would be needing a separate blockchain to carry out all aforementioned functions. Can't they use PoA network, which is similar to their blockchain, and they can still add the aforementioned functions or better be as a sidechain to ETH?
- What's the reason for forking ETH?
- What’s the Unique Selling point for Celo in the midst of several stable currencies, are we relying only on the one point of ease of access?
Should I invest in Celo or not?
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