The open-source blockchain platform for prosperity has the backing of some Libra association members
Currently at a test net stage dubbed as “Baklava”, the Celo foundation’s alliance for prosperity aims to provide digital financial services to anyone in the world who has access to a smartphone. Although the basic purpose of both Libra and the Celo network appears to be the financial inclusion of billions of unbanked people by way of fintech innovation, there are some subtle differences between the two.
While the social media giant’s digital payment system landed in troubled waters with the regulators and some of the prominent Libra association members calling it quits, some of its other well-known backers like Andreessen Horowitz and Coinbase Ventures have put their weight behind a new open-source blockchain developer platform called the Celo network.
Although Libra remains steadfast that it is eventually going to make headway with regulators, the companies & investors that backed it initially are obviously not so optimistic. Celo comes with a financial ecosystem that has its own blockchain, stable coin, and varied financial tools and services. The Celo Foundation recently announced fifty founding members of the project.
Who are the initial backers?
Despite being in development since 2017, the Celo network has only recently gained traction with the newly formed Celo Alliance for Prosperity which has the staunch supporters like Andreessen Horowitz (who funded Celo), Coinbase (Ventures), Bison Trails, Anchorage, and Mercy Corps — all of which are also Libra Association members.
Other prominent members include Carbon, MoonPay, Ledger, GiveDirectly, Grameen Foundation, Maple and Polychain Capital. Celo has received two private funding rounds — $30 million in 2019 and $6.5 million in 2018. Angel investors like Reid Hoffman (Co-Founder, LinkedIn) and Jack Dorsey (CEO, Twitter) are also on the roaster.
Anyone can apply to join the network with no minimum financial investment, unlike Libra which is asking its members to invest $10 million to operate the node. The full list of members can be accessed here. At the time of writing the project had 61 members, according to its website. With the 50 founding members, the project is expected to reach 400 million people.
How does it work?
The whitepaper proposes a platform that is designed to be used on smartphones — people can send money to each other using their phone numbers only rather than some complicated addresses. This also adequately serves the purpose of financial inclusion since billions of people around the world own a smartphone.
The proposed Proof of stake (PoS) blockchain network is similar to Ethereum in features and functionality — employing smart contracts, native tokens Celo Gold (cGold) and Celo Dollar (cUSD) and accounting program, Celo Gold. Both cGold and cUSD are ERC-20 tokens which can eventually provide interoperability between Celo & other Ethereum-based blockchains. Celo also uses a lightweight identity layer, which allows linking of phone numbers to digital wallets and enabling secure transactions to each other using the phone numbers.
However, the process of exchange is a little peculiar. Users will have to exchange other cryptocurrencies for cGold, then exchange that for Celo Dollars they can spend or just get cUSD from other exchanges. The reserve is backed by cryptos like Bitcoin & Ethereum, not fiat. The reserve doesn’t have to be fully collateralized.
Expected the Use cases
So far, 130 teams have expressed interest in building applications on the Celo platform. Although this is minute as compared to 1500 organizations that showed their willingness to work on top of the Libra platform within 4 months of its launch, it is nonetheless an encouraging sign. Celo Camp and Blockchain for Social Impact Incubator will be hosting projects build on top of the network.
Celo network is banking on developers to build some truly useful products in the following areas:
- Powering mobile and online work
- Enabling faster and affordable remittances and
- Reducing the operational complexities of delivering humanitarian aid, facilitating payments, and enabling microlending
Differences & similarities with Libra
At its face value, Celo seems to be combining the strengths and functionalities of the Ethereum blockchain & Libra network. Both Libra & Celo have their own native tokens linked to a basket of different fiat currencies along with an incubator, but there are certain differences as well.
The first difference is the reach — while the social media giant has a strong 2 billion+ following to sell its digital payment system, Celo so far approaches 400 million, which is still pretty decent. But important difference is the structure of the companies.
While Libra is being created by a centralized company with its own stable coin, where only paid invited members can run the nodes, Celo is an open-source, decentralized project run by a non-profit organization foundation. There might not be such a stringent regulatory oversight for the latter, apart from it being much more aligned with the blockchain/crypto philosophy.
Like many other ambitious blockchain projects, Celo also talks of lofty intentions for social impact with Celo. Time will tell if projects like Celo will replace the incumbent financial institutions in providing digital services to their users or will it face tough competition from the players in the legacy financial system.
Originally Published on Medium