Celo Review: The “Mobile First” Blockchain Platform

One of the blockchain projects that’s been working on making cryptocurrencies available to everyone by simplifying the payment process is Celo. Rather than using complex, long strings of letters and numbers as blockchain addresses, users of Celo are able to send and receive cryptocurrencies using their mobile phone number.

The team at Celo made the decision to use the mobile phone because it is so ubiquitous and understood. While some areas of the world haven’t received the cabling for internet or even for landline phones in 2020, the people that live in these areas do have mobile phones in many cases.

Celo Simplifies Blockchain Transactions

The Celo team simplified the user experience by getting rid of the clunky public keys on the user side and replaced them with the mobile phone numbers that most of us are used to. They are also far easier to remember and to type into a form as an address.

Using mobile phone numbers as addresses also allowed the team to develop a blockchain with far lower resource usage when compared with many modern blockchain solutions. This low resource design is key for increasing usage in areas where resources are scarce.

One final addition to the Celo platform is the decentralized algorithm EigenTrust. This is an algorithm that measures reputation, similar to the way a credit score measures our financial reputation. With EigenTrust as part of the system an account’s reputation score is defined by the number of other accounts who trust it weighted by their reputation scores.

EigenTrust was developed by Sep Kamvar, one of the founders of Celo, in 2002 for Google and it was previously used as an important component of the Google PageRank algorithm.

Using the Celo Platform

While the Celo app is the preferred way to send Celo Dollars (cUSD), the platform’s stable coin, it is not needed. Users can send cUSD via WhatsApp if they like, however in order to receive the cUSD the recipient will need to download and install the Celo wallet (currently available for Android only).

When the wallet is created, the mobile number is linked to a wallet address and a cryptographic hash of the phone number is stored on the blockchain. It’s really a simple process, and you can even try it out for yourself using the Celo developer wallet and the Alfajores Testnet.

We tried it out to see if it really worked as advertised by the Celo team and found that it truly is a simplified way to interact with a blockchain and cryptocurrency. After installing the wallet and linking a mobile number the app sends a code via SMS to the mobile number. The user inputs that code into the wallet app and the system begins to synch the wallet and the mobile device.

The Celo team has also stated that multiple phone numbers can be associated with the same Celo address, which can be useful when changing phone numbers. Numbers can be added or removed from a wallet address at any time.

There is a small fee that’s charged to the account to verify the phone number, but this is not a big deal with the testnet since the wallet comes prefunded with 10 cUSD. And if you continue using the wallet you can always top it up from the Celo faucet. Each request to the faucet delivers 10 cUSD and 5 CELO.

How Does Celo Work?

While Celo appears very simple for the users, on the backend it is just as technically sound as any competing blockchain project. Built using the Go implementation of Ethereum, Celo uses a Proof-of-Stake consensus algorithm. The founders chose PoS for its light resource usage. The system uses both validators and nodes to verify transactions and to ensure the network remains secure.

Celo is currently using a Byzantine Fault Tolerant consensus algorithm where a defined set of validator nodes are used to reach agreement on the validity of transactions posted to the network. This consensus method can reach agreement on the validity of transactions even when one-third of the nodes are malicious, faulty, or offline.

There are many other successful blockchain projects using PoS consensus and these include Cosmos, Tezos, and Algorand. And in the near future Ethereum will also transition to become a Proof-of-Stake blockchain.

Becoming a Celo Validator

One downside to the validator network is the cost of running a validator node, currently estimated to be over $15,000. Still, that’s quite inexpensive when compared with Cosmos for example, where it requires 10,000 ATOM (over $50,000) to become a validator.

Even though the cost is prohibitive for many, Celo is looking for ways to make it more affordable to run a validator. Currently that includes a multi-tiered system of validators, nodes, and light clients. The Celo community has also proposed increasing the number of validators into the millions, but currently there are a maximum of 100 validators on the network.

Note that validators are the most powerful components in the network. They are responsible for protocol changes, providing security audits, and supplying the hardware and software necessary to keep the network running.

Naturally the validators are compensated for the role they perform in the network. In addition to being compensated they also hold governance properties that steer the network and protocol in the best direction as deemed by the community.

Running a Celo Node

Celo includes transaction fees, like most other blockchain networks. In the case of Celo these fees are for transactions that get sent to the full nodes. Because the network becomes more efficient when there are more nodes, there needs to be a way to incentivize folks to run a full node. The good news is there are no costs for running a node other than the electricity used to run the machine the node is installed on.

Celo nodes benefit from “gateway fees” in the network. The nodes are also considered gateways to the network and they forward transactions and requests from the light nodes to the validators. In a network like Celo, where most of the nodes will be light or ultralight mobile wallet nodes, it is important to have a robust level of full nodes in place to service the light nodes.

Bottom Line

While Celo hasn’t gained mainstream acceptance yet, it has gained massive adoption in the cryptocurrency community, with nearly 100 companies sponsoring or supporting the project in some way. It’s easy to see that Celo is an extremely ambitious project, considering its mission is to create prosperity for everyone.

Understand that the project is in its very early stages however. While the main net was launched in May 2020, as of December 2020 it doesn’t appear as if adoption is happening very rapidly.

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