Celo EVM Layer 1, to Transit in to Ethereum Layer 2

July 18, 2023

Darko Simunovski

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CLabs, the organization driving the development of the Celo blockchain, has set its sights on returning to the Ethereum ecosystem. To achieve this, they plan to make a significant transition, moving away from their current status as an independent, EVM-compatible layer-1 blockchain. Instead, they intend to embrace an Ethereum layer-2 solution. This strategic shift represents a pivotal moment for Celo, as it signifies a return to its roots and closer integration with the Ethereum network. By adopting an Ethereum layer-2 solution, CLabs aims to leverage the robustness and scalability of Ethereum while still preserving the unique features and capabilities of the Celo network. This transition will enable seamless interoperability with the Ethereum ecosystem, allowing Celo users and developers to access a broader array of tools, applications, and smart contracts available on Ethereum.

Following months of research by the cLabs team as well as initial discussions among core Celo and Ethereum community members, details an architecture where the Celo blockchain initially leverages the OP Stack to become an Ethereum L2, with key differentiators including:

  • Decentralized sequencer powered by Celo’s existing validator set running Byzantine Fault Tolerance consensus.
  • Off-chain data availability layer, powered by EigenLayer and EigenDA, operated by Ethereum node operators, and protected by restaked ETH. EigenDA brings the design of danksharding to Ethereum early, enabling Celo to maintain its low fees.
  • A design that retains Celo’s 1-block finality.

Migrating from an EVM-compatible Layer 1 (L1) to an Ethereum Layer 2 (L2) solution is considered a technical upgrade that aims to improve the Celo ecosystem while staying true to its mission of creating prosperity for all. The transition to an L2 solution will not impede the ecosystem’s ability to foster financial inclusivity and openness in the Web3 space. Instead, it is expected to accelerate progress toward this goal by bringing real-world use cases to the broader Ethereum ecosystem. The proposed change also holds the potential to significantly enhance the scope and impact of the Celo blockchain and the key benefits of migrating to an L2 solution are:

  • Further Ethereum alignment and EVM compatibility, fostering a seamless developer experience
  • Increased liquidity in the Celo ecosystem
  • Stronger security assurances than Celo provides individually
  • A trustless bridge to Ethereum, simplifying liquidity sharing between Celo and Ethereum
  • Gas fees changes would be immaterial
  • Celo validator community would continue to play a key role in operating the network

Celo’s technology draws inspiration from and is greatly influenced by Ethereum. Both platforms share similar communities and a common vision of creating a more equitable financial system using decentralized technology. As research into Layer 2 (L2) solutions has advanced, it has opened up new possibilities for Celo to further align itself with Ethereum’s principles and goals.

Through the implementation of the L2 proposal, cLabs anticipates realizing the following set of advantages: Increased Cross-Community Collaboration: By officially aligning with the Ethereum community, Celo’s technical roadmap will have even closer ties to Ethereum’s development. Celo has been an early adopter of Ethereum Improvement Proposals (EIPs), such as EIP-1559 for gas fee reductions and EIP-4337 for account abstraction. By solidifying this alignment, Celo can collaborate more effectively with Ethereum on existing EIPs and also propose its own EIPs. This presents an opportunity for Celo to engage in cross-community collaboration, focusing on areas like standardizing off-chain data availability and decentralized sequencers.

Enhanced Compatibility: Celo has been an Ethereum Virtual Machine (EVM) compatible chain since its inception. However, maintaining compatibility with the EVM has required substantial work on the backend, particularly concerning tooling and libraries to ensure they remain composable through upgrades of Celo’s geth fork or core Web3 libraries. By migrating Celo to utilize the Optimistic Rollup (OP) stack, the need to constantly monitor compatibility is eliminated. This allows Celo developers to seamlessly utilize the full range of Ethereum tooling and libraries without concerns about compatibility issues.

Increased Security: Currently, Celo is secured by a set of 110 validators, elected by approximately 300 million locked CELO tokens. This setup provides a significant level of decentralization and economic security. However, moving to an L2 architecture can further enhance security by anchoring the state on the Ethereum mainnet while leveraging a decentralized source for data availability. By following optimistic security models, as described in the OP Bedrock Explainer, Celo can greatly improve its security threshold, ensuring a robust and resilient network.

Maintained Low Gas Fees: The proposal aims to maintain low gas fees. As an L2 solution with off-chain data availability, Celo’s gas costs can be significantly lower compared to other L2 solutions that opt for on-chain data availability, such as Optimism or zkSync era. The design of the L2 architecture will enable Celo to sustain its commitment to low gas fees, which is crucial for fostering an accessible and cost-effective ecosystem. More details on gas fees can be found in the Appendix.

Layer-1 and Layer-2 blockchains differ primarily in purpose, but also in their design and architecture. L1 networks are designed to be self-sufficient, while L2 solutions are aimed at enhancing the performance of L1 blockchain rather than operating independently. In summary, adopting the L2 proposal offers cLabs a range of benefits, including closer collaboration with the Ethereum community, improved compatibility with Ethereum’s tooling, enhanced security through an L2 architecture, and continued low gas fees for the Celo ecosystem. These advantages are expected to contribute to the growth, resilience of the Celo network and most importantly raising liquidity in the Celo ecosystem, which is crucial for the Celo network to survive the high competition of EVM layer’s 1.

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