cLabs, the organization behind the development of the Celo blockchain, is planning to return to the Ethereum ecosystem by transitioning from an independent layer-1 blockchain to an Ethereum layer-2 solution. The proposal aims to leverage OP Stack as the architecture, transforming Celo into an Ethereum L2 blockchain. This transition would eliminate the need to monitor tooling and libraries composability through upgrades, providing Celo developers with easier access to the full range of Ethereum tooling and libraries.
Key features of this proposed upgrade include an off-chain data availability layer operated by Ethereum node operators and protected by restaked Ether (ETH). It also involves transforming current validators into decentralized sequencers for L2. Layer-1 and Layer-2 blockchains serve different purposes and have distinct designs and architectures. While L1 networks operate independently, L2 solutions aim to enhance the performance of L1 blockchains.
Benefits and Implications
The transition is expected to offer several benefits, including increased security while maintaining low gas fees. Gas costs on the proposed L2 solution with off-chain data availability are anticipated to be significantly lower than on other L2s. The proposal will be discussed during a governance call on July 21 and subsequently released for a ‘temperature check’ on the following day.
Adopting this proposal would have minimal impact on end-users and enable CELO token holders to retain control over core contracts by participating in governance proposals. Additionally, CELO tokens will be used for gas payments. Despite being primarily a technical transition, it may have various implications for the Celo ecosystem. The integration could facilitate greater liquidity flow between Celo and other chains but may also generate additional costs for sequencers, such as fees on the data availability layer and gas on Ethereum. It remains unclear whether sequencers’ rewards will match those of current validators.
Celo’s Focus and Future Direction
With the increasing competitiveness in the blockchain space, Celo has been focused on improving its mobile experience by adding enhanced functionality and specific features. The Celo ecosystem targets developing economies where there is a growing demand for technological payment solutions.
This proposal marks an important step for Celo to enhance its performance, integrate with the Ethereum ecosystem, and provide developers with easier access to Ethereum tooling and libraries. It also opens up possibilities for more liquidity and interoperability between Celo and other chains. However, various considerations need to be addressed, such as the potential impact on sequencers’ costs and rewards. The governance discussions and subsequent decisions will shape the future direction of Celo’s integration into the Ethereum L2 landscape.