Celo Protocol Create The Conditions For Prosperity

Celo’s mission

Celo’s mission is to build a financial system that creates conditions of prosperity for everyone. Celo enables native and non-native digital assets–both cryptographic and Central Bank Digital Currencies (CBDCs)–to circulate freely across devices, carriers, and countries. This makes money mobile, global and accessible like never before.

In the author’s opinion, Celo designed and elaborate struct to as follows to achieve this vision:

1.       Ethereum-compatible Blockchain use POS consensus with 110 validators

2.       User-first with phone number PKI

3.       Celo Stablecoin Stability Mechanism

Consensus and POS

Celo's blockchain reference implementation is based on go-Ethereum, the Go implementation of the Ethereum protocol. In addition to the blockchain client, some core components of the Celo protocol are implemented at the smart contract level and even off-chain (e.g. phone number verification via SMS).

Byzantine Fault Tolerance

celo’s consensus protocol is based on an implementation called Istanbul, or IBFT. A well-defined set of validator nodes broadcast signed messages between themselves in a sequence of steps to reach agreement even when up to a third of the total nodes are offline, faulty or malicious. When a quorum of validators has reached an agreement, that decision is final.


Celo's proof-of-stake mechanism is the set of processes that determine which nodes become active validators and how incentives are arranged to secure the network.

Bonding Telephone number with address

Celo offers a lightweight identity layer that allows users of applications including Celo Wallet to identify and securely transact with other users via their contacts' phone numbers. Celo Wallet enables payments directly to users listed in their device's contacts list.


The Attestations contract allows a user to request attestations to their phone number for a small fee. A secure decentralized source of randomness is used to pick some validators that will produce and send via SMS signed secret messages that act as attestations of ownership of the phone number. The user then submits these back to the Attestations contract which verifies them and installs a mapping for the phone number to the user's account.

For the social payments use case, it allows for two important features. First, a user can send Celo currencies to a friend by using her phone number as the public key, allowing easy payments to contacts. Second, a user can send Celo currencies to a friend even if the friend has not yet downloaded a Celo wallet.

Compare Celo Stablecoin with Terra UST(only mechanism)

Terra protocol is an algorithm based stablecoin protocol, which is committed to providing a stable currency system with stable price and widely used.

Terra is essentially an unsecured stable currency, or algorithmic stable currency. The advantage of algorithmic stable currency is that the unsecured mechanism brings it higher capital efficiency. The disadvantage is that users' confidence in its stability is not as good as those fully mortgaged stable currencies, and the currency price is more likely to break down. Terra's stability mechanism

Terra's stability mechanism comes from the commitment of the smart contract to exchange its stable currency with Luna at a fixed rate. Its essence is the "implicit guarantee" of Luna's market value to the system wide stable currency.

Specifically, users can burn Luna with a market value of US $1 to cast us $1 UST, or send us $1 ust to the system and obtain the equivalent US $1 Luna, then when:

 when the price of a ust is less than US $1, the arbitrager can buy a large amount of UST, send ust to the system, obtain Luna tokens equivalent to the amount of US dollars according to the exchange rate of 1ust = US $1, and quickly sell Luna in the market, which will quickly create a buying order for ust and reduce the market circulation of ust until the price of ust approaches us $1, and the arbitrage space disappears;

 when the market price of UST is 1 USD, the seller will quickly increase the arbitrage price of UST to 1 USD, and the arbitrage will disappear according to the market price of LUT = 1 USD;

Therefore, the existence of arbitragers and the seamless exchange mechanism between Luna and ust ensure the stability of Terra's stable currency.


Celo stablecoins looks similar to UST.

Market participants can contribute in maintaining the Celo Dollar (or cEUR) price aligned to the parity by taking profits whenever deviations occur. This mechanism, called Mento, creates incentives such that when demand for the Celo Dollar rises and the market price is above the peg, users can profit using their own efforts by buying 1 US Dollar worth of CELO on the market, exchanging it with the protocol for one Celo Dollar, and selling that Celo Dollar for the market price.

Similarly, when demand for the Celo Dollar falls and the market price is below the peg, users can profit using their own efforts by purchasing Celo Dollar at the market price, exchanging it with the protocol for 1 US Dollar worth of CELO, and selling the CELO to the market.

The two looks alike? No

Celo protocol establishes a fixed supply of assets, called Celo (also referred to as the Celo native asset), a portion of which is distributed over time. From the initial asset distribution, a portion is placed in reserve and diversified.

The Celo protocol utilizes the same two key intuitions, with five novel features: (a) it introduces a multi-asset tiered reserve that supports several local and regional stable value currencies, (b) it sets expansion and contraction parameters that are tuned to the reserve ratio defined by the tiered reserve, (c) it introduces a decentralized exchange in which the different local and regional currencies and the reserve currency can be traded amongst one another without a central party, and that the protocol can use to perform expansions and contractions, (d) it releases block rewards and other incentives in the reserve currency, and (e) it has a governance mechanism in which long-term stakeholders in the reserve currency are responsible for governing the assets held in reserve and the new local currencies that are introduced.

Bring the CBDC to Blockchian

Celo Labs public a paper ‘Influencing the Velocity of Central Bank Digital Currencies’

explores the assets and process necessary for creating a central bank digital currency (CBDC) on the Celo platform, as well as the potential impact on the financial system. The paper also introduces the idea that current technological advancements allow for a better understanding of the velocity of money, and may afford central banks the ability to influence money velocity, thus potentially creating a new transmission channel for monetary policy.

For countries with imperfect financial facilities, Celo protocol’s compliant CBDC distribution mode is an option that can be considered. It brings a innovative monetary policy that can help governments improve macroeconomic regulation and control.