CLabs Proposes Celo’s Return to Ethereum Ecosystem via Layer-2 Transition
CLabs, the organization behind Celo blockchain, is contemplating a move back to the Ethereum ecosystem by transitioning from its existing independent EVM-compatible layer-1 blockchain to a layer-2 solution on Ethereum.
The proposal, currently under discussion on Celo’s governance forum, outlines the adoption of OP Stack architecture to transform Celo into an Ethereum layer-2 blockchain. This shift aims to simplify the utilization of Ethereum tooling and libraries for Celo developers and eliminate the complexities associated with monitoring tooling during upgrades.
Key aspects of the transition include the establishment of an off-chain data availability layer operated by Ethereum node operators and secured by restaked Ether (ETH). Additionally, the current validators will be transformed into decentralized sequencers for the layer-2 solution.
Layer-1 and Layer-2 blockchains have distinct purposes and designs. While Layer-1 networks function independently, Layer-2 solutions enhance the performance of Layer-1 blockchains, providing benefits such as increased security and lower gas fees.
The proposal highlights the expectation of maintaining low gas fees since the layer-2 solution utilizes off-chain data availability. A governance call is scheduled for July 21 to discuss the proposal before initiating a “temperature check” on the following day.
End-users and CELO token holders are expected to experience minimal disruption due to the migration, with CELO token holders retaining governance control through voting on proposals and using CELO tokens to pay for gas.
However, the transition may have various impacts on the Celo ecosystem. On one hand, it could facilitate increased liquidity between Celo and other chains. On the other hand, it may introduce additional costs for sequencers, such as fees on the data availability layer and Ethereum gas fees, potentially affecting sequencers’ rewards compared to the current validators’ rewards.
As Celo faces rising competition in the blockchain space, the project continues to focus on improving the mobile experience and offering specific features, particularly targeting developing economies where demand for payment technology solutions is high.