Celo’s L1 to L2 Proposal: What the Valora community should know

TL;DR:

• This week, the Celo community proposed a new initiative to migrate Celo from a Layer 1 blockchain to an Ethereum L2. The proposal would enhance the scope and impact of the Celo blockchain –  increasing the security and EVM compatibility of Celo while bringing the ecosystem’s real-world use cases onto Ethereum.

• What is an Ethereum L2? An “L2” is a Layer 2 blockchain that extends Ethereum, allowing for more and lower-cost transactions while inheriting the security guarantees of Ethereum. 

• How does this affect the Valora community? If Celo’s proposal is approved,Valora users would enjoy a broader ecosystem of dapps, the same fast, low-cost transactions of Celo, and the additional, increased security of Ethereum.

• What should you do? You don’t need to do anything, but you can support or comment on the proposal in the Celo Community Forum here and follow @Valora, @CeloOrg, and @cLabs on Twitter to join the discourse. 

What’s going on?

This week, the Celo community introduced a new proposal that would migrate Celo from being a completely separate blockchain to a “Layer 2” blockchain that operates “on top” of Ethereum. This system will allow Celo to maintain its high-speed, low-cost, and carbon-negative transactions while benefiting from the increased security and network effects of Ethereum.

Celo was originally founded in 2017 by Rene Reinsberg, Marek Olszewski, and Sep Kamvar as a Layer 1 mobile-optimized blockchain - built using the same distributed ledger technology that powers Bitcoin and Ethereum. Their mission was to remove barriers to the large-scale adoption of crypto with a mobile-friendly means of payment. The founders opted for building a Layer 1 blockchain as the only way to provide fast, low-cost transactions at the time - ETH’s transaction fees were too expensive for the use cases they wanted to serve.

Celo mainnet launched on Earth Day 2020 as the first carbon-neutral, proof-of-stake, EVM-compatible Layer 1 blockchain, then, in 2021, officially became carbon-negative.

The Celo community has always considered itself part of the broader Ethereum ecosystem, and thanks to recent technical developments (and Ethereum’s transition from proof of work to the less energy-intensive proof of stake), this proposal is a “coming home” moment for Celo. 

What is an L2?

The Ethereum Foundation defines Layer 2 as “a collective term for Ethereum scaling solutions that handle transactions off Ethereum Layer 1 while still taking advantage of the robust decentralized security of Ethereum Layer 1. A Layer 2 is a separate blockchain that extends Ethereum and inherits the security guarantees of Ethereum.”

What does Celo’s migration from an L1 to an L2 mean?

Celo and cLabs’ L2 proposal is a positive change that will only expand the Celo ecosystem. 

If this proposal is approved, the Celo ecosystem will continue to foster a financially inclusive ReFi-focused community while bringing more real-world use cases to the Ethereum ecosystem. 

Celo and cLabs’ L2 proposal is a positive change that will expand the Celo ecosystem. Valora would remain your trusted entry point for sending payments, getting rewards, and exploring Web3 dapps. 

This proposal also has the potential to substantially enhance the scope and impact of the Celo blockchain, increasing both security and EVM compatibility. Although this may not have a noticeable effect for many Valora users, it’s an important change that makes it easier for developers to build new dapps and infrastructure that benefits the whole Celo and Ethereum communities. 

What does this mean for the Valora Community?

Valora will remain your trusted entry point for sending payments, earning rewards, and exploring Web3 dapps.

If Celo’s proposal is approved, it will not affect the ecosystem of dapps available on Valora or any mobile-first features you enjoy today. Gas fees will remain low, and Celo validators will continue to play a critical role in operating the network. 

However, Valora users will likely enjoy a broader ecosystem of dapps and faster, more secure transactions:

• Celo dapps: There will be no changes to existing Celo dapps, including those listed on Valora’s dapps page. Celo’s mobile-first features and growing regenerative finance (ReFi) ecosystem will be unaffected. 

• Low gas fees: Gas fees will remain low - an essential requirement in achieving global financial prosperity and core to both Valora and Celo’s mission. 

• Faster, scalable transactions: Celo’s transition to an Ethereum Layer 2 will ensure faster, more scalable transactions and reduce the cost of off-chain data availability. The Celo validator community will continue to be involved in operating the network, and security will also be strengthened by leveraging Ethereum's powerful ecosystem. 

What’s next?

The L2 proposal is a suggested framework for the Celo community and how it could improve the Celo blockchain over the next year. 

In collaboration with the broader ecosystem, Celo aims to refine the design and address any potential challenges. Celo is actively researching factors such as gas fee calculation, data availability, and security and continuing to pose open questions for the community to discuss and analyze - ultimately deciding whether the L2 migration should proceed. 

We encourage you to:

📢 Join the conversation

• Your feedback on the L2 proposal is essential! Join in on the Celo Forum proposal’s comments section here.

• Keep an eye out for updates from @CeloOrg and @cLabs,’ like this Twitter thread. Your engagement is appreciated; please share what you think!

🗓️ Attend Celo’s governance call

• A special-edition EthCC governance call will be held on Friday, July 21, at 8am PT/5pm ET. 

🗳️ Vote for/against Celo’s L2 migration

• Following the Celo governance call (as early as Saturday, July 22), an on-chain governance proposal will be released for the community to vote on.