Celo Transitions to Ethereum Layer-2, Reduces Transaction Costs by 99%

Celo, a blockchain network originally launched as a layer-1 protocol in 2020, has successfully transitioned to an Ethereum layer-2 protocol using optimistic rollups. This significant shift was announced on March 26, highlighting the new protocol's features, including one-second blocks, sub-cent transaction costs, and the use of Tether’s USDt (USDT) and USDC (USDC) as gas. The transition, first proposed in the summer of 2023, was completed after the old layer-1 platform halted block production and the new network took over. The new platform is built on the OP technology stack and utilizes an optimistic rollups implementation.

Optimistic rollups are layer-2 scaling solutions designed to bundle multiple transactions off the main blockchain, reducing congestion and lowering transaction fees. These rollups assume that offchain transactions are valid by default, only resorting to fraud proofs during a challenge period if discrepancies are detected on the main chain. This architecture enhances Celo’s security and scalability, as transactions are now anchored to Ethereum, inheriting its economic security and decentralization. The new system also offers one-second block times and near-instant confirmations, making it more efficient and user-friendly.

Marek Olszewski, CEO of Celo developer cLabs, emphasized the benefits of this transition. He noted that the new system allows for deeper composability with Ethereum-native apps and protocols, significantly simplifying the codebase with 365,000 fewer lines of code. This reduction decreases the attack surface and leads to a lighter, cleaner, and faster codebase. The upgrade also preserved Celo’s near five-year chain history and was carried out in a trustless manner. The token was moved to the Ethereum blockchain, which should sensibly increase its liquidity. Olszewski explained that this transition makes Celo a fully-aligned Ethereum layer 2 by architecture, ecosystem, and mission.

Irfan Shaik, founder of rollup protocol Interstate, also recognized the positive impact of this change. He highlighted that Ethereum has the greatest network effects of any chain, allowing layer-1 protocols with liquidity fragmentation to tap into the largest pool of liquidity available on Ethereum layer 1s. This transition leverages Ethereum’s network effects, enhancing Celo’s capabilities and positioning it as a more robust and scalable blockchain solution.