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Celo blockchain proposes return to Ethereum ecosystem, transition to L2

Celo Blockchain Transitioning to Ethereum Layer-2 Solution

CLabs, the organization behind the Celo blockchain, is looking to rejoin the Ethereum ecosystem by transitioning from an independent EVM-compatible layer-1 blockchain to an Ethereum layer-2 solution. According to a proposal discussion on Celo’s governance forum, the transition would include leveraging OP Stack as the architecture to become an Ethereum L2 blockchain, allowing Celo developers to utilize the full range of Ethereum tooling and libraries.

The transition also includes an off-chain data availability layer operated by Ethereum node operators and protected by restaked Ether (ETH), as well as transforming current validators into decentralized sequencers for L2.

The key differences between layer-1 and layer-2 blockchains are in their purpose, design, and architecture. Layer-1 networks are designed to be self-sufficient, while layer-2 solutions are intended to boost the performance of layer-1 blockchains without operating independently.

Celo: Transitioning to Web 3.0 Design

The proposed transition to Web 3.0 design is said to bring increased security while keeping gas fees low. “We anticipate no major changes in gas fees. This is an L2 solution with off-chain data availability, so gas costs can be much lower than other L2s,” reads the proposal, which will be discussed on a governance call on July 21 and then released for a “temperature check” on the following day.

End-users will not be affected by the migration, and CELO tokenholders will remain in control of core contracts by voting on governance proposals. Moreover, CELO tokens will be used to pay for gas.

The transition may have a variety of impacts on the Celo ecosystem. According to the forum discussion, it could potentially facilitate more liquidity flowing between Celo and other chains, but also create additional costs for sequencers, such as fees on the data availability layer and gas on Ethereum. Additionally, it is uncertain if sequencers’ rewards will match with current validators’ rewards.

As blockchain technology becomes increasingly competitive, Celo has been making efforts to improve its mobile experience by incorporating enhanced functionality and specific features. The Celo ecosystem is also targeting developing economies, where more technological payment solutions are in demand.

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