Celo, a layer 1 blockchain known for supporting decentralized applications (dapps), has recently experienced a notable increase in activity. In early July, the daily transaction count surpassed the 1 million mark for the first time in 2024. This surge follows a record-setting spike at the end of 2023 when transactions exceeded 13 million, the highest level ever recorded for the network.
Additionally, the number of daily active users on Celo peaked earlier in July, reaching over 716,000, according to Token Terminal data. While June marked the highest number of active users so far, July is on track to surpass this record, based on data from Celo’s official explorer. Celo’s focus as a layer 1 blockchain network is on mobile-first dapps and smart contracts, providing various software development kits (SDKs) and tools aimed at financial applications.
Historical Performance and DeFi Activity
Celo was notably active in decentralized finance (DeFi) during the 2021 boom. However, since then, it has seen a significant decline in traction. The network’s total value locked (TVL) has dropped sharply from approximately $1 billion in October 2021 to about $100 million at present. Despite this decline, some multi-chain dapps continue to be active on the network, suggesting that while Celo’s native ecosystem may be weaker compared to other established blockchains, it still retains some level of utility and engagement.
The most prominent DeFi applications on Celo include Mento, Uniswap, and Curve DEX. These apps remain active, highlighting the network’s continued relevance in the DeFi space, albeit on a smaller scale than during its peak.
Transition to Ethereum Layer 2: A Strategic Move
In a strategic move to bolster its presence in DeFi, Celo is transitioning from its current layer 1 structure to an Ethereum layer 2 network. On July 7, Celo launched Dango, its native scaling solution for Ethereum, which is currently in the testnet phase. This new layer 2 network is set to become Celo’s flagship network, reflecting a significant shift in the network’s strategy.
The Celo community has voted to gradually transition from the layer 1 format to a more efficient Ethereum layer 2 network. This transition aims to place Celo in direct competition with other established layer 2 solutions like Base, Optimism, Arbitrum, and Blast. By integrating more closely with Ethereum, Celo seeks to leverage the larger ecosystem’s advantages, enhancing its scalability and interoperability.
Implications for the Future
This transition to an Ethereum layer 2 network is expected to bring several benefits to Celo. First, it could increase the network’s scalability, allowing it to handle a higher volume of transactions more efficiently. Second, it may enhance interoperability with Ethereum, enabling smoother interactions between Celo-based dapps and the broader Ethereum ecosystem. Finally, this move could attract more developers and users to the network, boosting its overall activity and utility.
The Celo community’s decision to embrace this transition reflects a proactive approach to addressing the network’s current limitations and positioning it for future growth. By aligning with Ethereum, Celo aims to tap into the larger network’s resources and user base, potentially revitalizing its DeFi activity and expanding its use cases.
Conclusion
Celo’s recent surge in activity, marked by rising transaction counts and active users, signifies a period of transformation for the blockchain network. The planned transition to an Ethereum layer 2 solution through the Dango scaling solution represents a strategic shift aimed at enhancing scalability and interoperability. As Celo integrates more closely with Ethereum, it stands to benefit from increased efficiency and a broader ecosystem, positioning itself for renewed growth and relevance in the evolving DeFi landscape.