CELO is the governing cryptocurrency for the Celo blockchain payment platform. While the platform was designed to enable simple and decentralised payments via mobile app, it is the cryptocurrency itself that has piqued the interest of day traders. Like many cryptos, the value of CELO has jumped considerably, with the price today over double what it was a year ago. In this review, we cover what the token is, how it works and how to start trading this DeFi crypto.
How Celo Works
Celo was set up to enable decentralised mobile payments using just a phone number. By linking a phone number to a crypto wallet, users are able to send and receive payments via the mobile app, anywhere in the world.
The token works by applying a hashing algorithm to the linked phone number, which is stored on the blockchain. Celo is based on Ethereum technology, but is a proof-of-stake rather than proof-of-work. This removes the need for individual mining or mining pools, reducing the environmental impact. Instead, it uses an address-based encryption algorithm called the Byzantine Fault Tolerance (BFT). This allows the system to operate even if a node fails, while also protecting against malicious behaviour, as described in the project whitepaper.
Because the crypto is permissionless like Bitcoin and Ethereum, wallet and transaction data on the network is publicly available using the Celo explorer. This makes the blockchain project truly decentralised and scalable.
Three different configurations are used to run the Celo software, each of which plays a different role in the operation of the network:
- Validators – validators secure the network by running the BFT algorithm to create blocks. A quorum of validators is required to reach an agreement on the validation of a transaction. However, this requires complex equipment as well as the staking (holding) of Celo coins, so token rewards are provided as an incentive for their efforts. Keen validators can join the existing community on the Discord messaging app.
- Node runners – instead of mining, node runners forward transaction requests from light clients for which they receive the transaction fee as a reward.
- Light clients – these are customers using the Celo platform to carry out transactions. Light clients download the software as an app and use the wallet to make and receive payments, for which they pay a transaction fee.
CELO, previously known as Celo Gold (CGLD) is the platform’s native currency. However, by linking its tokens to other assets it is less subject to volatility. This can include fiat currencies, commodities and natural resources. These linked assets are referred to as stablecoins, and it is these tokens that people will use to make payments, preventing the value of a transaction from changing dramatically once completed.
The stablecoin is an elastic-supply, stable value asset, whereas CELO is a fixed-supply, variable value asset. CELO is the governance mechanism that sits in a reserve and can be exchanged for the stablecoin to balance out high demand or shortage. By providing incentives for the stablecoin supply to match its demand, the token closely follows the price of its linked asset as follows:
- New stablecoins can be created by sending CELO to the reserve
- If demand for the altcoin rises, a profit can be made by creating a new stablecoin using CELO, then selling the coin at the market price
- This eventually drives the stablecoin back to its target price (the price of the linked currency)
- The opposite can be done if there is less demand for the coin
The first stablecoin supported by Celo is the Celo Dollar (cUSD), which tracks the price of the US Dollar, meaning its value will stay close to 1 USD. In the future, the crypto is looking to expand this to cGBP and cEUR. However, as the price of the native coin depends on the demand for tokens, CELO is a lot more volatile – and a lot more interesting to traders.
Longer-term investors looking to hold Celo should store it in a crypto wallet, to ensure it is safe and accessible. Holding the token in a crypto wallet also enables traders to participate in staking. There are various types of crypto wallets available, including hot wallets that are connected to the internet, or cold wallets that are completely offline. Both types have their advantages and disadvantages; while a hot wallet allows for more convenient access (for example through an app), they can also be less secure.
How To Start Trading Celo
Finding An Exchange Or Broker
Traders are most likely to buy and sell the native asset (CELO), which is not linked to other currencies. This can be done through either an exchange or a broker. An exchange simply allows traders to convert one currency into another, whereas a broker permits trades without owning the underlying currency. Brokers also offer a range of financial tools and increased flexibility in the type of trades that can be carried out. For example, with an exchange, a trader may look to deposit funds in USD or GBP, then exchange this for CELO. With a broker, traders can easily speculate on a range of cryptos and pairs such as CELO/USDT.
One of the most popular options for buying CELO is on the Coinbase exchange, which also permits CELO staking in return for rewards. Other Coinbase resources include mini crypto courses and quizzes, with the potential to earn additional rewards in return for correct answers. It is also possible to buy Celo on Binance, though the token is not currently supported on Kraken.
Many exchange and broker platforms offer crypto wallets as part of their service. However, for traders looking for alternative wallet providers, the X and S hardware wallets on Ledger are highly recommended. Unfortunately, Celo is not supported on the popular Exodus hot crypto wallet.
Cryptocurrency is a volatile market that can be highly influenced by factors including regulation and adoption in certain industries. Fundamental analysis is therefore extremely important when trading Celo. Keep on top of the latest token and general crypto news and outlook now, as well as the live price today. Traders can set price notification limits using their platform, or using the TradingView price chart. The Twitter page @celoorg is a great source of information for the latest updates, plus roadmaps laying out the future of the crypto and its underlying technology.
Pros Of Trading Celo
- Celo is a not-for-profit alliance designed to increase the accessibility of payments around the world, with its logo representing the unification of communities. This is a key differentiator versus the majority of other cryptocurrencies.
- The software is open-source which both encourages innovation and enhances its security.
- A quorum of validators ensures the network remains secure, with the BFT algorithm protecting against malicious attacks.
Cons Of Trading Celo
- Transaction fees apply when making a payment, which is done by requesting to make a change to the ledger.
- The future of Celo depends on whether it will become widely adopted. Currently, it sits towards the bottom of the top 100 cryptocurrencies in terms of market capitalisation.
- Celo has other competition such as Stellar Lumens, which is also a non-for-profit organisation that aims to make low-cost payments widely accessible.
Final Word On Trading Celo
While analyst websites such as Wallet Investor forecast that CELO will rise in 2021, the coin’s price prediction is ultimately dependent on its level of adoption. Its use case is promising, though its fate lies in its market capitalisation throughout this decade and beyond 2030. As with any investment, traders can reduce risk by diversifying their portfolio, across other crypto and non-crypto assets.
What Is CELO?
CELO is the native cryptocurrency of the Celo platform, which is a ‘mobile-first decentralised payment system. It works alongside stablecoins such as cUSD to produce a less volatile payment currency. However, the coin itself is a fixed-supply asset, which means its price reflects the market demand and is therefore subject to increased volatility.
Is CELO A Good Investment?
The platform has a promising use case, but its market capitalisation is currently lower than many other cryptos. Its success ultimately depends on the level of adoption of CELO in future years.
How Can I Buy CELO?
The crypto can be bought through a broker or exchange such as Coinbase. Some platforms also offer an integrated crypto wallet option for longer-term storage of the token
What Is The Difference Between CELO Vs Stellar?
Both cryptos have been created by not-for-profit organisations that aim to provide payment options to those without bank access. However, Celo is permissionless unlike Stellar, which means it is more transparent and decentralised. Anyone can be a token validator and data is publicly available, making it harder to hack.
How Does Celo Work?
The Celo platform combines the crypto coin with stablecoins such as cUSD to reduce volatility. This is done by incentivising the creation of stablecoins using CELO when there is high demand for stablecoins and vice versa. It is the stablecoins that are generally used to make payments, though it is the CELO crypto coin that is arguably worth buying for traders.