Perhaps because of its size, or age, Facebook has been getting hammered, exposed to a litany of accusations and legal troubles.
The latest is an ad-ban campaign but the company suffered its share of public and political confrontations.
Facebook’s Libra project was not spared. When announced in 2019, world’s central banks and financial regulators announced they would fight its stable-coin initiative for the destabilizing effect it would have on currencies and financial systems, concerned about the giant’s 2 billion users and potential influence on global finance.
Mark Zuckerberg appeared in front of Congress in October to address concerns surrounding Libra.
Today, its biggest threat is a competitor called Celo, another stable coin initiative, but one that resonates better with supporters, the same that deserted Libra, and more.
What is Celo?
According to Business Insider, The Celo Foundation, founded in 2017 was initially a nonprofit organization that aims to provide companies and developers with a blockchain platform and stablecoin, dubbed Celo Dollar, to build and power mobile apps.
The Celo Dollar is meant to help make remittances cheaper and more efficient, for example, but it could also be used for other use cases including microlending and humanitarian aid.
Unlike Libra, which will reportedly be backed by a basket of fiat currencies, including the US dollar, Celo is backed by other cryptocurrencies.
Finextra says Celo incorporates elements of the Libra project, but also Ethereum, which like it, Celo’s blockchain will be open source and allow users to build general-purpose decentralised applications on it.
Forbes says that rather than being a centralized issuer that supports the price pegs with fiat held in banks, Celo can offer an unlimited number of stablecoins all backed by cryptoassets held in reserve.
This collateralization serves as a buffer against potential volatility.
Celo is what is known as an algorithmic-based stablecoin provider which means the company employs a smart-contract based stability protocol that automatically expands or contracts the supply of its collateral reserves in a fashion similar to how the Federal Reserve adjusts the U.S. monetary supply,” according to Forbes.
Size, Membership and reach
Celo has now announced that it has signed up 50 founding members for its new initiative, dubbed the Alliance for Prosperity, per Medium for a claimed reach of 400 million people.
The alliance was formed to ensure that Celo delivers on its mission to help enhance financial inclusion by developing a blockchain-based financial ecosystem.
Members of the alliance include Andreessen Horowitz, and Coinbase, which could lead to a conflict of interest with Libra as these are also members of Facebook’s Libra Association.
LinkedIn founder Reid Hoffman and Twitter/Square CEO Jack Dorsey are also Celo members.
Libra Association deserters include Mastercard and Visa, PayPal, Stripe, and eBay, all of whom might jump ship to projects like Celo, especially since Celo members don’t have to contribute a hefty financial investment ($10 million membership fee for Libra) to be part of the association.
Celo has recently announced that its mainnet is now live, which will allow users to transfer Celo Gold tokens between one another, a significant step towards allowing the exchange of its stablecoin pegged to the dollar.
Roughly 509 investors in May, from dozens of countries, participated in an auction, paying $1 per Celo Gold (cGold) token. Most investors hailed from Germany, the United Kingdom, Turkey, India, Malaysia and Vietnam, according to cLabs, lead Celo developers. The average buyer spent $19,650, which is enough Celo Gold to theoretically become a validator on the network.
Celo aims and obstacles getting there
A key differentiator for Celo is that for the first time its blockchain platform allows users to send/receive money to a person’s phone number, IP address, email, as well as other identifiers.
Celo is also open-sourcing its entire codebase and design after two years of development. Additionally, the company is launching the first prototype of its platform, named the Alfajores Testnet, and Celo Wallet, an Android app that will allow users to manage their accounts and send/receive payments on the testnet.
While there are 1.7 billion unbanked people in the world, it can be reasonably estimated that there are 4 billion people without a smartphone. This suggests that any initiative with a financial inclusionary outlook will not necessarily be a panacea for the underbanked when it is likely huge swathes of them do not have a smartphone or internet access either.
That’s an aim shared by both Libra and Celo but Libra might have the upper hand due in large part to a larger array of tools and mediums to reach these customers.
Also, should central banks be looking for technology partners to build the rails on which their Central Bank Digital Currencies (CBDC) can run, who are they more likely to approach? Despite their misapprehensions around Libra, the centralised model may still be favourable to the decentralised approach that Celo will be offering.