In 2021, the popularity of fast and cheap layer 1 networks had significantly increased. However, things are changing now. With the introduction of more L1 smart contract platforms, competition has intensified. Networks that struggle to attract users amidst increasing competition are now exploring alternative paths. One of these alternatives is CELO.
The developer company behind the Celo blockchain, CLabs, had expressed its intention to transition Celo from an independent layer 2 network to an Ethereum layer 2 solution. Following this announcement, the proposal was officially presented for voting. As we previously reported, these developments led to an increase in the price of CELO. Today, a total of 131 votes were cast, with 128 in favor of the transition, two against, and one abstention. This means that CELO, which sought refuge in Ethereum, has received official approval.
The team initially announced this transition on Twitter on July 16th, stating that it came after months of research and discussions with members of the Celo and Ethereum communities. According to the proposal, the change aims to simplify liquidity sharing between Celo and Ethereum, enhance security, and facilitate a seamless developer experience. Celo is already compatible with the Ethereum Virtual Machine, so developers won’t experience significant changes.
Leading layer 1 smart contract platforms include Solana, Aptos, SUI, and other alternative networks. These are independent blockchains, just like Ethereum, that host smart contracts. However, the increasing number of alternatives is causing a fragmentation of the user base. In the future, a multi-chain era may be reasonable and meaningful, but this concept of multi-chain development may primarily focus on layer 2 solutions. Currently, when we look at TVL (Total Value Locked) and user base, we see that demand is predominantly met by Ethereum layer 2 solutions.
If the number of layer 1 solutions continues to increase, Solana and its competitors may face even greater challenges against layer 2 networks that rely on Ethereum. Rumors of more layer 1 networks undergoing a similar transition after CELO are positively impacting the future of Ethereum, while also raising concerns about the possibility of these “killers” being forgotten due to indifference.
Of course, predicting the future is impossible, and tomorrow’s conditions may change in favor of Solana and its competitors. At the time of writing this article, CELO is experiencing a 4% increase and is being traded at $0.51.