Can Celo — a three-good student on the stablecoin track — copy the rise of Terra?

25 min readNov 15, 2021

Research institution: Mint Ventures

Researcher: Xu Xiaopeng

Update time: 2021.11.6

1. Key points

Decentralized stablecoin is a track with huge space and fast growth. The Celo project has a good team background and its project narrative includes financial equality and negative carbon concepts, which meets the expectations of mainstream values for crypto business. The luxury investor background of the project is also conducive to introducing industry resources. The stablecoin + public chain strategy of the project is more competitive than a single stablecoin protocol, and the mobile-first strategy also adds a lot of highlights to the project.

However, from a quantitative point of view, Celo ecology has very little funds and quality projects, so it is difficult to support the current circulating market cap of US$ 2 billion. It is necessary to further observe how its “DeFi for people” US$100 million incentive plan launched in late August will promote the ecology. With the fierce competition of the new public chain, the golden window period for Celo’s development will not be too long.

As a good student, Celo started early on the decentralized stablecoin track, but it “caught up with the late episode” in the DeFi ecology. However, it still has development opportunities, and its game-changer may appear in the next six months.

1.1. Core investment logic

· The decentralized stablecoin market has a vast space, and its growth rate is much higher than the overall stablecoin market. The supervision of centralized stablecoins may further open up the development space for decentralized projects

· Celo’s stablecoin + public chain ecosystem business structure is more competitive than a single stablecoin protocol, as fully demonstrated by the rise of Terra Protocol

· Celo’s mobile-first and differentiation strategy of focusing on financially disadvantaged regions has allowed it to accumulate a large base of basic stablecoin users

· Excellent team and investor background

1.2. Main risks

Celo faces two core risks: a. The development of its on-chain DeFi ecosystem is weak, and it failed in the competition of the new public chain; b. The majority of its team is located in the United States, which is greatly affected by supervision.

1.3. Valuation

Compared with the business data of Terra Protocol on the same track, the market has now given Celo an optimistic valuation, which includes the expectation for Celos “DeFi for people” ecological subsidy of US$100 million. Whether Celo can maintain or even increase its market cap in the future depends on the introduction of ecological projects and capital capacity.

2. Basic situation of the project

2.1. Business scope

Celo’s core business is a public chain platform with decentralized stablecoin + DeFi as its core service, or an “open-source payment network”. It is committed to lowering the barriers for users to use crypto financial services, so that people who do not have bank accounts and lack financial service channels can also transfer money conveniently through mobile devices and use DeFi products freely.

2.2. Project history and roadmap

Celo project was established early and has been in operation for 4 years now. Its main network was launched in 2020. Since then, the progress of the project has been significantly accelerated.

2.3. Business situation

As mentioned earlier, Celo is an open-source payment network centered on stablecoins, and its business is stablecoin + public chain platform. We will observe its current business situation from these two perspectives.

2.3.1. Stablecoin

Celo’s currently launched stablecoins include the US dollar-pegged stablecoin cUSD (launched in June 2020) and the euro-pegged stablecoin cEUR (launched in June 2021). The main business data of these two stablecoins are as follows:

According to the above data, Celo’s overall stablecoin market cap is still small, with a value of about US$160 million. However, the number of stablecoin holding addresses is very high. Its cUSD has 220,000+ addresses, second only to Dai’s 500,000+ addresses among all decentralized stablcoins, and higher than the third-ranked Terra protocol’s USD stablecoin UST (140,000+, data in late September).

2.3.2. Public chain platform

Before introducing Celo’s public chain business, it is necessary to discuss the necessity of the underlying public chain for stablecoin products.

The stablecoin track is a track with very obvious network effects. Both users and merchants (protocols) are more willing to choose stablecoins with a wider user network to make or expand their businesses.

Therefore, in order to achieve a cold start of their projects and rapidly expand their user networks, the latecomers to the stablecoin track must adopt a highly differentiated competitive strategy from the current leading stablecoin projects, so as to have the possibility to come out and win.

The two core issues to be solved by stablecoin projects are: 1. How to realize the stabilization mechanism; 2. How to expand the user network and demand scenarios.

In the practices of most emerging decentralized stablecoin projects, they mainly focus on the design of stablecoin stabilization mechanisms and liquidation mechanisms. There are many eye-catching innovative ideas, such as Fei Protocol’s PCV (Protocol Control Value) Mechanism, as well as Liquity’s liquidation mechanism and so on. But judging from the results, none of these stablecoin projects have built a payment network with sufficient magnitude. In short, the user magnitude of their stablecoins is too low. Specifically, based on the comparison list of the number of decentralized stablecoin addresses in the previous paragraph, we can find that most users of decentralized stablecoin projects are far from Dai.

In this regard, we can draw a preliminary conclusion: the key to the success of a stablecoin project lies in the expansion of its users, not the design of its stabilization mechanism.

The several decentralized stablecoin projects mentioned above are all delicately designed in terms of the stabilization mechanism, but they lack good results in the expansion of demand scenarios.

Terra Protocol, the only stablecoin project with good development in recent years, focuses on “construction of demand scenarios” and has achieved good results. Its project market cap has surpassed MakerDAO and ranked in the top 20. Its strategy is not only to build a stablecoin protocol, but to build the underlying public chain from scratch, cultivate and introduce a large number of DeFi projects to provide financial scenarios for its native stablecoin UST, so as to achieve the early cold start and network expansion of its stablecoin.

Here the public chain has at least two core functions:

· It can offer better performance than Ethereum, with higher autonomy in core parameters.

· Public chain tokens can be used for ecological incentives. Whether it is self-built applications or subsidies to introduce third-party developers, these can quickly build the initial scenario of stablecoins.

At this point, Celo’s play style and positioning are very similar to Terra’s, which is reflected in:

· The starting point of the two projects is centered on “decentralized stablecoin”, instead of being a pan-public chain platform to directly compete with Ethereum. The strategic focus makes the project resources more concentrated.

· The story of the two projects has gradually evolved from a simple “decentralized stablecoin protocol” to a large financial ecosystem, and their positionings have shifted from currency services to an open integrated financial platform.

· Both adopt the method of stablecoin led by DeFi and using ecosystem to scenarios to vigorously cultivate as well as subsidize applications.

From this point of view, the author believes that Celo has avoided the biggest minefield of stablecoin projects, that is, “focusing on mechanism design, ignoring scenario expansion, and expecting stablecoins to expand spontaneously after realizing stabilization.”

In addition, the additional advantage of Celo over Terra comes from its compatibility with EVM, which greatly reduces the difficulty for developers to build applications on Celo.

So what about the development of Celo’s public chain? In fact, it is not so good.

Its core business data are as follows:

Celo’s TVL ranks 12th among all public chains according to the dApp data collected by Defillama

Among the top 10 Celo applications of TVL, Mento DEX used by Celo to stabilize its cUSD price occupies most of the market, as follows:

Overall, after deducting the official Mento’s US$770 million, Celo’s public chain ecology has a TVL of only US$200+, which is very poor. This is related to the fact that Celo did not start the public chain subsidy program until the end of August. Thus, it is still in the early stage of ecological construction.

2.3.3. Brief summary of business situation

Although the Celo project was established in 2017 and its mainnet was launched in mid-2020, its ecological development is still in the early stage, with a small number of applications on the chain and limited amount of funds. However, its stablecoin has a large number of coin holding addresses, and like Terra, it has chosen the strategy of driving the development of stablecoin through ecology. This can bring more opportunities for Celo to expand its user network than those simple stablecoin protocols.

2.4. The team

2.4.1. Core member

Celo’s operations are promoted by two core institutions, namely the Celo Foundation and CLabs. Clabs is currently responsible for project development, business development and other core tasks, with a large number of staff. The founder partners of CLabs are Rene Reinsberg and Marek Olszewski, and other partners are Sep K and Markus F.

Two of the founders have education experience at the Massachusetts Institute of Technology (MIT). Among them, Marek Olszewski has a Ph.D. in machine learning from MIT, and Reinsberg has an MBA from the MIT Sloan School of Business.

The two founders had previously served as research assistants at MIT, and then co-founded Locu, a community commerce platform Locu that was acquired two years later by the online business service platform GoDaddy for US$70 million. Both served as vice presidents at GoDaddy, and both left to found Celo in 2017.

The resumes of several other partners are also good, mostly from traditional financial institutions such as Morgan Stanley or large consulting companies.

Among them, Marek Olszewski is also the head of Valora, a mobile payment app in the Celo ecosystem. The project was independently financed in July this year and received an investment of US$20 million. The investors are still A16Z and Polychain.

2.4.2. The whole team

CLabs has a large staff size, and its LinkedIn profile shows that it currently has 130 employees, which is already a very large company in the crypto field. Most of its employees are in the United States, and about a quarter are in Germany. Many employees come from Ivy League schools, including MIT, UCLA, Stanford, Cambridge, and Brown University.

In terms of job positions, Clabs has the most engineering developers, accounting for about half, followed by business development positions, accounting for about 1/3.

Generally speaking, the Celo team is a typical elite team with a large staff size. Its core founding members have excellent education, entrepreneurship, and professional backgrounds, and most of its the employees graduate from famous schools.

2.5. Investment institutions

Since Celo started financing in 2018, it has raised a total of US$65 million, so the company has sufficient funding. Due to the founders’ excellent education and entrepreneurial background, and the fact that the project is aimed at a track with wide space, Celo has attracted many investors with a luxurious investment lineup.

Among them, there are famous venture capital institutions such as A16Z, Polychain capital, Dragonfly capital, industrial capital such as Coinbase, and well-known entrepreneurs such as Jack Dorsey, the founder of Twitter, and Reid Hoffman, the co-founder of Linkedin. In Celo’s multiple rounds of financing, A16Z has been constantly increasing its investment and has not missed any round of investment opportunities.

2.6. Summary of basic situation of the project

Through sorting out the basic situation of Celo, our observations on Celo are as follows:

· Its business is stablecoin + open financial platform, and its expansion strategy of stablecoin is correct.

· Its business situation has both positives and negativies: the number of its stablecoin user addresses is high, but the issuance scale is still small; its public chain ecology is relatively small in terms of both the number of projects and the amount of funds, so tt is in the early stage.

· The project team and employees have excellent backgrounds, so they have also won the favor of high-quality capital from inside and outside the industry. The project has abundant financing reserves and sufficient funding.

3. Business analysis

3.1. Stablecoin industry overview

3.1.1. The scale and market share of the stablecoin track

According to Coingecko data, the current overall scale of stablecoins has reached US$140 billion, with a daily trading volume of US$94.3 billion.

Among them, the total market cap of decentralized stablecoins (the top ten account for more than 95% of all decentralized stablecoins) accounts for less than 12% of the entire stablecoin market, and its daily trading volume is only 0.8%, as follows:

On the one hand, this shows that the current centralized stablecoins still have absolute dominance, especially USDT, whose transaction volume accounts for as high as 87.2%. But from another perspective, this also shows that decentralized stablecoins have a lot of room for growth, especially when centralized stablecoins face regulatory constraints.

On November 1, 2021, the Working Group on Financial Markets of the Biden administration released a report on stablecoins, stating that stablecoins are a competitive payment method, but they must be regulated. Biden’s economic advisers have repeatedly urged Congress to pass the legal framework of stablecoins. This framework will first include centralized stablecoins such as USDT, USDC, and BUSD into the scope of supervision, and conduct bank-like supervision over them.

3.1.2. The growth rate of the stablecoin market

In recent years, the scale of the stablecoin market has exploded. According to Debank data, the scale of the stablecoin market in November 2020 increased by 441% year-on-year, while it increased by 445% year-on-year in 2021. Considering that Debank’s data has not yet included data on new public chains such as Terra and emerging stablecoins such as MIM, the actual growth rate of stablecoin market in 2021 should be more than 500%.

The market size of decentralized stablecoins has grown even more rapidly.

As of November, its market size has achieved a year-on-year increase of about 10 times. According to Debank data, the total amount of decentralized stablecoins has increased from about US$790 million last year to more than US$9.41 billion at present, with a year-on-year growth rate of 1091%.

Similarly, Debank’s data does not include the UST on the Terra main chain and some other new decentralized stablecoins. Therefore, the total decentralized stablecoin market size should actually grow by more than 1800%, which is more than three times that of the overall stablecoin market.

Among them, the largest decentralized stablecoin, DAI, has an annualized year-on-year increase in market cap of about 1093%. It is worth mentioning that the current scale of the leading decentralized stablecoin DAI has increased by 62.% compared to the scale at the market high in May 2021, indicating that the growth of the decentralized stablecoin market is not entirely dependent on the bull market cycle.

Based on the above data, we can make a brief summary of the current stablecoin market:

· Stablecoins are still a market with a huge growth rate, and this year’s growth rate is much higher than last year.

· The growth rate of decentralized stablecoins is much higher than that of centralized stablecoins, and the growth rate of the former is more than three times that of the latter.

· The scale of the stablecoin market is not entirely dependent on the bull market, with its market cap growing much faster than the recovery of the crypto market.

· Although the regulatory stick may fall soon, the golden period for the development of decentralized stablecoins may have just arrived, and it is expected to continue to maintain a high growth rate in the future.

3.2. Project competition landscape

Celo focuses on decentralized stablecoins. In this chapter, we will also focus on analyzing the competitive landscape of decentralized stablecoins.

According to Coingecko data, the total issuance scale of the top 10 decentralized stablecoins by market cap is US$16.158 billion, as follows:

We can find that DAI still occupies the absolute leading position in the decentralized stablecoin market, accounting for half of the market, and its trading volume accounts for nearly 70% of the top ten. In addition to UST and MIM ranking 2 and 3, the market cap of the top three decentralized stablecoins accounts for 81%, and their trading volume accounts for more than 90% (excluding the transaction data of UST on the Terra main network, so the actual ratio should be higher).

Overall, the decentralized stablecoin market is not much less concentrated than the entralized stablecoin market.

Celo is a project that established the project “early in the morning”, but “caught up with the late episode” in terms of the stablecoin market cap. Does it still have the possibility of being a latecomer? Where does this possibility come from?

The author believes that compared to other decentralized stablecoins, Celo’s core advantages stem from the following points:

· Its business structure of the main chain + stablecoin ensures that its stablecoins cUSD and cEUR have preliminary scenarios in their own ecology, with a relatively simple cold start.

· The project has a strong investor background and well-known partners, including Deutsche Telekom, Opera browser, etc.

· It is compatible with EVM, which facilitates the introduction of application developers from other Ethereum and new public chains through subsidies

In addition, Celo has two main differences in its growth strategy of stablecoin users:

A. Mobile-first: Pay attention to the mobile terminal

i. It created the mobile payment app Valora in the ecology, led by the co-founder and raised funds separately;

According to the data of the Appstore, Valora has 586 ratings on the Appstore. Googleplay shows that Valora has been installed 100,000+ times. Both versions have been updated frequently. The latest version of IOS was released on October 18th, and the latest version of Android was released on November 2nd. According to official public information, Valora had more than 25,000 test users before it was officially launched. The author asked Celo officials for confirmation of Valora’s current user data but has not received a response so far. However, based on the installation data of Googleplay, we can estimate that the cumulative number of registered users is about 100,000 to 200,000. The data here does not include indirect customers provided by its business partners.

Compared with traditional transfers, Valora has the following advantages:

· Its transaction is based on the Celo blockchain, allowing convenient cross-border payments and transfers. The handling fee is US$0.01, with the average arrival time of 5 seconds.

· A user can transfer money to another user’s mobile phone number through his or her mobile phone number, and the block address of the payee is the public key generated through the decentralization of the mobile phone number (this operation is completed by the validator node)

· This operation is simpler than traditional encrypted wallets, reducing the user’s cost of use

ii. In terms of the introduction of ecological applications and the cultivation of developers, Celo also attaches great importance to mobile adaptation and scenarios. For example, the theme of its hackathon recently is “Make Crypto Mobile”.

iii. Many partners also come from related fields of mobile devices, including Deutsche Telekom, mobile browser Opera, mobile payment service provider Moola, etc.

B. Focus on areas with underdeveloped financial services

In terms of developer rewards, Celo has provided special bonuses for development teams in the following regions: Latin America, Africa, Brazil, Asia Pacific, and India, hoping to cultivate local apps for local markets. These regions are also Valora’s main markets.

The reason why Celo adopts the strategy of mobile-first and focusing on backward areas is based on a judgment: the area and population where smartphones are popular is larger than those that can be covered by traditional finance. Many people in backward areas do not have bank accounts, but they have a smartphone. Celo hopes to bring them low-threshold, high-efficiency transfer and financial services through stablecoin + Defi + mobile devices.

Perhaps because of this, the market cap of Celo’s stablecoin cUSD is not large, but it is second only to DAI in the number of holding addresses among decentralized stablecoins, showing a large number of holders but a low per capita account amount. Of course, this is still a bit of test.

In addition to paying attention to the financially disadvantaged population, Celo has also made a lot of efforts in poverty alleviation and environmental protection. For example, it has tried many times to donate money to victims in Haiti through stablecoins, and it has cooperated with Wren (a project that funds tree planting and rainforest protection) to reduce carbon emissions. In addition, there are a variety of applications for poverty alleviation fundraising and carbon emissions trading in the Celo ecosystem. It is worth mentioning that Celo will use 0.5% of its reserve pool funds to directly purchase carbon credit token cMCO2.

In the context of high global concern about the environmental pressure brought by crypto mining, Celo’s self-positioning of “negative carbon blockchain” coincides with the MakerDAO’s recent talk about “transforming DAI to a green currency”. They all hope to strive for a better social image for themselves in the public opinion space.

In general, Celo differs from most stablecoin projects in its network expansion strategy. Its core characteristics can be summarized as follows:

· Business structure of public chain + stablecoin

· Mobile-first product positioning and growth strategy

· Focus on the population with financial needs in backward areas

As the author has repeatedly emphasized before, stablecoins are a track with very strong network effects. There is no room for more than two competitors in the same set of strategies. Newcomers must have new insights in positioning, strategy and products if they want to come out and win.

Celo basically follows the above principles and differentiates itself from existing stablecoin players in many dimensions.

More vividly, Celo is currently like a Terra Protocol which is in the early stage of development, adopts a mobile-first strategy and focuses on the needs of the population in backward areas.

3.3. Token model analysis

There are two sets of tokens in the Celo system: 1. Core governance token: Celo (formerly Celo Gold); 2. Stablecoin: cUSD and cEUR.

3.3.1. Stabilization mechanism of stablecoin

Celo adopts a set of stabilization mechanisms that integrates the characteristics of many stablecoin projects in the world. Its core points are as follows:

· Celo’s stablecoins are backed by a reserve pool composed of a set of comprehensive assets. The reserve ratio of the reserve pool (the ratio of the value of the reserve asset divided by the value of the circulating stablecoin) is much higher than 1, which provides the core foundation for the intrinsic value of its stablecoins.

· Despite the existence of reserve funds, unlike MakerDAO, Celo’s stablecoins are not minted from over-collateralization, but are obtained by issuing Celo tokens to the official stabilization module Mento. Users can obtain stablecoins such as US$1 cUSD by sending a US$1 worth of Celo, or send a US$1 cUSD back to Mento in exchange for a US$1 Celo. Under this mechanism, when the market price of cUSD is lower than US$1, someone will buy cUSD at a low price in exchange for US$1 of Celo. Similarly, when cUSD is higher than US$1, someone will use Celo to mint cUSD to sell. The existence of arbitragers will ensure that cUSD will not deviate too far from its anchor price.

· Three mechanisms will be used to ensure sufficient funds in the reserve pool: i. When the reserve rate falls below the threshold, the Celo produced by the block will be included in the reserve pool to replenish capital; ii. A certain rate of transfer fees can be charged to supplement capital (currently not enabled); iii. A certain stabilization fee is charged in the transaction module of Mento to supplement the reserve capital.

· In order to improve the security of reserves, its asset portfolio is more diverse, currently including Celo, BTC, ETH, Dai and carbon credit token cMCO2. This is safer than just using project tokens as collateral (Terra is similar to this scheme, and Luna is the hidden margin of its native stablecoin).

Asset composition of Celo’s reserve pool, data source: https://celoreserve.org/

Celo’s stablecoin mechanism has many similarities with Terra protocol, and the core of both is to ensure its stabilization through minting arbitrage. However, Celo’s stabilization pool design is more systematic and complete, with better stabilization effect. Looking back at the historical trend of the Celo stablecoin cUSD, there was no significant de-anchorage, and it was basically stable between 0.99–1.02. Even during the 5.19 crypto market collapse this year, its price did not fluctuate much.

Historical trend of cUSD, source: Coingecko

3.3.2. Governance token Celo

a. Token distribution and release plan

The actual total number of Celo tokens is 1 billion, and the specific distribution before 2050 is as follows:

As of November 2021, the percentage of Celo tokens in circulation was about 34.73%, and the monthly inflation rate was around 2%.

b. Token usage and scenario

The main uses of Celo as a governance token are as follows:

· Obtain block output rewards: Gain block output rewards of the main network through staking

· Community governance: Celo is a required asset for campaigning for validator nodes, voting for nodes, initiating and voting on governance proposals. Nodes can obtain block output rewards through validation behaviors

· It can be used to mint stablecoins of the system such as cUSD and cEUR

· It can be used to pay for the gas of the network (can also be paid by the stablecoins of the system)

Like other token assets, the price of Celo is ultimately determined by market supply and demand. Its supply comes from the system’s token distribution and unlocking. Its long-term demand mainly comes from the demand for stablecoin minting, because stablecoin minting can only be carried out through Celo. So the more stablecoins the entire ecosystem requires, the greater the minting demand, and the greater the ratio at which Celo is locked. As the supply gradually decreases, it forms the core driving force for price rising.

3.4. Risks

At present, Celo’s risks mainly come from the following two parts:

a. The DeFi ecosystem on the chain is not well expanded, and it fails in the competition of the new public chain

Celo and Terra Protocol were established at a close time point, and both chose the differentiated competition model focusing on the main business of stablecoin + public chain platform in terms of overall strategy. However, at present, the overall development of the ecology on the Celo chain is significantly slower than that of Terra. Coupled with the rise of BSC, Avalanche protocol, antom, Polygon, and a large number of secondary networks on Ethereum, Celo is facing increasingly severe competition on the public chain. Similar to stablecoin, public chain is also a track with obvious network effects. A fast-growing public chain can form a positive cycle of users-funds-developers, forming a Matthew effect. For now, Celo’s Defi subsidy program “Defi for people” does not seem to be attractive enough for Ethereum leading apps. In August, Celo officially announced subsidy cooperation project including Aave, Curve, Sushiswap, etc. At present, only Sushi has officially migrated. For Aave, in its recently announced V3 cross-chain function diagram, it includes L2 and multiple new public chains, but Celo is not seen among them. If Celo cannot seize the opportunity to introduce more on-chain applications as soon as possible, it will become increasingly difficult to catch up with other public chains.

V3 cross-chain function planning of Aave, Source：https://governance.aave.com/t/introducing-aave-v3/6035

b. Regulation arrives

Stablecoins are currently the focus of supervision. Although USDT, USDC, BUSD and other centralized stablecoins should be the first to bear the brunt of regulation, those decentralized stablecoin projects with large market capitalizations will also attract regulatory attention. For example, the Mirror protocol on Terra Protocol was recently targeted by the SEC of the United States, which subpoenaed Terra Protocol’s actual leader, Do Kwon, to testify. This triggered a furious backlash from Do Kwon, who directly countersued the SEC. However, the founder of CLabs behind Celo and most of its employees live and work in the United States, so the impact and deterrence of regulation is obviously greater than that of Terra, which is based in South Korea.

4. Preliminary valuation

4.1. Five core questions

What business cycle is the project in? Maturity stage or the early and middle stage of development?

The project is in the early stages of development. Its stablecoin business and public chain ecosystem are still small, and there is still a lot of room for development.

Does the project have a solid competitive advantage? Where does it come from?

Celo has a luxurious lineup of investors, and its ecological tactics of “stablecoin + public chain” is also more competitive than a simple stablecoin protocol. However, compared with existing stablecoins and new public chain leaders, as well as its similar “stablecoin army” Terra, Celo currently does not have a very solid competitive advantage.

Is the medium and long-term investment logic of the project clear? Is it in line with the industry trend?

The medium and long-term investment logic of the Celo project comes from the huge development space of the decentralized stablecoin market and the power of its own public chain ecology + mobile strategy. Decentralized stablecoin is still a very good track. Celo’s mobile strategy based on “stablecoin + public chain” and its focus on backward areas have also differentiated itself from other competitors. Generally speaking, it is in line with the development trend of the industry.

What are the main variables in the operation of the project? Are these variables easy to quantify and measure?

At present, whether Celo’s on-chain ecology can rise rapidly, seize the window period for the development of the new public chain, and timely provide a cold start scenario for its stablecoin is the key point whether Celo can still stay on the competition table of decentralized stablecoins. This factor can be observed through indicators such as the overall TVL of the Celo ecosystem, the number of high-quality projects, and the number of on-chain transfers of stablecoins.

What is the management and governance of the project? What is the level of DAO?

Celo has started formal community governance. So far, 43 proposals have been approved or voted, including parameter adjustments, adding reserve assets, and releasing contracts and product functions. The number of participating addresses in each voting is basically more than 100, with a relatively large number of participants.

Celo’s recent governance proposals, Source：https://thecelo.com/governance

4.2. Valuation level

Celo is a comprehensive project of stablecoin + public chain ecology. Its token Celo contains three intrinsic values:

· Resources\commodities: used as gas fees for transfer within the ecology

· Currency: as a payment medium, and with transfer and storage value

· Equity: It has voting right and control right to the project, can capture part of the economic value of the protocol, and can stake to obtain the distribution of new tokens in the system

It is very difficult for any public chain token to conduct horizontal comparison valuation by the PS\PE class, or we cannot valuate it by the approach of DCF cash flow discount. But in order to observe the current market cap level of Celo, the author will choose Terra Protocol, which is very similar to Celo in many dimensions, and compare the core indicators of the two projects horizontally so as to make a preliminary evaluation of Celo’s current market cap. The comparability of Terra and Celo is mainly presented in:

· The track is the same: both focus on the stablecoin track, with stablecoin + finance as its core business

· Business portfolio and strategy are similar: Both adopt a stablecoin + public chain combination business form, and provide initial scenarios for native stablecoins through the public chain ecology to expand the user network

· There are many similarities in product mechanisms: For example, both have similar stabilization mechanisms of stablecoins, and both all use POS consensus mechanisms, etc.

Next, we compare the core data of the two projects.

We find that although Terra’s circulating market cap is nearly 20 times that of Celo, there is not much difference between Celo and stablecoin leader Terra in some core data, such as:

· Total number of addresses: Celo is about half of Terra

· Number of transfers: both are similar, and Celo is slightly higher recently

· Number of stablecoin addresses: There is currently no public data on the number of stablecoin addresses for Terra, but according to previous data from https://terra.flipsidecrypto.com/, the number of stablecoin addresses in late September was around 140,000 ( Data update has been suspended at present). It is now estimated that it will not exceed 200,000, which is also similar to that of Celo.

It can be seen that, the distance between the two projects is not large from the perspective of user scale and the number of ecologically active users. The real gap between the two projects lies in the issuance scale of stablecoin and the DeFi capital capacity of the public chain ecosystem. In these two indicators, Terra is 24 times and 36 times that of Celo respectively. From the perspective of market cap\ecological core application TVL, the market has given Celo a optimistic valuation compared to Terrac, which includes the expectation for Celo’s “DeFi for people” ecological subsidy of US$100 million.

Therefore, it may still not be the best time to buy Celo.

But from a qualitative point of view, the author believes that Celo has the correct differentiation strategy, that is, the combination of stablecoin + public chain, mobil-first and attention to financially backward regions. This allows Celo to have a user scale and active population that is not inferior to leading decentralized stablecoin projects. This is exactly the result of Celo’s early focus on off-chain marketing (focusing on offline promotion in backward regions in Asia, Africa, and Latin America), creating a user status of “multi-users, wide regions, and low per capita assets”. However, to some extent, this also made Celo miss the early dividends of the new public chain DeFi development from February to August this year.

However, if Celo’s ecological construction and project introduction are rapid, its TVL will have a significant growth trend, thus this project will still have a high configuration value.

4.3. Summary of preliminary valuation

From a qualitative point of view, decentralized stablecoins are a track with huge space and fast growth. The Celo project has a good team background. The project narrative includes the concepts of financial equality and negative carbon, which is in line with the expectations of mainstream values for crypto business. And the luxurious investor background of the project is also conducive to the introduction of industry resources. The project’s stablecoin + public chain tactic is more competitive than a simple stablecoin protocol, and the mobile-first strategy also adds a lot of highlights to the project.

From a quantitative point of view, Celo ecosystem has very little capital and high-quality projects, and it is difficult to support the current circulating market cap of US$2 billion. Therefore, it is necessary to further observe the promotion of the ecology by its “DeFi for people” US $100 million incentive plan. With the fierce competition of the new public chain, the golden window period for Celo’s development will not be too long.