Celo Announces Its Own Cryptocurrency Platform and Receives Support From Major Backers of Facebook’s Libra

Mar 11, 2020 11:11 EDT
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The non-profit Celo Foundation has announced its ‘Alliance for Prosperity’ – a blockchain-based crypto platform that allows developers to build social and financial utility mobile apps. Launching today with over 50 partners, the initiative aims to provide crucial financial tools to the 5.6 billion mobile users around the globe, including those residing in the un-banked and under-banked areas of the world.

The Alliance for Prosperity boasts a number of unique features that serve to distinguish it from the plethora of other blockchain-based offerings. For example, users can exchange other cryptocurrencies for the Celo Gold which, in turn, can be used to procure the Celo Dollar stablecoin. Moreover, this Celo Dollar stablecoin can be sent directly to a person’s phone number rather than a complicated address, substantially enhancing the platform’s ease of use.

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Celo envisions the Alliance for Prosperity as a repository of powerful social and financial mobile apps that offer myriad functionalities, such as simpler cash transfer programs, peer-to-peer lending, collaborative small-scale insurance, etc.

Chuck Kimble, Celo’s cLabs head of business development and the head of the Alliance for Prosperity, described the platform’s lofty ambitions as follows:

“[The use cases include] powering mobile and online work, enabling faster and affordable remittances, reducing the operational complexities of delivering humanitarian aid, facilitating payments, and enabling microlending.”

The platform stands in stark contrast to Libra – Facebook’s (NASDAQ:FB) faltering cryptocurrency project. As an illustration, anyone can join Celo’s Alliance platform without any requisite minimum financial investment. On the other hand, Facebook’s Libra demands a minimum $10 million investment from its backers as a pre-condition to joining the club. Also, as Celo is not attempting to replace any sovereign currency with its own, it should theoretically be able to withstand the attendant regulatory glare with much more fortitude.

The platform does have its pitfalls though. The reserve bolstering Celo’s platform is backed with other cryptocurrencies, such as Bitcoin and Ethereum, but is not fully collateralized. This could render the platform vulnerable to a so-called ‘bank run’ – a cascade of withdrawals that sap the liquidity out of the system. Moreover, a collapse in the prices of the underlying cryptocurrencies can substantially reduce the worth of Alliance’s reserve, leading to operational instability.

Perhaps, in cognizance of some of these shortcomings, Celo has allowed arbitrageurs to pocket the difference between the pricing of the Celo Gold and the Celo Dollar stablecoin, thereby incentivizing a narrow price differential between the two.

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The open-source Celo platform is still in the beta phase with the official launch of its ‘mainnet’ expected sometime in April. Even so, the first of its decentralized apps, the Celo Wallet, is already available on the iOS and Android OS. The non-profit, founded in 2017, has raised $36.4 million in funding so far.

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As yet, 130 teams have expressed interest in building on the Celo platform. For reference, Libra disclosed that around 1,500 organizations had expressed interest in the project four months after its reveal.

Interestingly, Celo’s Alliance for Prosperity is being backed by some of Libra Association’s members, including Andreessen Horowitz, Coinbase, Bison Trails, Anchorage, and Mercy Corps. This does raise the specter of a conflict of interest. Celo’s other high-profile backers include Carbon, GiveDirectly, Grameen Foundation, Maple, and Polychain. For a full list of backers, click on this link.

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