Motivation
- lower costs
- 24/7 global access
However，
- crypto-assets are volatile
- long hexadecimal cryptographic addresses
Celo Intro
- Lightweight identity
- Stability mechanism
- Incentives and governance for sustainability
based off Ethereum. Include：
- a native digital asset called Celo Gold
- all Celo assets
1 - Lightweight identity
Address-based Encryption (a variant of “identity-based encryption”)
Attaching phone numbers to Celo addresses enables capturing reputation (EigenTrust)
2 - Stability mechanism
50% of cGLD will go to the reserve and 50% of cGLD will be used to buy crypto-assets (e.g. Bitcoin and Ether)
There is trading between cGLD and cUSD, controlling the cUSD to peg to $1 value.
There’s a variable fee on Celo Gold transactions that goes to bolstering the reserve. The rate is based on the reserve ratio. (lower the reserve ratio, the higher the transfer fee)
3 - Incentives
Incentive: Proof-of-bonded-stake model
encourages long-term holding of Celo Gold by weighting rewards according to the amount of Celo Gold bonded and length of time remaining in the bond.
4 - Governance
Anyone can propose protocol improvements along with an implementation fee.
Then voted on by Celo Gold holders weighted by their bonded-stake
Process of adding new stablecoins
Very similar to governance, just that instead of paying a submission fee proposers have to stake Celo Gold.
If the new stablecoin is not backed by the shared reserve, then no need voting.
Celo More details
How to achive Stability
The stability mechanism can be understood as a hybrid crypto-collateralization and seigniorage-style model. To maintain the stability of cUSD, the protocol sets incentives for users to adjust cUSD supply to match cUSD demand at the price peg. At a high level, the Celo expansion and contraction mechanism allows users to create new cUSD by sending 1 US Dollar worth of cGLD to the reserve, or to burn cUSD by redeeming them for 1 US Dollar worth of cGLD. This mechanism creates incentives such that when demand for cUSD rises users are incentivized to buy 1 US Dollar worth of cGLD on the market, exchange it with the protocol for one cUSD and then sell that cUSD for the market price (Expansion Cycle in below numerical example). This direct link between cUSD and cGLD is driving the market price of cUSD back towards 1 US Dollar without the need for the protocol to estimate the optimal expansion or contraction amounts. Having a crypto-only reserve allows for this process to be running constantly and transparently.
To bolster the reserve the expansion and contraction mechanism contains a spread, a small fee that is paid for every transaction within that mechanism. When the reserve ratio is below a certain threshold, a fraction of the block rewards (called epoch rewards) is distributed to the reserve. In times of a low reserve ratio, a variable transfer fee on cGLD transactions will also help to further bolster the reserve.
Referece
https://medium.com/celoorg/a-look-at-the-celo-whitepaper-c0061118ffd4
https://medium.com/celoorg/diving-into-the-celo-price-stability-protocol-d7afd210609e
https://storage.googleapis.com/celo_whitepapers/Celo__A_Multi_Asset_Cryptographic_Protocol_for_Decentralized_Social_Payments.pdf