Celo Finalizes Ethereum Layer-2 Migration After 20 Months

YEREVAN (CoinChapter.com) — Celo has officially migrated from a Layer-1 blockchain to Ethereum Layer-2 using Optimism’s OP Stack. The transition, finalized after 20 months of development, enhances security and network efficiency. The upgrade was completed at block height 31,056,500, confirming Celo’s full integration into Ethereum’s ecosystem.

The migration process started with Celo validators pausing block production on the original Layer-1 network. cLabs, the development team behind Celo, announced the start of the transition on X. Less than two hours later, the network resumed block production as a Layer-2 blockchain, with public RPC (Forno) and indexers becoming operational.

The official countdown website confirmed the update, stating:

“The Celo L2 migration has been successfully completed. Celo is now live as an Ethereum Layer 2.”

This marks a shift towards greater Ethereum interoperability while maintaining Celo’s low transaction fees.

Ethereum Compatibility and Faster Transactions

Celo’s Ethereum Layer-2 migration reduces block production time to one second, a significant improvement from the previous five-second intervals. The integration strengthens security and network resilience by leveraging Ethereum’s infrastructure. Developers can now build on Celo’s Layer-2 network with minimal modifications.

The network retains its low transaction fees of $0.0005, ensuring affordability for users. The transition to Ethereum Layer-2 also improves cross-network transactions by enabling native Ethereum bridging. This reduces dependence on third-party bridging solutions, which have been targets of past security vulnerabilities.

Celo’s Layer-2 upgrade makes it easier for Ethereum-based projects to operate within its ecosystem. Marek Olszewski, CEO of cLabs, noted that this transition brings Celo closer to Ethereum’s existing developer environment, simplifying the integration process.

Celo Price Reaction and Ethereum Fee Revenue Drop

Following the migration, CELO’s price increased by nearly 4%, reflecting market interest. The upgrade is expected to improve liquidity and transaction efficiency, making the blockchain more attractive to users and developers. Trading volume spiked, with CELO reaching a local high of $0.4058 before facing a minor pullback.

Ethereum’s transaction fee revenue has declined by 95% as more users adopt Layer-2 scaling solutions. The rise of Ethereum Layer-2 networks like Celo has led to a shift away from Ethereum’s main chain, reducing fee-based revenue.

Ethereum co-founder Vitalik Buterin commented on the transition, stating:

“Celo has done a lot for crypto’s global adoption, and I am excited to see Celo fully embracing the Ethereum family.”

Industry Debates on Layer-2 Blockchain Scaling

Solana co-founder Anatoly Yakovenko has questioned the necessity of Layer-2 solutions, arguing that a monolithic Layer-1 structure can provide sufficient scalability. He emphasized that Layer-1 blockchains can be “faster, cheaper, and more secure” without relying on fraud proofs or upgrade multisigs.

Yakovenko criticized Layer-2 solutions for depending on external data availability stacks, which he described as “glacially moving” and inefficient. He suggested that a well-designed Layer-1 can eliminate the need for complex Layer-2 mechanisms. His remarks reflect ongoing industry debates about blockchain scalability and efficiency.

Meanwhile, Binance founder Changpeng Zhao has reopened discussions on whether AI-focused blockchain projects should be built on Layer-1 or Layer-2 networks. He noted that while Layer-1 provides more sovereignty and decentralization, it also requires significant effort to maintain, including running nodes and validators.

“Having your own L1 feels like you have more sovereignty, but it’s also a lot more work,”

Zhao stated.

In contrast, Layer-2 solutions reduce operational complexity by leveraging an existing blockchain like Ethereum, providing access to DEXs, liquidity pools, and established communities. Zhao questioned whether industry sentiment had shifted on this issue, adding,

“Is L1 cooler than L2 or the reverse?”

His remarks highlight ongoing debates about the best blockchain infrastructure for AI projects.

The expansion of Ethereum Layer-2 networks has reshaped the debate on blockchain scalability. Some developers advocate for Layer-2 networks as a way to enhance security and reduce congestion, while others suggest improving Layer-1 throughput instead.

Joanna Zeng, co-founder of SOON, an SVM rollup on Ethereum, stated:

“L1s will not change their base layers, but they can still benefit from better scalability. Instead of arguing against L2s, the real opportunity is proving the strength of SVM by expanding beyond Solana.”

The role of Layer-2 scaling remains a key topic in blockchain development.

Celo’s Layer-2 Model and Future Challenges

Celo’s low transaction fees enhance user adoption but present challenges in sustaining long-term security and validator incentives. To address this, some Layer-2 networks explore strategies like Maximal Extractable Value (MEV) and alternative fee models to maintain network stability.

MEV refers to the maximum value that miners or validators can extract by reordering, including, or excluding transactions during block production. This practice can lead to unfair advantages and potential security concerns within the network. In Layer-2 solutions, MEV poses similar challenges as in Layer-1 networks. Validators may also exploit transaction ordering to gain additional profits, impacting transaction fairness and user trust. Addressing MEV is crucial for maintaining the integrity and reliability of Layer-2 platforms.

Additionally, beyond MEV strategies, Layer-2 networks consider alternative fee models to ensure sustainable funding. Implementing minimal base fees or dynamic pricing mechanisms can help generate consistent revenue, supporting network operations and security without compromising low transaction costs. By exploring MEV mitigation techniques and alternative fee structures, Celo aims to balance affordable user transactions with the economic incentives necessary for validators, ensuring long-term network stability and security.

Notably, the integration of Celo’s Layer-2 network into Ethereum improves developer accessibility, expanding the range of decentralized applications that can be built. The shift also aligns with broader efforts to enhance Ethereum scalability, addressing network congestion and cost-efficiency concerns.

Above all, as the blockchain industry continues adjusting to the Layer-2 expansion, networks like Celo must navigate the evolving landscape of transaction fee models, liquidity distribution, and security incentives.