Can the excellent student Celo replicate the rise of Terra?

Author: Xu Xiaopeng

Section 1: Key Points of the Research Report

Decentralized stablecoins represent a vast and rapidly growing sector. The Celo project has a strong team background, and its narrative includes financial equality and carbon-negative concepts, aligning with mainstream values regarding expectations for crypto businesses. Additionally, the project's impressive investor background is beneficial for attracting industry resources. The combination of stablecoins and a public blockchain strategy is more competitive than a purely stablecoin protocol, and the mobile-first strategy adds significant highlights to the project.

However, from a quantitative perspective, the funding and number of quality projects within the Celo ecosystem are quite weak, making it challenging to support the current circulating market value of $2 billion. Therefore, it is necessary to further observe the impact of the "DeFi for People" $100 million incentive program launched in late August on the ecosystem. As competition among new public chains intensifies, the golden window for Celo's development will not be very long.

Celo, which got an early start in the decentralized stablecoin sector but "arrived late" in the DeFi ecosystem, still has development opportunities, and its decisive moves may emerge in the next six months.

1. Core Investment Logic

● The decentralized stablecoin market has a broad space and grows much faster than the overall stablecoin market. Regulatory scrutiny of centralized stablecoins may further open up development space for decentralized projects.

● Celo's business structure of stablecoins + public blockchain has stronger competitiveness than a purely stablecoin protocol, as evidenced by the rise of the Terra Protocol.

● Celo's mobile-first and differentiated strategy focusing on underbanked regions has allowed it to accumulate a large user base for its stablecoins.

● Excellent team and investor background.

2. Valuation

Celo faces two core risks: a. Weak expansion of the on-chain DeFi ecosystem, leading to failure in competition among new public chains; b. The majority of the team is based in the United States, making it significantly affected by regulatory influences.

3. Main Risks

Compared to the business data of Terra Protocol in the same sector, the market has currently given Celo a relatively optimistic valuation, which includes expectations for Celo's "DeFi for People" $100 million ecosystem subsidy. Whether Celo can maintain or even increase its market value in the future will require further observation of the introduction of ecosystem projects and funding capacity.

Section 2: Basic Project Information

1. Project Business Scope

Celo's core business is a decentralized stablecoin + public blockchain platform centered around DeFi, or what it calls an "open-source payment network." It aims to lower the barriers for users to access crypto financial services, enabling people without bank accounts or financial service channels to conveniently transfer money and freely use DeFi products via mobile devices.

2. Past Development and Roadmap

Celo was established early and has been operational for four years. Its mainnet launched in 2020, and the project's progress has significantly accelerated since then.

3. Business Situation

As mentioned earlier, Celo, as an open-source payment network centered around stablecoins, focuses on stablecoins + public blockchain platforms. We will observe its current business situation from these two perspectives.

Stablecoins

Celo currently has two stablecoins: the USD-pegged stablecoin cUSD (launched in June 2020) and the Euro-pegged stablecoin cEUR (launched in June 2021). The main business data for these two stablecoins is as follows:

According to the data above, Celo's overall stablecoin market value is still small, around $160 million. However, the number of addresses holding stablecoins is very high, with over 220,000 addresses for cUSD, second only to Dai's 500,000+ addresses among all decentralized stablecoins, and higher than the third-ranked Terra Protocol's USD stablecoin UST (140,000+, data from late September).

Public Blockchain Platform

Before introducing Celo's public blockchain business, it is necessary to discuss the necessity of a foundational public blockchain for stablecoin products.

The stablecoin sector exhibits significant network effects; both users and merchants (protocols) prefer stablecoins with broader user networks for transactions or business expansion.

Therefore, newcomers in the stablecoin sector must adopt highly differentiated competitive strategies compared to leading stablecoin projects to achieve a successful cold start and rapidly expand their user networks.

The two core issues that stablecoin projects need to address are: 1. How to achieve stability mechanisms; 2. How to expand user networks and demand scenarios.

Most emerging decentralized stablecoin projects primarily focus on designing stability mechanisms and liquidation mechanisms, with some innovative ideas, such as Fei Protocol's PCV (Protocol Controlled Value) mechanism and Liquity's liquidation mechanism. However, these stablecoin projects have not built a sufficiently large payment network; in short, their user base is too small. As seen in the previous section's comparison of decentralized stablecoin address numbers, most decentralized stablecoin projects fall far short of Dai.

From this, we can draw a preliminary conclusion: the key to the success of stablecoin projects lies in expanding the user base rather than designing stability mechanisms.

The decentralized stablecoin projects mentioned above all have intricately designed stability mechanisms but lack effective demand scenario expansion.

In contrast, the only relatively successful stablecoin project in recent years, Terra Protocol, has focused on "building demand scenarios," achieving good results, with its market value surpassing MakerDAO and ranking in the top 20. Its strategy is not just to create a stablecoin protocol but to build a foundational public blockchain from scratch and cultivate and attract numerous DeFi projects to provide financial scenarios for its native stablecoin UST, facilitating early cold starts and network expansion for the stablecoin.

The public blockchain plays at least two core roles:

● It can provide better performance than Ethereum, with greater autonomy over core parameters.

● Public blockchain tokens can be used for ecosystem incentives, whether for self-built applications or subsidizing third-party developers, allowing for rapid establishment of initial scenarios for stablecoins.

In this regard, Celo's approach and positioning are very similar to Terra's, reflected in:

● Both projects start with "decentralized stablecoins" rather than competing directly with Ethereum as a general public blockchain platform, allowing for more concentrated project resources.

● Both projects' narratives gradually expand from a simple "decentralized stablecoin protocol" to a broader financial ecosystem, shifting their positioning from currency services to an open comprehensive financial platform.

● Both adopt a strategy of leading with DeFi to promote stablecoins, vigorously cultivating and subsidizing applications.

In this light, I believe Celo has avoided the biggest pitfall of stablecoin projects, which is "focusing on mechanism design while neglecting scenario expansion, expecting stablecoins to spontaneously expand after achieving stability."

Additionally, Celo's extra advantage over Terra comes from its compatibility with EVM, significantly reducing the difficulty for developers to build applications on Celo.

So, how is Celo's public blockchain development? In reality, it is not very ideal.

Its core business data is as follows:

According to dApp data collected by Defillama, Celo's TVL ranks 12th among all public chains.

Among the top 10 Celo applications by TVL, the Mento DEX, which Celo uses to stabilize its cUSD price, accounts for a significant portion, as follows:

Overall, after deducting the official Mento's $770 million, Celo's TVL is only over $200 million, which appears quite meager. This is related to Celo's public blockchain subsidy plan, which only started at the end of August, and it is still in the early stages of ecosystem construction.

Business Situation Summary

Although the Celo project was established in 2017 and its mainnet launched in mid-2020, its ecosystem development is still in the early stages, with few applications on-chain and a small funding volume. However, its stablecoin has a large number of holding addresses, and like Terra, it has chosen to drive stablecoin development through its ecosystem, providing more opportunities for expanding Celo's user network compared to purely stablecoin protocols.

4. Team Situation

Core Members

Celo's operations are driven by two core organizations: the Celo Foundation and CLabs. CLabs is currently responsible for the project's development, business expansion, and other core tasks, with a relatively large team. The founders and partners of CLabs are Rene Reinsberg and Marek Olszewski, along with partners Sep K and Markus F.

Both founders have educational backgrounds from the Massachusetts Institute of Technology (MIT), with Marek Olszewski holding a PhD in machine learning from MIT and Rene Reinsberg having an MBA from MIT Sloan School of Management.

Both founders previously served as research assistants at MIT and later co-founded the community business platform Locu, which was acquired by the online business service platform GoDaddy for $70 million two years later. Both served as vice presidents at GoDaddy and left in 2017 to establish Celo.

The other partners have solid backgrounds, mostly coming from traditional financial institutions like Morgan Stanley or large consulting firms.

Marek Olszewski is also the head of Valora, a mobile payment application within the Celo ecosystem. This project raised $20 million in independent financing in July this year, with investors including A16Z and Polychain.

Overall Team

CLabs has a considerable team size, with its LinkedIn profile showing around 130 employees, which is quite large in the crypto field. Most of its employees are based in the United States, with about a quarter in Germany, and many employees come from Ivy League schools, including MIT, UCLA, UC Davis, Stanford, Cambridge, and Brown University.

CLabs employee locations and alma maters, source: LinkedIn

In terms of roles, CLabs has the most engineering and development personnel, accounting for about half, followed by business development positions, which make up about one-third.

Overall, the Celo team is large, with core founding members having excellent educational and entrepreneurial backgrounds, and most employees coming from prestigious schools, making it a typical elite team.

5. Investment Institutions

Since starting fundraising in 2018, Celo has raised a total of $65 million, ensuring ample financial reserves. Due to the founders' strong educational and entrepreneurial backgrounds, along with the project's focus on a vast sector, Celo has attracted many investors, boasting a luxurious investment lineup.

This lineup includes renowned venture capital firms such as A16Z, Polychain Capital, and Dragonfly Capital, as well as industry capital like Coinbase, and well-known entrepreneurs such as Twitter founder Jack Dorsey and LinkedIn co-founder Reid Hoffman. A16Z has consistently increased its investment in Celo, not missing any funding rounds.

6. Summary of Project Basic Information

Through the analysis of Celo's basic situation, we observe the following:

● The business is focused on stablecoins + an open financial platform, with a relatively correct strategy for expanding stablecoins.

● The business situation has both positives and negatives: while the number of stablecoin user addresses is high, the issuance scale remains small; the public blockchain ecosystem is small in terms of both project quantity and funding volume, still in its early stages.

● The project team and employee backgrounds are excellent, which has attracted high-quality capital from both within and outside the industry, providing the project with substantial financing reserves.

Section 3: Business Analysis

1. Overview of the Stablecoin Industry

Scale and Market Share of the Stablecoin Sector

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

Among them, decentralized stablecoins (the top ten, accounting for over 95% of all decentralized stablecoins) represent less than 12% of the total market share, with a daily trading volume of only about 0.8%, as shown below:

Chart: MintVentures Data Source: Coingecko Date: November 4, 2021

On one hand, this indicates that centralized stablecoins still hold absolute dominance, especially USDT, which accounts for 87.2% of trading volume. However, from another perspective, this also suggests that decentralized stablecoins have significant growth potential, especially as centralized stablecoins face regulatory constraints.

On November 1, 2021, the Biden administration's financial working group released a report on stablecoins, stating that stablecoins are a competitive payment method but must be regulated. Biden's economic advisors have repeatedly urged Congress to pass a legal framework for stablecoins, which will first bring centralized stablecoins like USDT, USDC, and BUSD under regulatory oversight, subjecting them to bank-like regulations.

Source: CNBC

Growth Rate of the Stablecoin Market

In recent years, the stablecoin market has experienced explosive growth. According to Debank data, the market size of stablecoins grew by 441% year-on-year in November 2020, and by 445% year-on-year in 2021. Considering that Debank's data has not yet included new public chains like Terra and emerging stablecoins like MIM, the actual growth rate of the stablecoin market in 2021 should exceed 500%.

Trend of Stablecoin Market Size, Data Source: Debank

The growth rate of centralized stablecoins has been even more rapid.

As of November, the market size achieved approximately a tenfold year-on-year increase. According to Debank's statistics, the total amount of decentralized stablecoins has grown from about $790 million last year to over $9.41 billion now, with a year-on-year growth rate of 1091%.

Similarly, Debank's data does not include UST on the Terra main chain and some other newer decentralized stablecoins, so the actual total growth rate of the decentralized stablecoin market should exceed 1800%, which is more than three times the overall growth rate of the stablecoin market.

Growth Trend of Decentralized Stablecoin Market Value, Data Source: DeBank

Among them, the largest decentralized stablecoin, DAI, has an annualized year-on-year growth rate of approximately 1093%. Notably, the existing scale of the leading decentralized stablecoin DAI has increased by 62% compared to its market peak in May 2021, indicating that the growth of the decentralized stablecoin market may not entirely rely on bull market cycles.

From the above data, we can summarize the current stablecoin market as follows:

● Stablecoins remain a rapidly growing market, with this year's growth rate far exceeding last year's.

● The growth rate of decentralized stablecoins is significantly higher than that of centralized stablecoins, being over three times its growth rate.

● The scale of the stablecoin market does not entirely depend on bull markets; its market value growth rate is much faster than the recovery speed of the crypto market.

● Although regulatory scrutiny may soon intensify, the golden period for the development of decentralized stablecoins may just be beginning, with the potential for continued high growth rates in the future.

2. Project Competitive Landscape

Celo focuses on decentralized stablecoins, and in this chapter, we will analyze the competitive landscape of decentralized stablecoins.

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

We can see that DAI still holds an absolute leading position in the decentralized stablecoin market, accounting for nearly half of the total scale, with trading volume accounting for nearly 70% of the top ten. Adding the second and third-ranked UST and MIM, the top three decentralized stablecoins account for 81% of the market value and over 90% of trading volume (not including UST's trading data on the Terra mainnet, so the actual ratio should be higher).

Overall, the concentration level of the decentralized stablecoin market is not much lower than that of centralized stablecoins.

As a project that "got an early start" but "arrived late" in terms of stablecoin market value, does Celo still have the potential to surpass its competitors? Where does this potential come from?

I believe that Celo's core advantages compared to other decentralized stablecoins stem from the following points:

• The business architecture of mainnet + stablecoins ensures that its stablecoins cUSD and cEUR have initial scenarios within its own ecosystem, making cold starts relatively simple.
• The project has a strong investor background and well-known partners, including Deutsche Telekom, Opera browser, and others.
• EVM compatibility facilitates the introduction of developers from Ethereum and new public chains through subsidies.

Additionally, Celo has two main differences in its strategy for growing stablecoin users:

A. Mobile First: Emphasizing Mobile Platforms

1. It has developed a mobile payment application, Valora, within its ecosystem, led by a co-founder, and has raised funds separately;

Valora's interface on the App Store and Google Play

According to app store data, Valora has 586 ratings on the App Store, and Google Play shows over 100,000 installations, with frequent updates for both versions. The latest iOS version was released on October 18, and the Android version was released on November 2. According to official information, Valora had over 25,000 test users before its official launch. Regarding Valora's current user data, I have reached out to Celo's official personnel for verification but have not received a response yet. However, based on Google Play's installation data, it can be inferred that its cumulative registered user count is around 100,000 to 200,000. This data does not include indirect customers provided by its business partners.

Compared to traditional transfers, Valora has several advantages:

● Transactions run on the Celo blockchain, allowing for convenient cross-border payments and transfers, with a fee of $0.01 and an average arrival time of 5 seconds.

● Users can transfer money to another user's phone number, with the recipient's blockchain address being a decentralized public key generated through the phone number (this operation is completed by validating nodes).

● This operation is simpler than traditional crypto wallets, reducing user usage costs.

2. In terms of introducing ecosystem applications and nurturing developers, Celo also places great importance on mobile adaptation and scenarios. For example, its recent hackathon theme was "Make Crypto Mobile."

3. Many of its partners also come from mobile-related fields, including Deutsche Telekom, mobile browser Opera, and mobile payment service provider Moola.

B. Targeting Financially Underdeveloped Regions

Celo provides special bonuses for development teams in several regions to nurture local applications tailored to the market, including Latin America, Africa, Brazil, Asia-Pacific, and India. These regions are also the primary markets for Valora.

Celo's mobile-first and focus on underdeveloped regions strategy is based on the judgment that the number of regions and populations with smartphone penetration exceeds those covered by traditional finance. Many people in underdeveloped areas do not have bank accounts but do have smartphones. Celo aims to provide them with low-barrier, efficient transfer and financial services through stablecoins + DeFi + mobile devices.

Perhaps this is why Celo's stablecoin cUSD has a relatively small market value, but among decentralized stablecoins, its number of holding addresses is second only to DAI, reflecting a situation of many users but low average account balances. Of course, this still needs some verification.

In addition to focusing on financially underdeveloped populations, Celo has also made significant efforts in poverty alleviation and environmental protection, such as multiple attempts to donate stablecoins to Haitian disaster victims and collaborating with Wren (a project that funds tree planting and rainforest protection) to reduce carbon emissions. Furthermore, there are multiple applications within the Celo ecosystem related to fundraising for poverty alleviation and carbon trading. Notably, Celo plans to use 0.5% of its reserve pool funds to directly purchase carbon credit tokens cMCO2.

Currently, carbon credit token cMCO2 accounts for 0.09% of Celo's total reserve funds, source: https://celoreserve.org/

In the context of global concerns about the environmental impact of crypto mining, Celo's self-positioning as a "carbon-negative blockchain" aligns with MakerDAO's recent discussions about transforming DAI into a green currency, both seeking to improve their social image in the public discourse.

Overall, Celo's strategy for expanding its stablecoin network differs from most stablecoin projects, with its core characteristics summarized as:

● Public blockchain + stablecoin business architecture.

● Mobile-first product positioning and growth strategy.

● Focus on the financial needs of underdeveloped populations.

As I have repeatedly emphasized, stablecoins are a sector with strong network effects, and the same strategy cannot accommodate more than two competitors. Newcomers must have new insights in positioning, strategy, and products to succeed.

Celo essentially follows these principles, achieving differentiation from existing stablecoin players across multiple dimensions.

To put it more vividly, Celo currently resembles an early-stage project adopting a mobile-first strategy while focusing on the needs of underdeveloped populations, similar to Terra Protocol.

3. Token Model Analysis

The Celo ecosystem has two sets of tokens: 1. Core governance token: Celo (formerly Celo Gold); 2. Stablecoins: cUSD and cEUR.

Stability Mechanism of Stablecoins

Celo employs a stability mechanism that integrates features from many existing stablecoin projects, with the following core points:

● Celo's stablecoins are backed by a reserve pool composed of various assets, with the reserve ratio (the value of reserve assets divided by the value of circulating stablecoins) significantly exceeding 1, providing the core support for the intrinsic value of its stablecoins.

● Despite the existence of reserve funds, unlike MakerDAO, Celo's stablecoins are not minted through over-collateralization but are obtained by sending Celo tokens to the official stability module Mento. Users can send $1 worth of Celo to receive $1 worth of cUSD and vice versa. In this mechanism, when the market price of cUSD falls below $1, someone will buy cUSD at a low price to exchange for $1 worth of Celo. Similarly, when cUSD is above $1, someone will mint cUSD using Celo to sell, and the presence of arbitrageurs ensures that cUSD does not deviate too far from its pegged price.

● Three mechanisms will be used to ensure the sufficiency of reserve pool funds: 1. When the reserve ratio falls below a threshold, newly minted Celo will be added to the reserve pool to replenish capital; 2. A certain percentage of transfer fees can be charged to supplement capital (currently not enabled); 3. A certain stability fee can be charged in Mento's trading module to replenish reserve capital.

● To enhance the security of reserve funds, its asset composition is more diverse, currently including Celo, BTC, ETH, Dai, and carbon credit token cMCO2, which is safer than using only project tokens as collateral (similar to Terra's approach, where Luna serves as an implicit collateral for its native stablecoin).

Composition of Celo's reserve pool assets, data source: https://celoreserve.org/

Celo's stablecoin mechanism shares many similarities with the Terra Protocol, with both relying on minting arbitrage to ensure stability. However, Celo's reserve pool design is more systematic and complete, resulting in better stability. Looking back at the historical performance of Celo's stablecoin cUSD, it has not experienced significant de-pegging, remaining stable between 0.99 and 1.02, even during the crypto market crash on May 19 of this year, when its price did not fluctuate much.

Historical performance of cUSD, source: Coingecko

Governance Token Celo

a. Token Distribution and Release Plan

Celo's total token supply is 1 billion, with the specific distribution before 2050 as follows:

As of November 2021, the circulating supply of Celo tokens is approximately 34.73%, with a monthly inflation rate of around 2%.

b. Token Use Cases and Scenarios

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

● Earning block rewards: Obtaining rewards for block production through staking.

● Community governance: Celo is essential for electing validating nodes, voting for nodes, and initiating and voting on governance proposals. Nodes can earn block production rewards through their validation activities.

● It can be used to mint system stablecoins such as cUSD and cEUR.

● It can be used to pay for network gas fees (system stablecoins can also be used for payment).

Like other token assets, the price of Celo is ultimately determined by market supply and demand, with its supply coming from the system's token distribution and unlocking. Its long-term demand primarily stems from the minting demand for stablecoins, as stablecoins can only be minted using Celo. Therefore, the more stablecoins needed by the entire ecosystem, the greater the minting demand, leading to a higher proportion of Celo being locked up, which, as supply gradually decreases, forms a core driving force for price increases.

4. Risks

Celo's risks currently mainly come from the following two aspects:

a. Weak expansion of the on-chain DeFi ecosystem, leading to failure in competition among new public chains

Celo and Terra Protocol were established around the same time and both chose a differentiated competitive model focusing on stablecoin core business + public blockchain. However, the overall development of Celo's on-chain ecosystem is clearly lagging behind Terra. With the rise of BSC, Avalanche, Fantom, Polygon, and numerous Ethereum Layer 2 networks, Celo faces increasingly severe competition in the public blockchain space. Similar to stablecoins, public blockchains also exhibit significant network effects, where rapidly developing public chains can create a positive cycle of users—funding—developers, leading to a Matthew effect.

Currently, Celo's DeFi subsidy plan "DeFi for People" seems insufficiently attractive to leading Ethereum applications. Among the subsidy cooperation projects announced in August, including Aave, Curve, Sushiswap, etc., only Sushi has officially migrated. In Aave's recent announcement of the V3 cross-chain functionality, it included L2 and multiple new public chains, but Celo was not mentioned. If Celo cannot seize the opportunity to quickly introduce more diverse on-chain applications, the gap between it and other public chains will become increasingly difficult to bridge.

Cross-chain planning of Aave V3 functionality, source: https://governance.aave.com/t/introducing-aave-v3/6035

b. Regulatory Scrutiny

Stablecoins are currently a key focus of regulation. Although the immediate targets should be centralized stablecoins like USDT, USDC, and BUSD, larger market-cap decentralized stablecoin projects will also attract regulatory attention. For example, the Mirror protocol on Terra Protocol has recently come under scrutiny from the U.S. SEC, which issued a subpoena to Do Kwon, the actual leader of Terra Protocol, requiring him to testify. This action prompted a strong backlash from Do Kwon, who counter-sued the SEC. However, the founders and most employees of CLabs behind Celo live and work in the United States, making them significantly more affected by regulatory influences compared to Terra, which is based in South Korea.

Section 4: Preliminary Value Assessment

1. Five Core Questions

What stage is the project in its business cycle? Is it in the mature stage or the early to mid-development stage?

The project is in the early development stage. Its stablecoin business and public blockchain ecosystem are still small, with significant room for growth.

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

Celo has a luxurious lineup of investors, and its "stablecoin + public blockchain" ecosystem strategy is more competitive than a purely stablecoin protocol. However, compared to existing stablecoins and new public chain leaders, as well as similar "stablecoin groups" like Terra, Celo currently does not have a very solid competitive advantage.

Is the project's mid- to long-term investment logic clear? Does it align with industry trends?

Celo's mid- to long-term investment logic stems from the vast development space of the decentralized stablecoin market and its focus on public blockchain ecosystem + mobile strategy. Decentralized stablecoins remain a very promising sector, and Celo's mobile strategy and focus on underdeveloped regions provide a certain level of differentiation from other competitors, overall aligning with industry development trends.

What are the main variable factors in the project's operations? Are these factors easily quantifiable and measurable?

Currently, whether Celo's on-chain ecosystem can quickly gain momentum, seizing the window of opportunity for new public chain development and timely providing cold-start scenarios for its stablecoins, is the key point for Celo to remain at the decentralized stablecoin table. This factor can be observed through indicators such as Celo's overall TVL, the number of quality projects, and the number of on-chain transfers of stablecoins.

What is the project's management and governance model? What is the level of its DAO?

Celo has initiated formal community governance, having voted on 43 proposals, including parameter adjustments, adding reserve assets, and releasing contracts and product functions. The number of participating addresses in each voting session is generally over 100, indicating a high level of participation.

Recent governance proposals from Celo, source: https://thecelo.com/governance

2. Valuation Level

Celo is a comprehensive project combining stablecoins and public blockchain ecosystems, and its token Celo has three intrinsic values:

● Resource/Commodity: Used as gas fees for transactions within the ecosystem.

● Currency: Serves as a medium of payment, transferring and storing value.

● Equity: Provides voting rights and control over the project, allowing for capturing a portion of the protocol's economic value and staking for additional token distribution.

Any public chain token is challenging to compare horizontally using PS/PE ratios, and it is even more difficult to value using DCF cash flow discounting methods. However, to observe the current market value level of Celo, I will choose another project, Terra Protocol, which shares high similarities across multiple dimensions with Celo, to conduct a horizontal comparison of the core indicators of both projects and derive a preliminary evaluation of Celo's current market value. The comparability between Terra and Celo mainly lies in:

● Same sector focus: Both concentrate on the stablecoin sector, with stablecoins + finance as their core business.

● Similar business composition and strategy: Both adopt a stablecoin + public blockchain combination to provide initial scenarios for their native stablecoins through public blockchain ecosystems to expand their user networks.

● Many similarities in product mechanisms: Such as similar stability mechanisms for stablecoins and both using POS consensus mechanisms.

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

We find that although Terra's circulating market value is nearly 20 times that of Celo, Celo does not differ significantly from the leading stablecoin project Terra in some core data, such as:

● Total number of addresses: Celo is about half that of Terra.

● Number of transfers: Similar, with Celo slightly higher recently.

● Number of stablecoin addresses: Terra's stablecoin address data is currently not publicly available, but based on previous data from https://terra.flipsidecrypto.com/, its stablecoin holding addresses were around 140,000 in late September (the current data has been paused), and now it is estimated to be no more than 200,000, which is also similar to Celo's stablecoin address count.

It can be seen that in terms of user scale and the number of active users in the ecosystem, the two are not far apart. The real gap between the two projects lies in the issuance scale of stablecoins and the DeFi funding capacity of the public blockchain ecosystem. In these two indicators, Terra is 24 times and 36 times that of Celo, respectively. From the perspective of market value and core application TVL of the ecosystem, the market has given Celo a relatively optimistic valuation, which includes expectations for Celo's "DeFi for People" $100 million ecosystem subsidy.

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

However, from a qualitative perspective, I believe Celo has the right differentiation strategy, namely the combination of stablecoins + public blockchain, as well as a mobile-first approach and focus on financially underdeveloped regions. This allows Celo to have a user scale and active population comparable to leading decentralized stablecoin projects, which is a result of Celo's early focus on offline market promotion (targeting underdeveloped regions in Asia, Africa, and Latin America), creating a user base characterized by "many users, broad regions, and low average assets," but it has also caused Celo to miss out on the early benefits of new public chain DeFi development from February to August this year.

However, if Celo's ecosystem construction and project introduction progress rapidly, leading to a significant increase in its TVL, the project still holds high allocation value.

3. Summary of Preliminary Value Assessment

From a qualitative perspective, decentralized stablecoins represent a vast and rapidly growing sector. The Celo project has a strong team background, and its narrative includes financial equality and carbon-negative concepts, aligning with mainstream values regarding expectations for crypto businesses. Additionally, the project's impressive investor background is beneficial for attracting industry resources. The combination of stablecoins and a public blockchain strategy is more competitive than a purely stablecoin protocol, and the mobile-first strategy adds significant highlights to the project.

From a quantitative perspective, the funding and number of quality projects within the Celo ecosystem are quite weak, making it challenging to support the current circulating market value of $2 billion. Therefore, it is necessary to further observe the impact of the "DeFi for People" $100 million incentive program on the ecosystem. As competition among new public chains intensifies, the golden window for Celo's development will not be very long.

Celo, which got an early start in the decentralized stablecoin sector but "arrived late" in the DeFi ecosystem, still has development opportunities, and its decisive moves may emerge in the next six months.

Section 5: References and Acknowledgments

This article would like to especially thank the Celo APAC community for their assistance in providing materials and information.

Other reference information:

Project Market Value

https://www.coingecko.com/

Business Data

https://thecelo.com/

https://explorer.celo.org/

https://defillama.com/

https://debank.com/

https://celoreserve.org/

https://terra.flipsidecrypto.com/

https://blocktivity.info/

https://messari.io/

Terra Station

Project Documentation

https://docs.celo.org/

https://github.com/celo-org/docs

Official Information: https://www.chainnews.com/projects/celo.htm