We spoke with Nikita, a DeFi analyst at Midas.Investments, about Celo and why you should invest in it.
Before we got started on the topic, we asked Nikita if he could tell us a little bit about himself. “I am currently DeFi analyst at Midas.Investments, but I do it a part-time because I am also a second-year student at the University of Oxford. I am majoring in history, but I have wide-ranging interests. And actually, the thing that got me into crypto is my interest in free-market economics. And that is how I decided to do an internship at Midas.Investments.”
Then we got to our main topic. We asked Nikita about the Celo project and how it is different from other projects.
“Celo is a new blockchain project that sort aims to end claims to finally fulfill the kind of main promises of decentralized finance, which is to provide people all over the world with access to financial services and, eventually, ensure that they can live their lives in a financially independent way.”
“They’ve introduced three major technological innovations, in my opinion. The first is related to mobile technology – these are for users, essentially to make transactions and crypto user friendly. And that is why we are seeing all of this regulation, because governments may claim that crypto is too difficult for people to understand and therefore it is important that we regulate it and then essentially simplifying at least interfaces (technology is still really complex). By simplifying the interface, the UI and UX, makes it easier for investors to interact with the technology. Next innovation Celo introduced is ultra wide synchronization – if you think about it, connecting your Metamask to a blockchain requires quite a bit of effort, because you need to download all the headers from the blockchain, for example. As a result, using Metamask is not a viable option for someone who is solely reliant on their mobile phone. Celo’s third innovation is in tokenomics – kind of algorithmic cryptic cryptocurrencies – aims to create a stable currency that is defined natively. And it does so by employing traditional central bank mechanisms, for example through construction and expansion of supply, based on demand for stable currency and ecosystem.”
The following question we posed to Nikita was about how Celo was founded in 2017, what they began with and how they got to where they are now.
“If you read the white paper, the core of the project is now kind of similar. They haven’t made many changes, but they have tweaked a few things. As previously stated, they have introduced ultralight nodes – synchronization, which is basically for phone users to easily interact with the blockchain (a new mechanism called Plumo Ultralight Sync). In terms of other issues, I’d say they’ve stayed on track and haven’t made major changes aside from how they approach things now.”
We asked Nikita how he thinks Celo will affect future crypto adoption and whether it will change our perception of blockchain technology.
“It is obviously difficult to predict because there are so many different variables at play, but the hope is that more blockchains like Celo will emerge. It is one of the first blockchains to truly demonstrate the potential of allowing a wide range of people to easily access blockchain technology – gain financial independence, gain access to the financial system, and so on. There are faster blockchains than Celo, but none of them, not even Phantom, allow for such ultralight synchronization and cater to a specific audience of mobile users. In response to your second question, whether it will change our perception of cryptocurrency, I would say yes, but with a caveat. Celo could essentially demonstrate to crypto critics that crypto can be used for good, to actually help people and build an inclusive financial system. The caveat is that the blockings will eventually become more complicated, and the average investor will find it increasingly difficult to comprehend them in depth. So, in that sense, we could argue that there will be increased criticism – how many people can actually understand the technology and how accessible it is.”
We then asked him why so many institutional investors are choosing Celo and whether regular retail investors should look into their coin as well.
“I believe they’ve invested because they are looking for projects that will pique the interest of the average retail investor and that will probably lead to mass adoption. And I believe that is one of the reasons they invested, because they saw a potential to appeal to a broad range of people – large numbers of people – as an alternative to traditional finance in the way that some other crypto blockchains happened. They are also good at conducting their research, digging deep, and comprehending the technology in question.”
We then talked about how we can use all of these new mentioned technologies in our daily lives, such as how they will affect regular transactions, activities, and so on.
“The first technology Celo introduced is essentially about allowing people to interact with other people just using mobile phones, not just mobile phones but also things like email addresses or even just names. That is, when you want to send crypto to someone, you can use your private details instead of your public address, which you copy and paste. So I believe that will help to break down one of the main barriers that people face when adopting DeFi. People are legitimately put off by the fact that to send crypto to someone, they must copy and paste his 30 digit address, and sometimes you get his address wrong and lose your money. Using email addresses or even names could reduce such situations, while also simplifying the interface.”
“The second technology that I mentioned is ultralight synchronization. It is primarily aimed at mobile users, and it allows people to sync their wallets with blockchains. It will lower the entry barrier for people and allow more users to join DeFi.”
“The third one focuses on tokenomics. In terms of keeping the peg stable, it is a kind of pseudo-central banking mechanism because they want their stable coins to be pegged to Celo and other cryptocurrencies that are used as collateral. So, why is it useful? It is, in my opinion, less relevant than the other technologies, but I believe it is beneficial to the psyche because it is a very stable mechanism. For starters, it enables decentralized pegging, as there is no centralized third party that pegs everything for you. The second factor, as previously stated, is a more stable mechanism – because of the supply, expansion, and contraction mechanisms employed, your peg remains more stable. Celo isn’t just creating an ecosystem based on a single stable currency. They intend to use other local currencies in the future. So, in essence, they are developing a financial system that people all over the world can use.”
“One of the cool things they’re doing with other crypto-backed fiat currencies is making sure they can be created by anyone. So, for example, you don’t need protocol approval, blockchain approval, or vote approval to create a new stable currency. It can be created by anyone and then shared with people all over the world (for example Ruble backed by Celo). It is essentially distributed to people as shares, which they can then use instead of traditional fiat currencies.”
“Another innovative thing they are using is they created sort of heavy joint pool. Even though the Euro and the Dollar are separate fiat currencies, they share a pool because they are both backed by Celo and a variety of other cryptocurrencies. They do it because they want to use one crypto-backed fiat currency to stabilize the other, and they can do so by using a joint pool.”
Nikita then introduced us to Beefy.Finance (Celo network), one of his favorite projects.
“I think what stands out to me is cUSD-DAI because they are pegged, they will not give it to you one-to-one, but with a really good rate (58% APY). And then you can get really good pairs with cUSD-cEUR – this one is interesting because you think of them as very different fiat currencies, but they are quite similar in the Celo context because they are backed by similar assets. There is no random third party that claim back each virtual dollar with one unit of a real dollar.”
Nikita then briefly talked about NFTs projects on Celo due to extraordinary growth and interest in DeFi gaming.
“One project that I found interesting is called Wildchain – DeFi gaming. It is a game that allows you to play the role of an environmental advocate, for example, by planting species – and your Earth is basically like a structured game, with the ultimate goal of combating climate change. The way that business model works is that they don’t rely on donations and instead probably collect fees like any other DeFi game (when you buy new species; breed species they collect some fee). They then put those fees to good use by donating them to various climate change-related projects. From what I’ve read, I believe this game has enormous potential because, once again, it is similar to Celo principles in that it aims to pique the interest of ordinary people in DeFi.”
Then, via chat, Nikita was asked, “How do you see DeFi’s future?”
He responded that he dislikes these types of predictions because they are simply too far out and difficult to predict. “When it comes to DeFi, there are several important variables we should consider and pay attention to. The first is government regulation – governments see DeFi as a threat to legitimacy because what DeFi does or aims to do is create a kind of independent financial system/independent government control, and the government sees it as a threat to them because they need to get their taxes somewhere and haven’t regulated DeFi yet. So it may be the case that they will start regulating it and that would mean that DeFi would essentially lose its appeal. Then there’s a middle ground where there’s some regulation but it’s reasonable. It is not possible to have it completely unregulated; otherwise, retail investors will avoid it, just as ordinary investors would avoid DeFi because there are simply too many risks. As a result, we will almost certainly require some regulations.”
As usual, at the end of happy hour, we asked Nikita about his portfolio and the strategies he employs to create it.
“What I usually do is conduct extensive research on the project to determine who has long-term potential. The majority of my holdings are in Bitcoin and Ethereum because they are widely used and because I believe Ethereum has a lot of potential -proof of stake system consensus mechanism. I also hold other tokens. One of them is Fantom, which has huge potential in my opinion – all the metrics are there in terms of transaction throughput and transaction speed, and it is all in the blockchain to utilize an interesting technology called a Decentralized Acyclic Graph. AVAX is another token I hold for similar reasons because they use a similar technology to fund them. I also hold the coin TIME because of its economic model – TIME has come from what we call DeFi 2.0, so some people are no longer interested in things like Uniswap or Aave, maybe not Uniswap, because Uniswap 3.0 is pretty cool. We’ve had some really interesting projects come out recently, such as OHM and TIME, with interesting tokenomics. I also have some SPELL tokens because they have some interesting utility cases.”