Analyzing Celo’s On-Chain Performance

1.Introduction

1.1. About on-chain metrics

On-chain metrics have evolved significantly, transforming from simple transaction counts into sophisticated indicators that provide deep insights into the underlying health, adoption, and potential of blockchain networks and protocols.

These metrics serve as a critical bridge between the blockchain's internal ecosystem and its interaction with the broader crypto economy. However, the interpretation of these metrics can be complex, influenced by factors such as data collection inconsistencies and the need to correlate blockchain activity with real-world events.

Understanding these metrics is not just about deciphering raw numbers; it’s about uncovering the story they tell. For Celo, a blockchain uniquely focused on financial inclusion and mobile-first access, on-chain metrics reveal much about its progress toward these ambitious goals. Yet, as with any blockchain, these metrics must be contextualized within the broader crypto landscape, particularly in comparison to established networks like Ethereum and other emerging challengers.

In this article, we will delve into Celo's on-chain metrics, focusing on DeFi & Fundamentals activity, as well to stablecoin adoption, using data from Artemis, Token Terminal, and DeFi Llama.

1.2. A rapid evolving ecosystem

Before diving into the specifics, it’s worth reflecting on the broader context of on-chain data. When I first interacted with on-chain data aggregators back in 2020, it was a revelation—a new world of opportunities opened up by blockchain’s inherent transparency. Unlike traditional finance, real-time on chain financial data provides full transparency, akin to a traditional company openly sharing its financial statements with the world.

Blockchain protocols are, in many ways, startups. Data aggregators have become key tools for understanding and analyzing, in real-time, what’s happening within these ecosystems. Imagine a traditional finance company that decided to open its financial statements to the public; that’s what it felt like when I first analyzed AAVE’s on-chain data and began calculating traditional startup metrics like P/F (Price-to-Funds) or P/S (Price-to-Sales) ratios.

The information available through these aggregators has improved significantly, allowing us to analyze protocols as real companies, complete with metrics on treasury, runway, burn rate, earnings, ecosystem incentives, and much more. However, standardization in on-chain data is still a challenge. Different platforms might present slightly varied metrics based on the inputs they consider, but the overall data trends remain consistent across sources. Despite these challenges, we’re fortunate to have multiple sources to cross-reference and validate the data. |That said, grab your coffe and prepare for a deep dive within the Celo ecosystem.

That said, grab your coffe and prepare for a deep dive within the Celo ecosystem.

1.3. Index of analyzed metrics

Today we are gonna focus on 2 types of metrics.

The first one will be more general, analyzing DeFi & Fundamental Metrics. Here we can find conceps as:

• Daily Transactions (DT): The number of transactions processed on the Celo blockchain daily. This metric reflects the overall activity level on the network.
• Daily Active Addresses (DAA): The number of unique addresses actively participating in transactions on a daily basis. This indicates the level of user engagement and interaction with the blockchain.
• Total Value Locked (TVL): The total amount of assets locked within Celo's DeFi protocols. TVL is a critical indicator of the liquidity and trust in the DeFi ecosystem.
• Decentralized Exchange (DEX) Volume: The trading volume on decentralized exchanges within the Celo network. This measures the liquidity and trading activity, which are essential for a healthy DeFi environment.
• Protocol Revenue: The income generated by the Celo network from transaction fees and other sources. This metric provides insight into the financial sustainability of the protocol, which is currently low compared to other blockchains.
• Core and Sub-Ecosystem Developer Commits: The number of commits made by developers to the Celo codebase, including contributions from the broader ecosystem. This metric reflects ongoing development activity and innovation within the network.
• Token Holders: The number of unique token holders, which gives insight into the distribution and decentralization of the network's assets.

The second one will be focused on stablecoin metrics, something of Celo interest:

• Stablecoin Market Cap: The total market capitalization of stablecoins within the Celo network, particularly focusing on cUSD, USDT, and USDC.
• Stablecoin Transfer Volume: The total volume of stablecoins transferred within the Celo network, indicating the level of usage and integration into various applications.
• Active Stablecoin Addresses: The number of unique addresses holding or transacting with stablecoins, providing insight into the adoption and spread of stablecoins within the ecosystem.
• Stablecoin Supply Growth: The increase in the supply of stablecoins like USDT and USDC over time, particularly after significant events such as their onboarding onto the network.
• Stablecoin Usage in DeFi: The extent to which stablecoins are utilized within Celo’s DeFi protocols, offering insights into their role in the ecosystem’s financial activities.

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2.1 About DeFi and Fundamentals analysis

2.1.1 Transactions and Active Addresses:

Celo’s network has experienced a significant increase in daily transactions and active addresses, particularly following the launch of Opera MiniPay. This surge highlights Celo's success in promoting mobile-first adoption, aligning with its broader mission to provide financial inclusion to underbanked populations. The ability to handle high-frequency, low-cost transactions has become a cornerstone of Celo’s strategy, differentiating it from more traditional, high-value DeFi networks like Ethereum.

However, a deeper analysis of these metrics reveals a disparity between the number of transactions and the total value transacted. While the number of transactions has increased significantly, the total value per transaction remains relatively low, suggesting that Celo’s user base is more focused on small, everyday transactions. This is consistent with Celo’s aim to support retail users in emerging markets. Yet, this raises a key question: can Celo scale its DeFi offering to attract larger, institutional players? For long-term growth, especially in DeFi, it will be crucial for Celo to bridge this gap and deepen its liquidity by capturing more high-value transactions.

2.1.2 Total Value Locked (TVL) and DeFi Growth:

Total Value Locked (TVL) remains one of the critical indicators of success for any blockchain’s DeFi ecosystem. In Celo’s case, its TVL has grown, but at a slower pace compared toother blockchains. This disparity can be attributed to the types of users Celo attracts—largely retail users making smaller transactions—rather than the larger DeFi whales that drive up TVL on other networks.

Celo’s TVL reached notable peaks after significant protocol developments, such as the integration of stablecoins like USDC and USDT, but it hasn’t yet maintained the liquidity needed to compete on a larger scale.

This highlights a core issue for Celo: while it’s successfully onboarding users, it needs more innovative DeFi products and liquidity incentives to engage them in higher-value DeFi operations. Without this engagement, the network risks falling behind more liquidity-rich platforms, despite its potential as a mobile-first blockchain.

2.1.3 Protocol Revenue

Protocol revenue is a crucial metric that demonstrates the financial sustainability of a blockchain ecosystem. In this regard, Celo faces significant challenges. Despite the network’s increase in user activity and adoption, the protocol’s revenue remains much lower than that of many of its peers. This discrepancy could stem from several factors, such as Celo’s focus on small, low-fee or even fee-less transactions. While this aligns well with Celo’s mission of financial inclusion, it also means the network doesn’t generate as much revenue from transaction fees as high-fee DeFi operations on other blockchains like Ethereum or Binance Smart Chain.

Additionally, the lack of high-revenue-generating applications within Celo’s ecosystem could be limiting its financial growth. Many of the high-value protocols on other chains, like complex DeFi applications or NFT marketplaces, have yet to take off in Celo’s ecosystem. This highlights the importance of attracting more value-driven applications to help increase the overall revenue of the network.

This could be something highly beneficial in the future, especially considering Celo’s focus on building a more inclusive financial system. However, for Celo to sustain itself through protocol revenue, the network will need to scale significantly. This would require an enormous increase in transaction volume and overall DeFi activity. A key question here is: How much time will it take to reach that volume? While Celo’s vision is clear, the journey to achieving the necessary transaction scale is uncertain and will likely depend on a combination of factors, including market demand, new applications, and user incentives.

Another looming question is related to Celo’s future as it transitions to Layer 2. I currently lack deep experience in this area, so I prefer not to speculate too much, but it’s clear that the shift to an L2 could have significant implications for the network’s transaction volume, fees, and overall protocol revenue. For now, it’s something we must keep a close eye on, as it could potentially reshape the network’s entire economic model.

2.2 Stablecoin Dynamics: A Crucial Pillar for Celo

2.2.1 Market Dominance vs. Active Usage:

The stablecoin landscape within Celo presents a fascinating dynamic. USDT holds the largest market cap among stablecoins on Celo, but cUSD dominates in terms of active usage. This dichotomy can be explained by cUSD’s deep integration into the everyday operations of Celo users, particularly for remittances and small-value payments. cUSD’s role in facilitating low-cost, fast transactions aligns perfectly with Celo’s mission of enabling financial inclusion in underserved markets.

On the other hand, USDT, though holding a larger market cap, appears to be used more for liquidity provision and larger transactions, reflecting its role as a globally accepted stablecoin. This pattern indicates a division of use cases, where cUSD is favored for daily, retail transactions, while USDT might be more attractive to institutional players and liquidity providers looking for a trusted, globally recognized asset.

2.2.2 Adoption Challenges and Opportunities:

The ecosystem’s stablecoin diversity also suggests enhanced stability, but challenges remain in encouraging balanced use across all stablecoins. While cUSD has found a niche in smaller transactions, USDT and USDC adoption within DeFi remains limited. Tools like Opera MiniPay could help level the playing field and encourage users to interact more with these stablecoins.

Celo’s mission of financial inclusion could further be realized through the broad adoption of cUSD, which is currently reaching many smaller addresses. Its role in providing a stable, easy-to-use digital currency for everyday transactions, particularly in underserved markets, highlights its potential to expand further. cUSD can continue driving financial inclusion and offering a way for users to access financial services typically unavailable in their regions.

3. Celo’s Path Forward: Strengths, Challenges, and Strategic Opportunities in DeFi and Stablecoin Adoption

While there are numerous metrics that can be analyzed to evaluate the health and progress of the Celo ecosystem, the focus on key metrics like user engagement, transaction value, DeFi growth, and stablecoin adoption offers the most relevant insights into Celo’s potential. By concentrating on these core areas, we can better understand the strengths and challenges that lie ahead for Celo in its journey toward financial inclusion and DeFi growth. Below are the key insights derived from this analysis.

User Engagement vs. Transaction Value

Celo has successfully increased user engagement, especially through initiatives like Opera MiniPay, which has driven a significant rise in daily transactions and active addresses. However, the overall transaction value remains lower compared to other DeFi ecosystems, indicating that Celo’s user base may primarily consist of smaller retail users, which limits its ability to attract larger, high-value transactions. This imbalance presents both an opportunity and a challenge: while Celo is democratizing access to financial services, it must also work to capture larger DeFi users to deepen liquidity and stimulate more significant economic activity within its ecosystem.

DeFi Growth Challenges and Strategic Opportunities

Despite Celo’s emphasis on financial inclusion, the Total Value Locked (TVL) in its DeFi ecosystem is still lagging behind its peers. This shortfall indicates that while the platform is good at onboarding users, there’s a gap in retaining them for high-value DeFi operations. A key area of improvement lies in creating more innovative and valuable DeFi products that attract liquidity providers.

The data also suggests that Celo’s treasury and DeFi protocols deployed needs greater visibility. To truly drive DeFi growth, Celo must leverage these strengths and create a more transparent, highly trusted ecosystem that can attract developers and investors alike.

One key recommendation for Celo’s ecosystem is improving visibility on DeFi aggregators like DefiLlama. Many protocols deployed on Celo lack full representation on these platforms, which affects both liquidity metrics and ecosystem awareness.

Updating the Celo Community Fund and protocol treasury data on these platforms could significantly boost transparency and increase trust, ultimately attracting more liquidity providers and investors.

Stablecoin Adoption and CeFi vs. DeFi

The stablecoin ecosystem within Celo presents a unique dynamic: cUSD remains a key driver of activity, with widespread usage among smaller addresses, highlighting its role in financial inclusion. At the same time, USDT holds a larger market cap but has yet to gain similar traction in DeFi use cases. This points to an untapped potential in Centralized Finance (CeFi), where CeFi platforms have twice as many active addresses compared to DeFi in Celo’s ecosystem. There’s a clear strategic opportunity for Celo to bridge CeFi and DeFi by creating products or incentives that help CeFi users transition into DeFi, where stablecoins like USDT and USDC could play a larger role in the DeFi landscape.

Stablecoin Diversity and Financial Inclusion

The diversity of stablecoins on the Celo network is a strength, with six different stablecoins circulating in its ecosystem, and more local stablecoin are about to be created. This diversity could shield Celo from risks associated with single stablecoin dependencies, such as regulatory changes or peg instability. Additionally, the usage patterns of cUSD reinforce its impact on financial inclusion, as it continues to serve a broad user base that traditionally lacks access to stable financial services. Celo’s mission to reach underserved markets is clearly being realized through cUSD, and the platform’s ability to drive widespread stablecoin adoption remains one of its strongest assets moving forward.

Growth Potential in CeFi and Beyond

The dual opportunity in both DeFi and CeFi means that Celo can strategically position itself as a hybrid player—blending the benefits of both centralized and decentralized finance. As the platform continues to expand its user base and improve its DeFi offerings, the untapped potential in CeFi provides another avenue for growth. With the right products and incentives, Celo could leverage CeFi’s existing user engagement to grow liquidity in its DeFi ecosystem.

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