Mento DollarPrice

(USDM)

Celo utilizes an identity protocol called ODIS, which enables users to link their phone numbers securely to their public crypto wallet keys. This innovative feature allows individuals to send cUSD to anyone in their phone's contact list, even if the recipient doesn't have a crypto wallet set up yet. When the recipient eventually creates a wallet, their cUSD will be accessible. This unique "mobile-first" approach significantly lowers the barrier to entry for cryptocurrency, making digital payments as simple as sending a text message and promoting financial inclusion globally.

CELO and cUSD serve distinct purposes within the Celo ecosystem. CELO is the native utility and governance token; it has a volatile market value and is primarily used for network staking, voting on protocol changes, and securing the network. It also forms a crucial part of the reserve backing cUSD. In contrast, cUSD (Celo Dollar) is a stablecoin designed to maintain a stable value pegged to the US Dollar. Its main use is for everyday transactions, remittances, and as a reliable store of value, embodying Celo's mission for accessible and stable digital currency.

cUSD maintains its $1 peg using the Mento stability protocol, which allows users to always exchange $1 worth of CELO for 1 cUSD, and vice-versa. This mechanism relies on arbitrageurs to correct price fluctuations. If cUSD trades above $1, arbitrageurs profit by buying $1 of CELO, converting it to 1 cUSD via Mento, and then selling that cUSD on the open market, pushing its price down. Conversely, if cUSD falls below $1, they buy cheap cUSD, exchange it for $1 worth of CELO through Mento, and sell the CELO for a profit, thereby increasing cUSD's demand and price.

Celo has implemented several safeguards to mitigate the "Death Spiral" risk associated with some algorithmic stablecoins. Unlike systems that rely solely on their native token for backing, cUSD is overcollateralized by a diversified Celo Reserve. This reserve includes external, uncorrelated assets such as Bitcoin (BTC), Ethereum (ETH), and other stablecoins like USDC, reducing reliance on the volatile CELO token alone. Additionally, the protocol incorporates a Peg Stability Module (PSM), which enables direct 1:1 swaps with other established stablecoins like USDC during periods of high market volatility, further strengthening its peg and resilience against downward spirals.

Yes, this is a distinctive and highly user-friendly feature of the Celo ecosystem. Unlike many other blockchain networks where a specific native token (like ETH on Ethereum) is required to cover transaction gas fees, Celo offers "fee abstraction." This means users have the flexibility to pay for network transaction fees using cUSD itself, as well as other stable assets like cEUR or cREAL, or the native CELO token. This simplifies the user experience by eliminating the need to hold a separate volatile asset solely for gas, making transactions more accessible and straightforward for everyday use.

As of March 26, 2025, Celo successfully transitioned to an Ethereum Layer 2 network. For cUSD holders, this migration had a seamless impact, requiring no specific action on their part. The cUSD tokens remained in users' wallets and continued to function as before. The primary benefits of this upgrade for cUSD users include significantly faster transaction processing times, now at approximately 1-second block times, and enhanced security. By leveraging Ethereum’s robust base layer, cUSD transactions gain the benefits of Ethereum's established security while maintaining Celo's mobile-first ethos and carbon-neutral commitment through on-chain credits.