Celo's Layer 2 Plans Devastated By Coinbase, Community Divided

Coinbase's recent decision to not support Celo's transition from a Layer 1 blockchain to a Layer 2 solution on Ethereum has ignited intense discussion within the cryptocurrency community.

Coinbase has advised its users to withdraw their CGLD (Celo L1) tokens by January 13, 2025, or risk losing access to their assets. This migration involves a hard fork scheduled for January 16, 2025, which will cease block production on the Celo L1 network, thereby making the funds inaccessible on Coinbase.

Importantly, Coinbase emphasized that users can transfer their CGLD tokens to CELO-compatible wallets. However, the lack of support from the platform for the critical upgrade has attracted criticism. Market observers are concerned about the potential repercussions for Ethereum's scaling ecosystem.

Celo co-founder Marek Olszewski voiced disappointment, arguing that Coinbase's decision disrupts the broader Ethereum vision of leveraging Layer-2 solutions for scaling. He wondered whether other EVM-compatible Layer 1 networks might reconsider similar transitions due to resistance from influential exchanges.

"It’s disheartening that Coinbase has chosen not to support the Celo L2 upgrade. This feels like a wrench in Ethereum’s layer-2-centric scaling roadmap. Why would other EVM-compatible L1s follow suit now?” he queried.

Ethereum advocate Anthony Sassano suggested internal miscommunication within Coinbase might be the issue, urging the exchange to reassess its position. Alex Witt, General Partner at Verda Ventures, questioned Coinbase's inconsistent approach. He pointed out that both Celo Layer 2 and Coinbase's own Base network use Optimism’s technology stack. Witt suggested the optics are "monopolistic," hinting at Coinbase's possible bias towards its network.

Witt acknowledged Coinbase's mission to "increase economic freedom in the world" and hoped the decision wasn't influenced by monopolistic tendencies.

Back in July 2023, cLabs, backed by a16z, proposed shifting Celo to a Layer 2 on Ethereum. After a comprehensive eight-month evaluation, governance approved the use of Optimism’s OP Stack. To prepare, Celo introduced two testnets: Dango launched in July, and Alfajores, set for updates on September 26.

Considering Celo's migration plans were public for over a year, the community questioned the late timing of Coinbase's announcement.