Today Deutsche Telekom announced a ‘significant’ purchase of the Celo public blockchain’s cryptocurrency. The smartphone focused blockchain offers decentralized finance, including remittances, and is best known for its Alliance for Prosperity. When Facebook first unveiled Libra, it talked a lot about financial inclusion. Some view Celo in a similar light but without the baggage of international regulator attention.
The reason for the token purchase by Deutsche Telekom, is so its subsidiary T-Systems MMS can operate a validator node for the proof of stake blockchain network. Celo also announced the launch of its second stablecoin for euros, alongside the existing dollar one.
“Our investment in CELO, combined with infrastructure operated by T-Systems, allows our company to take a strategic approach to participating in a public blockchain network,” said Adel Al-Saleh, Deutsche Telekom director and CEO of T-Systems. “We are able to secure the Celo network with our investment and our own cloud infrastructure while facilitating user onboarding and use-case development on top of the Celo network.”
The cryptocurrency purchase was made by the Telekom Innovation Pool (TIP), its strategic investment fund. A former T-Systems staffer observed on Twitter that this highly innovative step by a very large company is being pigeon-holed as a fintech investment.
T-Systems MMS started to get involved in staking services for public blockchain more than a year ago and participates in the Flow blockchain. It also provides data feeds for decentralized oracle Chainlink. When we spoke to the T-Systems MMS team last year, they explained how the hosting of nodes and providing staking services for Proof of Stake (PoS) public blockchains is a modern extension of traditional telecoms infrastructure services.
What’s a validator node?
Proof of Work requires many energy-hungry calculations to prevent someone from easily corrupting a blockchain. In contrast, Proof of Stake works by nodes that validate transactions risking or staking money in the form of cryptocurrency. If the node misbehaves such as by adding a false transaction, its stake could be at risk.
Every blockchain has different rules about when penalties might be imposed, called slashing. And infrastructure providers such as T-Systems MMS are best positioned to make sure stakes are not accidentally slashed. The upside is that those willing to stake cryptocurrencies earn a decent return. For example, currently Polkadot offers a staking reward of more than 13% and most offer more than 5%.
Meanwhile, Celo also announced the addition of a euro denominated stablecoin cEURO. While it’s not the only application, one of Celo’s first is to enable a secure and inexpensive way to tranfer money using smartphones. To date, in terms of fiat currency equivalents, it has offered cUSD.
Both stablecoins are algorithmic and supported by multiple crypto-assets held in the Celo Reserve, such as bitcoin and ether.
“Transferring money between countries is still a huge challenge because of the siloed systems created by traditional financial services,” said Rene Reinsberg, co-founder of Celo. “An open infrastructure like Celo, coupled with the Celo Euro stablecoin, enables easy access to digital assets from virtually anywhere in the world within seconds, creating an entirely new remittance market for the European Union.”
Meanwhile, Celo’s Alliance for Prosperity has more than 130 members that include Andreessen Horowitz, Anchorage, Coinbase, GSMA, and Mercy Corps. It aims to provide inclusive mobile applications for easier transfers, peer-to-peer lending, international remittances, digital assets and wallets.