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Analysis of Celestia (TIA), the modular blockchain

Analysis of Celestia (TIA), the modular blockchain

Financing, tokenomics, team, roadmap, governance, pricing... The independent study of Celestia (TIA) carried out by our team of analysts before considering an investment.

The Big Whale's opinion 🐳

Celestia has popularised the concept of modular blockchain, an innovation in the ecosystem responding to an identified demand.

its team has significant experience in the sector.

The TIA token has appreciated strongly (660% over three months) thanks to the promise of numerous airdrops offered by projects that will rely on Celestia.

However, the concept of modularity complicates the operation of blockchains and is not without risk, as Celestia constitutes a new intermediary.

Only 7.4% of tokens were reserved for retail investors in the initial allocation, raising concerns when private investors will be able to sell theirs.

Overview 🧬

Imagined to start in 2019, Celestia launched its network in October 2023.

Celestia is a "modular" blockchain that differs from traditional so-called "monolithic" blockchains, which manage four main functions: execution (transaction processing), settlement (dispute resolution), consensus (transaction scheduling) and data availability (accessibility of data written to the blockchain).

One of Celestia's theses is that monolithic blockchains have to make compromises to be able to perform all the functions, whereas a blockchain that focuses only on a limited number of them will be much more efficient. Celestia has thus specialised in data availability, and any blockchain can rely on it to publish its data.

In short, Celestia can be described as the Amazon Web Services (AWS) of Web3 as it offers a decentralised storage service to other blockchains.

Financing 💰

Celestia has raised $56.5 million in two deals.

The first round (seed), amounting to $1.5 million, took place in March 2021 and saw the participation of several leading investors such as Interchain Foundation, Binance Labs, Maven 11 Capital and KR1.

The second round (series A and B announced simultaneously), amounting to $55 million, took place in October 2022. It attracted the attention of big names in the sector, including Bain Capital Crypto, Polychain Capital, Placeholder, Galaxy, Delphi Digital, Blockchain Capital, and FTX Ventures.

The exact amount invested by this FTX subsidiary is unknown, but it has been described as "small investment" by the Celestia team after the exchange platform collapsed.

A vesting clause is applied to private investors and the team, meaning they cannot resell their TIA tokens on the market. They will only be able to do so gradually from 30 October 2024, one year after the official launch of the network. This vesting period is due to end three years later.

A total of 35.6% of TIAs have been reserved for private investors, a percentage well above the average seen in other similar projects. According to Liquifi, a vesting service for crypto projects, the average share has hovered around 19% since 2017.

DISTRIBUTION
Source : Celestia Labs

Team and community 👾

Mustafa Al-Bassam, the CEO of Celestia Labs, is known for having been one of the co-founders of the hacker group LulzSec. This collective was responsible for a series of spectacular computer attacks in the early 2010s. The group targeted a number of high-profile organisations, including the CIA and companies such as Sony and Fox. These attacks were primarily motivated by a desire to highlight security vulnerabilities.

Mustafa Al-Bassam (born in Baghdad in 1995 and a British citizen) was given a 20-month suspended prison sentence, community service and a two-year ban on using the internet by the British courts in 2011.

He is very committed to online privacy and worked with NGOs (including Privacy International) after Edward Snowden's revelations in 2013 about a vast US surveillance system.

The engineer enjoys a high reputation in the industry. He was selected by Forbes as one of the most influential entrepreneurs under 30 in tech in 2016. This early status enabled him to collaborate as early as 2018 with Vitalik Buterin, the inventor of Ethereum, on research into data availability.

In 2019, he sold his start-up Chainspace to Meta (ex-Facebook) when the latter was exploring blockchain payments for its Libra project.

Celestia's CTO is Ismail Khoffi, who was previously an engineer at Tendermint, the company behind the Cosmos blockchain.

Research director John Adler is one of the inventors of optimistic rollups (a concept at the heart of Ethereum's scalability improvements) and has worked as a researcher at Consensys.

The Celestia project enjoys widespread community support, with 261,000 followers on X (formerly Twitter) and 159,000 members on Discord.

Social analysis  👥

According to social analysis company Kaito, Celestia is the 11th most mentioned crypto project across various social networks in the last 30 days.

The attention around Celestia is not linked to a spontaneous spike in activity, as the project's popularity has been increasing at a steady pace since its launch in October.

Modularity has been the 8th most popular narrative in the crypto ecosystem for several months (notably behind the "ETF" and "IA" behemoths). Celestia is the project that embodies the concept of modularity and is thus best placed to take advantage of it.

KAITO
Source : Kaito

The TIA token 📈

The TIA is the project's governance token, but is also used to secure the network (via staking). Projects wishing to use Celestia to publish their data must spend TIAs.

About a quarter of the tokens are currently liquid and a large proportion have been distributed in the form of airdrop to testnet participants and Cosmos blockchain stakers.

To date, only 7.4% of TIAs are in the hands of retail investors. This aspect should raise a certain amount of suspicion as it augurs a future transfer of tokens from private investors to the latter.

The gradual lifting of vesting (which will allow private investors and the team to resell their tokens if they wish) will lead to a 65% increase in the quantity of TIAs in circulation on 30 October 2024. It is important to keep this event in mind, even though the market will probably have priced it in before it happens because this timetable is public.

It is not a foregone conclusion that private investors will sell their TIAs en masse at that point. This will depend on the traction of the project, its adoption by the community and the configuration of its price.

The annual inflation of the TIA is 8% and will fall each year for 20 years before reaching 1.5%. Currently, it is possible to enjoy around 15% returns with staking (a figure twice as high as inflation as around 50% of tokens are staked).

What makes Celestia attractive 💡

According to documentation from Manta, an Ethereum layer 2 that has chosen Celestia to list its data, this project would cost 100 times less than Ethereum to list its data.

This gap will tend to narrow with the implementation of EIP-4844 on Ethereum (date still uncertain), but Celestia should still remain at least 10 times more affordable.

Layer 2 Ethereum is also a claimed target for Celestia as the project has multiple development tools for the OP stack (Optimism), the Polygon CDK or Arbitrum Orbit. In addition, Celestia is based on the Cosmos SDK, which enables very good integration with the entire Cosmos ecosystem.

Celestia has already attracted numerous projects such as Dymension, Manta and Alt Layer. Most of them have distributed airdrops of their tokens to TIA stakers in order to decentralise their governance (and get people talking about them?).

The ability to recover airdrops has therefore contributed to the craze around TIA and its price rise (+660% in three months).

Risks ⚠

Although Celestia offers real economic added value and scalability gains to projects that adopt its services, making such a choice is not without risk. Choosing Celestia means opting for an additional intermediary and therefore exposing yourself to an additional vulnerability.

According to Vitalik Buterin, any Ethereum rollup that chose another blockchain to register its data on would not be able to claim the same security.

"The very essence of a rollup is the unconditional guarantee of security: you can recover your assets even if everyone else is ganging up on you. This is not possible if the availability of the data depends on an external system", he explained on X (ex-Twitter) on 16 January.

As is often the case, reducing costs and improving scalability come at the expense of security, so it's up to each player to choose the compromise that suits them best.

Regulation ⚖

Celestia has so far never come under particular scrutiny from regulators. Nevertheless, like many projects, its token could be requalified as a financial security in the US.

Governance 🗳

Currently, 49% of TIAs are staked. Venture capital fund Polychain is the largest validator with 7.4% of voting power.

Tokens are highly concentrated: the five largest validators concentrate a third of the vote and the 17 largest entities control two-thirds of the network.

It is important to note that although private investors cannot sell their tokens during the vesting period, they can be staked and used to participate in governance.

Note the large number of staking-as-a-service platforms (Bitcoin Suisse, Chorus One, P2P, Coinbase Cloud, etc.) which illustrate the presence of individual users.

SMARTSTAKE
Source : Smart Stake

Competitors ⚔

Ethereum hosts the largest amount of data from other blockchains, including its rollups such as Optimism and Arbitrum.

This is because Ethereum is seen as one of the most secure blockchains due to its longevity and the value of all staked ETH.

In this respect, Ethereum is therefore a competitor to Celestia on the data side (even if the two projects can hardly be placed on the same level).

As a data availability specialist, Celestia currently has no direct competition but this won't last forever.

Eigen DA, designed by the team behind EigenLayer (a very ambitious project whose review we will publish next week), is due to release its network on the mainnet shortly.

Avail, developed within the Polygon ecosystem, could also take market share from it, but this is still being tested.

Roadmap 📒

One of the key points on Celestia's roadmap for 2024 is the implementation of Blobstream on its mainnet. Blobstream will facilitate and optimise the integration of Celestia by Ethereum layers 2.

The implementation of a "burn" ("destruction") system for part of the TIAs paid during transaction fees is currently under discussion within the community, but this is still at the draft stage.

SUNZU
Source : Sun Zu Lab

Market analysis 📊

1 = 12/12/2023: Polygon Chain Development Kit (CDK) announces the integration of Celestia as a data availability layer.

2 = 03/01/2024: Flash-crash related to Matrixport report predicting SEC rejection of all Bitcoin spot ETFs.

3 = 10/01/2024: SEC green light for Bitcoin ETF launch.

"The TIA-USDT pair on Binance is showing solid daily volumes for a newly launched token, averaging between $80M and $250M. These volumes are similar or even higher than XRP-USDT on Binance in January, for example," says Chadi El Adnani, Head of Content & Research for Sun Zu Lab, a company specialising in crypto market analysis.

"TIA outperformed BTC and ETH by 35% over the month of January 2024," he adds.

SUNZU
Source : Sun Zu Lab

Graphical analysis 📈

Since its launch, the price of TIA has increased by a factor of around 20. Its price is continuing a very strong uptrend with a few slight corrections (see below).

We believe that Celestia's capitalisation ($2.8 billion) is overvalued in relation to its current use. However, we must be aware that the crypto market operates very much by anticipating new trends, and that of data outsourcing is certainly one of them.

AT

Conclusion ✅

TIA can be considered an attractive investment in 2024 as part of the diversification of a crypto portfolio.

It is driven by the modularity trend, a dymamic theme in which Celestia is the leader.

The staking of TIA offers the opportunity to receive numerous tokens from projects that use Celestia to host their data.

The downside: distribution is concentrated in the hands of its team and private investors.

It is possible to buy TIA on most classic crypto platforms (Binance, Coinbase, Kraken, Swissborg, etc.) or on Osmosis, the main decentralised exchange in the Cosmos ecosystem.

If you opt for a non-custodial wallet, choose Keplr or Leap to store your tokens and stake them.

Warning: you absolutely must stake via non-custodial wallets if you hope to receive airdrops from projects that use Celestia. If you go through a centralised intermediary, the company will keep them.

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