Analysis of Celestia (TIA), the modular blockchain

What you need to know 🐳

Celestia popularized the concept of modular blockchain, an innovation in the ecosystem that meets an identified demand.

Its team has significant experience in the sector.

The concept of modularity complicates the general functioning of blockchains and is not without risk, as Celestia constitutes a new intermediary.

General Presentation 🧬

Conceived in 2019 under the name Lazy Ledger, Celestia launched its network in October 2023.

Celestia is a "modular" blockchain that differs from traditional "monolithic" blockchains that handle three main functions: execution (transaction processing), settlement (dispute resolution), and data availability (accessibility of transaction data).

One of Celestia's theses is that monolithic blockchains must compromise to ensure all these functions, while a blockchain that focuses solely on a limited number of them will be much more efficient.

Celestia has thus specialized in data availability, and any blockchain can rely on it to publish its data at much lower costs than on a monolithic blockchain.

Celestia offers its services particularly to Ethereum and Bitcoin layer 2s (see our analysis on them), but also to projects developing as a layer above Celestia.

Additionally, Celestia is based on the Cosmos SDK, which allows for very good integration into the entire Cosmos ecosystem through the Inter-Blockchain Communication Protocol (IBC).

Funding 💰

Celestia raised $56.5 million through two operations.

The first round (seed), amounting to $1.5 million, took place in March 2021, with the participation of several prominent 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 was described as a "small investment" by the Celestia team after the collapse of the exchange platform.

Team and Community 👾

Mustafa Al-Bassam, the CEO of Celestia Labs, is known for being one of the co-founders of the hacker group LulzSec. This collective is responsible for a series of spectacular cyber-attacks in the early 2010s. The group targeted several large organizations, including the CIA and companies like Sony and Fox. These attacks were mainly motivated by the desire to highlight security flaws.

Mustafa Al-Bassam (born in Baghdad in 1995 and holding British citizenship) was sentenced in 2011 by British justice to a 20-month suspended prison sentence, community service, and a two-year internet ban.

He is very committed to online privacy and has collaborated with NGOs, including Privacy International, following Edward Snowden's revelations in 2013 about a vast surveillance system by the United States.

The engineer enjoys a great reputation in the sector. He was named by Forbes as one of the most influential under-30 entrepreneurs in tech in 2016. This early status allowed him to collaborate with Vitalik Buterin, the inventor of Ethereum, on research on data availability as early as 2018.

He sold his startup Chainspace to Meta (formerly Facebook) in 2019 when the latter was exploring blockchain payments for its Libra project.

The position of Chief Technology Officer of Celestia is held by Ismail Khoffi, who was previously an engineer at Tendermint, the company behind the Cosmos blockchain.

The Director of Research, John Adler, is one of the inventors of optimistic rollups (a concept at the heart of improving Ethereum's scalability) and worked as a researcher at Consensys.

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

Operation ⚙️

Celestia was the first project to implement data availability sampling (DAS). This system relies on "light nodes" that randomly verify samples of network data to ensure their validity without having to store them entirely.

The advantage is that a light node can run on almost any device, even a smartphone. This low technical barrier is a great strength for the decentralization of the network.

Moreover, the more light nodes there are, the more they can collectively verify large amounts of data in parallel. This allows the network to produce larger blocks and thus improve its capacity thanks to the increase in light clients.

Ecosystem 💪

As an infrastructure project, Celestia offers its services to all types of layer 2. The significant reduction in operating costs for layer 2s and services such as Conduit or Gelato, which facilitate their deployment, contribute to creating a dynamic ecosystem.

You can see here all the layer 2s that rely on Celestia, and their number is growing rapidly.

Manta is a general-purpose Ethereum layer 2 and was the first blockchain to rely on Celestia.

Orderly is an Ethereum layer 2 specialized in aggregating liquidity between decentralized trading protocols based on order books.

Lyra, initially a derivative trading application on Optimism and Arbitrum, recently launched its own layer 2.

Many promising projects are still in development.

Initia allows for easily launching interconnected layer 2s based on Celestia. The project is quite similar to Dymension (read our analysis), but has a much more developed ecosystem and more transparent communication.

Eclipse is an Ethereum layer 2 based on the Solana Virtual Machine (SVM) aiming to offer much higher performance than current layer 2s.

Movement is an Ethereum layer 2 that combines the Ethereum Virtual Machine (EVM) with Move from Aptos and Sui, also aiming to offer high performance.

The launch of high-performance layer 2s should significantly increase the amount of data published on Celestia's network.

The TIA Token 🪙

The TIA is the token that secures the network via staking and participates in its governance.

The annual inflation of TIA is 8% and will decrease each year for 20 years until it reaches 1.5%.

Projects using Celestia to publish their data must spend TIA. The more Celestia is adopted by blockchains consuming a lot of data, the more demand for TIA will increase.

TIA was initially distributed as follows:

• 35.6% of TIA reserved for private investors
• 17.6% of TIA belongs to the project team
• 20% for the community (including 7.4% for the initial airdrop)
• 26.8% for the ecosystem and R&D

Risks ⚠

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

According to Vitalik Buterin, any Ethereum layer 2 choosing another blockchain to record its data could not claim the same security.

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

As often, cost reduction and scalability improvement come at the expense of security. Each actor must choose the compromise that suits them best.

Regulation ⚖

Celestia has never been the subject of particular attention from regulators so far. However, like many projects, its token could be reclassified as a security in the United States due to its token fundraising.

Competitors ⚔

The implementation of EIP-4844 on Ethereum has drastically reduced the cost of data availability on its network, but Celestia remains at least 10 times more affordable. The Ethereum Pectra update, scheduled for late 2024 or early 2025, will include PeerDAS, which will further reduce its data availability costs.

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

Many projects want to specialize in data availability like Celestia. We currently have an abundance of offers and a much lower demand. This could change if the number of layer 2s explodes.

Among the biggest competitors are Eigen DA, designed by the team behind EigenLayer, and Avail, initially developed within Polygon Labs and then launched as an independent project.

These two projects rely on KZG commitments, based on zero-knowledge proofs technology, for their security. Celestia does not integrate this technology because it does not yet deem it mature enough.

Roadmap 📒

Celestia is working on integrating a zero-knowledge proof verifier within its network, which would allow creating trustless bridges between Celestia and its layer 2s, enabling secure TIA transfers to other environments.

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

Where to buy TIA? 🛒

TIA can be purchased on most classic crypto platforms (Binance, Coinbase, Kraken, Swissborg, etc.) or on Osmosis, the main decentralized exchange in the Cosmos ecosystem, using Keplr or Leap wallets.

The Big Whale's Opinion 🐳

Celestia has significantly pushed the concept of modularity and positioned itself as the project at the heart of this narrative.

One of the project's slogans, "Build whatever," reflects the possibilities offered by this narrative where each actor can build specialized services capable of combining with each other.

Celestia envisions a future with thousands of layer 2s, some generalists, others specialized in a domain or for a specific application.

Celestia is above all a minimalist blockchain: it pushes all execution functions to its layer 2s and only verifies their data.

It can produce blocks storing much more data than its competitors, and the size of these blocks can be increased if necessary by increasing the number of light clients.

The simplicity of Celestia and its adaptability are therefore its two major strengths to stand out in a multichain world. Its main challenge will be to face the multiplication of competing projects.