The concept of modular blockchains has become a defining narrative for scalability and efficiency. According to Vitalik Buterin himself, the future of Ethereum, and blockchains by extension, lies in decentralizing the layers that make up the system.

While rollups have tried to achieve this, they still need to overcome many technical limitations. Celestia, a new modular blockchain that recently launched its mainnet, is here to fix the problem.

According to thought leaders in the industry, Celestia represents one of the most disruptive innovations in blockchain design since Ethereum. For this reason, Celestia has ignited considerable hype within the blockchain community.

But what does Celestia have to offer, and can it live up to the hype?

In this edition, we’ll brief you on some background knowledge on Celestia and why we think Celestia’s token will be a good performer in the future.

Overview

• As the demand for adaptable and efficient blockchain solutions surges, the limitations of monolithic structures have become painfully apparent, paving the way for modular architecture.

• Celestia is a modular blockchain network that separates key blockchain layers into different entities for maximum efficiency and scalability.

• Celestia’s mainnet was one of the most hyped launches of the year, signifying huge investor interest and growth potential.

• Celestia will have to battle it out with the growing ecosystem of rollups to prove its place in the blockchain space.

What Is Celestia?

Celestia is the first modular blockchain network built with versatility and scalability at its core. Celestia’s infrastructure is based on the Cosmos SDK and uses the Tendermint consensus algorithm. This video is an excellent example of background knowledge that can be easily missed when doing your own research.

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One of Celestia's standout features is its ability to scale as demand grows, ensuring it can handle a large volume of transactions without slowing down. Additionally, its modular architecture makes it easier for developers to integrate new features and functionalities, making it a versatile platform for various applications.

To understand how Celestia does this, let’s explore the fundamentals of blockchain design.

Modular Vs. Monolithic Blockchains

Blockchains are made up of separate layers that function hand in hand. The primary layers include the consensus, data availability, execution, and settlement layers.

So far, modern-day blockchains have maintained monolithic architecture in that the core functions mentioned above operate within the same network.

Modular blockchains present a new paradigm in blockchain design. They specialize in a single task and optimize for one specific function. The remaining functions are outsourced to other blockchains.

Picture a modular blockchain as a puzzle in which the pieces can be organized differently to achieve many configurations. With modular blockchains, these configurations are optimized for specific applications such as DeFi.

Celestia: A Shift Towards Modular Design

Celestia is a modular data availability(DA) network. The DA layer is responsible for publishing and storing transaction data and also participates in consensus.

As a modular network, Celestia lacks a smart contract execution environment. Projects building on Celestia develop their own execution layers. This enables Celestia to optimize for data availability.

One of the core features behind Celestia’s tech is data availability sampling (DAS). DAS enables nodes to verify data availability without downloading all data for a block. With DAS, Celestia can scale with an increasing number of users.

Here’s a simple explanation of DAS by Nick White, one of Celestia’s COO:

https://x.com/nickwh8te/status/1559977957195751424?s=46&t=nznXkss3debX8JIhNzHmzw

Celestia’s modular design paves the way for unmatched scalability, adaptive execution environments, flexible security, and consensus mechanisms.

Use Cases & Ecosystem

Celestia’s modularity enables several innovative use cases:

• Rollup-as-a-service

• Decentralized sequencers

• Settlement layers

• Optimized settlement layer

While still in its early stages, Celestia’s ecosystem possesses the foundational components for future growth. Celestia’s ecosystem currently hosts an array of applications, from rollups to sequencers to DeFi.

With the mainnet launch and active marketing set to begin, Celestia is looking to onboard new projects into its ecosystem. Notable projects already using Celestia’s tech stack include Manta Network, Eigen Layer, Dymension, and Neutron.

While most projects are still in early testnet phases, they are poised to attract massive TVL to Celestia’s ecosystem.

Tokenomics & Market Data

Celestia’s native token is TIA. According to Celestia, TIA has four principal utilities:

• Rollups use TIA to pay for blockspace (think of this as storage space) when publishing data on the network.

• TIA can be used as a gas token for rollups, so developers don’t have to bootstrap their own tokenomics.

• Users stake TIA to secure the network and take part in consensus.

• TIA enables the community to participate in decentralized governance.

TIA tokenomics are as follows:

• Maximum supply: 1 bn TIA

• Circulating supply: 141, 043, 528 TIA

• Current market cap: $357,052,920

• FDV: $2,318,818,365

During the mainnet launch, 60 million TIA, or 6% of the total supply, was allocated to airdrops for developers and testnet users. TIA plunged more than 20% post-exchange listing, most likely due to their sell pressure. However, TIA’s price has consolidated around $2.33.

New tokens will be released at 8% in the first year and decrease by 10% annually until it reaches an annual inflation floor of 1.5%.

Team and Investors

Celestia is led by a distinguished team of experts with meticulous credentials. Most of Celestia’s team members are previous founders and industry-leading experts with experience in blockchain research and development at ConsenSys, Ethereum, Cosmos, etc. With such an eminent team, it was easy for Celestia to attract funding from top-tier ventures.

In October 2022, Celestia Labs secured a whopping $55 million in a series B funding round at a valuation of $1bn. Series A and B funding rounds were led by renowned firms Bain Capital Crypto and Polychain Capital, with involvement from other notable ventures.

Such significant funding and support from industry giants underscores the potential and promise of Celestia.

The Modular Edge: Is This a Strategic Investment Play?

Celestia’s mainnet launch ignited a significant frenzy within the crypto community, only comparable to the hype around Arbitrum’s launch earlier this year. While this is a good indicator of retail and institutional interest, is TIA a good bid, especially in the mid to long-term?

There are several ways to capitalize on TIA’s investment potential. First is by holding TIA and speculating on future price increments. The second is by staking TIA, with the current staking APR sitting at 20.91%. Third is by providing liquidity on DEXs like Osmosis.

TIA’s performance in the coming months will likely depend on a few factors:

• The number of roll-ups that choose to use Celestia tech stack

• Traffic per rollup.

• Marketing and business development efforts.

• Inflation from new token unlocks.

Pros

• Celestia’s tech is unrivaled. From modularity to light nodes that can run on a smartphone, Celestia introduces cutting-edge tech for both the present and future blockchain landscape. This tech has been hailed by thought leaders such as Vitalik Buterin.

• At launch, Celestia already had an impressive number of wallets, developer tools, cross-chain bridges, and DeFi protocols. However, it’s too early to tell whether the active addresses were due to airdrop farmers.

• TIA’s circulating market cap at launch, at $300m, is reasonable enough for a top-tier layer 1 with the hype, tech, and backing to rally 2-3x in the mid/long-term. Achieving a $1bn market cap for TIA within the next few months isn’t an overambitious projection, especially with the looming bull market.

• The lack of token unlocks in the first year will help to address the missing consumer-ready applications. This will buy Celestia some time to build out the ecosystem. Hopefully, this will be enough to absorb massive sell pressure arising from future token unlocks.

• Celestia boasts an experienced, world-class team. A good team is one of the most important considerations for prospective investors.

• Celestia is backed by A-list ventures with both the experience and resources a new project needs. Such significant funding and support from industry giants underscore the potential and promise of the Celestia.

Cons

• Celestia lacks an execution environment of its own. A fully functional consumer-facing on-chain application layer is needed to attract retail.

• Token unlocks will have a negative price impact if there is heavy sell pressure, or they may generate negative sentiment, igniting sell pressure. Notably, initial core contributors, seed & Series A & B investors can expect 33% of their tokens unlocked at year 1, indicating a timescale at the sale pressure would heighten. Additionally, the remaining 67% is unlocked continuously from years 1 to 3 for initial core contributors and years 1 to 2 for seed and Series A&B investors. Year 1 would undoubtedly be the one to avoid if unlock pressure follows convention. tinuously from year

• The current L1/L2 landscape is crowded with many recently launched projects, all competing for developers’ attention.

• Celestia’s website doesn't provide a well-laid-out roadmap for their plans.

Verdict

TIA’s technology, tokenomics, backers, and team all indicate a positive projection in TIA’s price in the mid/long term despite zero guarantees in crypto.

Cosmos Ecosystem

Cosmos is one of the blockchains that took the most brutal hit in the bear market. The collapse of Terra(LUNA) left a considerable liquidity hole in the Cosmos ecosystem. For example, Osmosis, one of the leading DEXs on Cosmos, saw its liquidity fall from $1.7bn to just over $100mn today.

However, according to reliable projections from the community, Cosmos is poised to make a relatively huge comeback(as we’ve seen with Solana) driven by:

• Promising top-tier blockchains like Injective, Celestia, and Kujira opting for the Cosmos SDK. Both Injective and Kujira have rallied more than 3X since the beginning of the year, along with many other IBC tokens. Avalanche is also set to integrate with the IBC.

• dYdX migration to Cosmos will bolster liquidity within the Cosmos ecosystem. dYdX will bring huge amounts of additional TVL and activity to the Cosmos ecosystem when trading begins. At least 200m of native USDC issued by Noble will flow into the Cosmos ecosystem.

• Integrating Bitcoin into the Cosmos ecosystem through the Nomic nBTC upgrade opens up a window of new opportunities. Nomic’s decentralized Bitcoin bridge is now operational.

• Although not official yet, there are growing rumors about a possible proposal for ATOM halving. If passed, this would make ATOM deflationary.

@maria_dedotfi’s recent thread explores the bullish narratives around ATOM:

https://x.com/maria_dedotfi/status/1720438857684976075?s=46&t=nznXkss3debX8JIhNzHmzw

The growth of the Cosmos ecosystem will play a huge role in Celestia’s future, especially regarding liquidity access. Cosmos is also set to roll out an incentive program to support further the demand and growth of projects within its ecosystem.

Past Performance Of Recent L1/2s

Arbitrum and Sui are the two infrastructure projects comparable to Celestia, which also launched their tokens this year. Launching in a full-scale bear market, ARB and SUI’s performance has been commendable.

ARB has managed to sustain a relatively stable TVL of around $2bn. Arbitrum’s success has been fuelled by a growing ecosystem of projects, such as GMX, and multiple partnerships within the industry. However, a huge token unlock, $1.2bn in value, is scheduled for March 2023.

Sui’s was launched in May 2023. Its TVL has been on a consistent uptrend after a minor correction in July, currently sitting at $102 million. However, SUI price has dropped more than 50% from its ATH in May and is just beginning to rally.

The number of active addresses doubled in the last two months, indicating widespread developer and user adoption. These metrics are consistent with an impending potential SUI price rally in the near future.

Overall, both Arbitrum and Sui continue to show huge promise due to their actively growing ecosystems. If Celestia can follow the same trend, TIA likely holds the same promise as $ARB and $SUI, providing another option for L2 maxis to spread their bets.

Final Take

Our overarching thesis is that modular blockchains like Celestia will achieve massive adoption as developers and users opt for innovative and sustainable scaling solutions. Ethereum’s rollup-centric approach will limit data availability as more rollups compete for blobspace.

This will work in Celestia’s favor. As the crypto community awaits Ethereum’s ultimate solution to the DA problem, Celestia will attract developers with their performance-ready infrastructure for decentralized and cost-efficient DA.

From a technical perspective, Celestia checks all the boxes for long-term, sustainable utility. Ultimately, the trajectory of TIA will depend on Celestia’s business development efforts, partnerships, incentives, marketing, etc., which are the major factors driving blockchain adoption.