LD Capital: Brief Analysis of Modular Blockchain Celestia
I. Project Overview
Celestia is a modular blockchain project that focuses on data availability. In contrast to single-chained blockchains that independently handle execution, settlement, consensus, and data availability, modular blockchains decouple these functions across specialized layers. As part of a modular stack, similar to the structure of LEGO blocks, this approach provides better flexibility and scalability for each module. The foundational layer of Celestia consists of consensus and data availability, referred to by the project as the DA layer.
Celestia is a proof-of-stake (POS) blockchain based on CometBFT and Cosmos SDK. The two key functionalities of its DA layer are Data Availability Sampling (DAS) and Namespaced Merkle Trees (NMT).
DAS enables lightweight nodes to verify data availability without downloading the entire block. As lightweight nodes cannot validate data availability by merely downloading block headers, Celestia employs a two-dimensional Reed-Solomon encoding scheme to re-encode block data for DAS on lightweight nodes. The working principle of Data Availability Sampling (DAS) involves lightweight nodes performing multiple rounds of random sampling on small portions of block data. As lightweight nodes complete more rounds of block data sampling, confidence in data availability increases. Once a lightweight node successfully reaches a predetermined confidence level (e.g., 99%), the data is considered available.
NMT enables the execution and settlement layers on Celestia to download only the transactions relevant to them. Celestia divides the data within blocks into multiple namespaces, with each namespace corresponding to applications such as rollups built on Celestia. Each application only needs to download and process data relevant to itself, thereby improving network efficiency.
II. Financing Information
III. Economic Model
TIA is the native token of Celestia, with a total supply of 1 billion tokens. The initial annual inflation rate is 8%, decreasing by 10% each subsequent year until the annual inflation rate reaches 1.5%.
(1) Use Cases
- Rollup developers utilizing Celestia DA need to pay fees in TIA.
- Similar to Ethereum, Rollups built on Celestia will use TIA as gas fees.
- Staking.
- Governance.
(2) Allocation and Unlocking Situation
On September 26, 2023, Celestia announced the commencement of the Genesis Drop, where eligible participants could claim up to 60 million TIA starting on October 17, 2023. One-third of the Genesis Drop, equivalent to 20 million TIA, was allocated to 7,579 developers and researchers. The remaining two-thirds were distributed to 576,653 on-chain addresses, with 20 million TIA awarded to the most active users of Ethereum Rollups, and another 20 million TIA allocated to stakers and relayers on Cosmos Hub and Osmosis.
On October 31, 2023, Celestia completed the deployment of the mainnet test version and initiated the airdrop, marking the launch of its modular network. The initial token circulation included 25% for research and ecosystem development, and 100% for public distribution, totaling 26.7% (=26.8%*25%+20%). However, considering that 12.6% of the public distribution is allocated for future initiatives, excluding this portion resulted in a circulating supply ratio of 14.1% (=26.7%-12.6%), corresponding to 141 million tokens in circulation. When factoring in the inflation, this aligns with the current circulating supply of TIA displayed on CoinGecko at 145 million tokens.
Although the unlocking of other portions, such as TIA for investors, is scheduled for one year later, there is potential selling pressure from the inflationary aspect of TIA. The 8% annual inflation rate is based on a total token supply of 1 billion, meaning there will be an additional 80 million tokens due to inflation in the first year. This accounts for 56.7% of the initial circulation of 1.41 billion tokens. If this portion of tokens is roughly averaged over each day, it could potentially generate selling pressure of approximately $1.227 million per day (valued at $5.6 per token). This is a factor that might be easily overlooked.
IV. Spot Market Data
TIA was listed on multiple exchanges, including Binance and OK, immediately after its debut. Within the first 10 days of trading, it experienced minor fluctuations around the $2.5 range. On November 11, after a strong surge, TIA initiated a bullish trend, reaching a peak of $7.4. The concentrated chip price is around $2.47, followed by the vicinity of $5.9. In recent days, trading volume has slightly declined, returning to levels seen during the initial consolidation phase after listing. The current price is positioned at the 0.618 Fibonacci retracement level. Binance’s major accounts net sold 187,000 tokens, while retail investors net bought 100,000 tokens.
V. Contract Data
OI/MC=13.6%
Since the price began to decline from its peak, both CVD and open interest have decreased simultaneously. The long/short positions ratio and the ratio of long positions to large accounts have both increased, reaching values above 1. There is a slight divergence between active buying and selling volumes and the number of transactions.
LD Capital
As a global blockchain investment firm, we have built a portfolio of over 250 investments since 2016, spanning across various sectors, including infrastructure, DeFi, GameFi, AI, and the Ethereum ecosystem. We focus on investing in projects with disruptive innovations, actively taking on the role of primary investors, and providing comprehensive post-investment services to these projects. We employ a combination of direct investment from our own funds and a distributed fund model to cover all-stages of investment.
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