🟣 Celestial Alignment

Everyone and their mother is migrating to Celestia.

January 25, 2024

In the crypto world, narratives are everything. It is the ultimate 24/7 attention economy, mostly ruled by a bunch of sub-30-year-olds living in a 1BR apartment hopped up on Zyn and Red Bull (hopefully, this isn’t too personal for some of our readers). Protocol teams know this and are sure to be up to date on the latest narratives circulating crypto Twitter to ride the wave while it lasts until the hot ball of money rotates to something new.

The two hot narratives of this cycle are modularity and the intersection of AI x crypto. This shouldn’t come as a surprise to most of you - we’ve been talking about modularity for well over a year, created THE best Celestia analytics dashboard in crypto, wrote about the AI narrative in a newsletter in February last year during the first big speculative wave fueled by the emergence of ChatGPT in Q4 2022, and just this morning released a comprehensive breakdown on the AI x crypto space.

I actually believe in these narratives (to a degree). But its also hard to tell sometimes what is actual adoption of these promising technologies and what is a team just looking to time a narrative.

I’m going to briefly turn my attention to the handful of teams “going modular” with Celestia underneath. My feed was lit up yesterday by announcement, after announcement, after announcement, after announcement of projects launching with “Celestia underneath,” choosing it as their data availability layer. There are real benefits of choosing Celestia over Ethereum for DA, mostly improving the profitability of a rollup’s sequencer by >90%, allowing teams to scale their product and offer a better user experience to tens/hundreds of thousands of users.

Are teams choosing Celestia to save their end users money and create a better UX, or are they doing it to ride the narrative even though older chains like Near supposedly offer 30x cheaper DA costs than Celestia? Unsure.

What I’m saying is not an indictment on Celestia’s tech and the team. I actually think they’re great and have built something truly innovative.

But is cheap blockspace the missing ingredient for crypto mass adoption? No. We need better use cases that don’t revolve around different forms of onchain gambling, proof of personhood, and better wallet UX (among other things). We continue to be in this infrastructure purgatory that I’m praying we eventually get out of.

Maybe one day, but today is not the day. On the bright side, at least we have aggregation layers to look forward to soon…

— EffortCapital

Continuing with the Celestia topic, above is a chart of Lyra chain’s sequencer profit pre and post-migration to Celestia. I’m no distributed systems engineer, but it looks like the migration occurred around 09:00 based on the change in trend. Whats cool about this is that the migration performed by RaaS provider Conduit, occured with zero downtime or performance issues thanks to Celestia’s “Ethereum fallback” that creates DA redundancy. This does beg the question tho…is there a DA moat if switching costs are this low? I think I know the answer to this, but will save my opinion for you all to come to your own conclusions.

While I like to talk tongue-in-cheek about the modular thesis and not needing more cheap blockspace today, I am excited to see if cheap DA unlocks any innovative use cases. DePIN is my favorite sector, as outlined in my 2024 thesis, that may benefit the most from solutions like Celestia. I will be following any DePIN sovereign rollups closely as they pop up and encourage you to do the same.

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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.