Detailed explanation of Celestia principles and token economy: How to pledge after going online?

4 months ago
This article is approximately 2031 words,and reading the entire article takes about 3 minutes
What is the staking APR after Celestia is launched? Is it staking or selling?

Original author: Biteye core contributor Fishery Isla

Original editor: Biteye core contributor Crush

Original source: Biteye

01 Preface

「All tokens, locked or unlocked, may be staked.」 

All locked or unlocked tokens can be staked.

On September 26, the modular block project Celestia announced an airdrop of 60 million Celestia tokens TIA to 7,579 developers and 576,653 active addresses on the chain. Qualified users must airdrop 60 million Celestia tokens at 20:00 on October 17, 2023. Received before, since the main network has not yet been launched (planned to be at the end of 2023), the specific time when TIA will start transfers is still unknown.

Celestia is a king-level project that was launched in the middle and late stages of the last bull market (20-21). Investors have great expectations for it. Many institutions are squeezing their heads and want to participate in the 55 million Series B financing.

Celestia completed a US$1.5 million seed round under the name LazyLedger in early 2021. In June 2021, it announced that it would be renamed to the Celestia we are familiar with. In October, it completed a B-round financing of US$55 million at lightning speed. It gradually began operations and publicity at the end of 2021. In 2023 The airdrop was announced in September of this year. According to official expectations, it will be launched on the mainnet by the end of the year, and airdrop transfers can then be started.

It only took more than 2 years from project establishment to airdrop. On the one hand, the execution ability of the Celestia team is worthy of recognition, especially with the procrastination of the same king-level projects StarkWare, zkSync and LayerZero.

On the one hand, it also benefits from the fact that Celestia is developed based on the Cosmos SDK. The sovereignty of the Cosmos tether: the consensus of the chain is maintained by the PoS of the native token (most of the other kings tokens are just governance tokens, so they can be dragged on forever). If you want to go online on the mainnet, you must first complete the airdrop confirmation. When the mainnet goes online, the balance will appear in the first block.

It should be noted that since there is no smart contract on the Celestia main network, trading can only begin after CEX is launched to open TIA recharge or Celestia main network opens Osmosis IBC.

In addition, regarding the staking operation after the launch, this is the key point and will be discussed in the airdrop section later.

02 background

Celestia is very popular in the institutional investment circle, and it was able to obtain such a huge amount of financing in a short period of time, largely due to the influence of an academic paper in September 2018 - Fraud and Data Availability Proofs: Maximizing Light Client Security and Scaling Blockchains with Dishonest Majorities.

This paper was published on arxiv. The first author is Celestia CEO Mustafa, and the third author is Vitalik. The concept of new fraud proof proposed in this paper is the cornerstone of todays Celestia technology.

It should be made clear that Vitalik is the third author of the article, which only means that he participated in and approved the technology in the paper, and does not mean that he endorses the Celestia project. On the contrary, in early 2022, Vitalik posted on Reddit about concerns that using Celestia DA to handle Ethereum assets would be subject to a 51% attack.

It’s too complicated to explain the details, but simply put,Celestias technical route is recognized by Ethereum, but Ethereum is exploring supporting its own DA, while Celestia is a third party.

Papers and most reports on the market focus on theory. Until the TIA airdrop, many investors did not understand what Data Availability (DA, data availability) actually is. This part will be explained in simple and easy-to-understand language below.

03 Inflation economy and the principle of pledge income

Be sure to note: Cosmos tokens are different from general airdrops. The total amount mentioned in the airdrop introduction isSpecifically refers to the distribution ratio of all tokens at the genesis block time, the subsequent issuance of PoS will require additional calculations. For many Cosmos tokens, the total amount of tokens is unlimited after the chain is opened, and this is the case with TIA.

In the TIA genesis block:

  • Total supply chain: unlimited

  • Supply (genesis block, percentages for this below): 1 billion

  • Seed investors: 15.9%

  • Series AB investors: 19.7%

  • RD and ecosystem: 26.8%

  • Community: 20%

  • Initial core contributors: 17.6%

Unlock information:

Detailed explanation of Celestia principles and token economy: How to pledge after going online?The team and investors will begin releasing 33% of their allocation after the first year. The team will receive the remaining funds within 3 years, and the investors will receive the remaining funds within 2 years.

RD and ecosystem are 25% unlocked at launch, with the remaining 75% unlocked continuously from Year 1 to Year 4.

Initial core contributors unlock 33% in the first year, and the remaining 67% are unlocked continuously from year 1 to year 3.

For seed investors, 33% of the seed capital is unlocked in the first year, and the remaining 67% is unlocked continuously from the first to the second year.

Investors in Series A B: 33% of Series A and Series B are unlocked in the first year, and the remaining 67% are unlocked continuously from the first year to the second year.

Seeing this, it seems that except for the unlimited supply, it is similar to most airdrops. In fact, it is not the case. What we really need to pay attention to is the inflation distribution problem caused by the unlimited supply of PoS. According to official documentation, the TIA inflation rate starts at 8% per year and decreases by 10% per year until it reaches the long-term issuance rate of 1.5%. The exact annual inflation rate can be found in the chart below.

Detailed explanation of Celestia principles and token economy: How to pledge after going online?

The 8% here can be understood as if all 1 billion TIAs issued in the genesis block are pledged from the beginning, then the annual interest rate will be 8%, which means that 8 million TIAs will be produced in a year (fixed) , in the second year it becomes 8 million minus 800,000 (10%), 7.2 million.

In reality, the APR pledged by POS is not calculated this way. We have to consider how many people will participate in the pledge. This is obviously a problem that arises through market games: Under normal circumstances, if few people pledge, then the pledged APR will High, then high APR will attract new people to buy and participate in staking, the rewards will be distributed to more people, and APR will decrease, and so on.

Any player who has played Yield Framing will understand the above knowledge. What is introduced below is what most people don’t know, the key points!

The official document states: All tokens, locked or unlocked, may be staked, but staking rewards are unlocked upon receipt., which roughly means All tokens locked or unlocked can be staked, but staking rewards are unlocked upon receipt. It will be unlocked later.

In other words, in addition to the 7.4% retail airdrop, the 926 million TIAs can still be pledged even if they are locked or used for other purposes, such as ecological funds.

At first glance, it seems reasonable, and the staking income is also locked, but in fact this goes against normal logic. It is clearly in the locking stage, but it can still be pledged. When to pledge and how much to pledge are all unknown, and these variables are closely related to the pledge income.

In the early days, the Cosmos chain happened to be playing with the economics of staking. If you just look at the official circulation line chart (below) without knowing the above game rules, it is easy to cause misjudgment.

Detailed explanation of Celestia principles and token economy: How to pledge after going online?

Calculating an account, on the day of the chain opening, assuming that the official did not participate in staking, if 10% of the 7.4% retail airdrops were pledged (a casual assumption, because it takes time to receive, and some people will sell after receiving, it is reasonable), then on the day The interest rates will be outrageous:

(8% /365)/0.74% = 2.96% 

Next, if we continue to assume that the official does not participate in staking, the staking rate of retail airdrops reaches an exaggerated 50%, and the daily interest rate is also 0.59%.The rewards unearthed are not ordinary copycats.Therefore, APR alone can still convince a large number of investors to enter the market and pledge, pushing up the secondary market price.

In fact, it would be fine if only 7.4% of the circulating amount were fighting each other internally. Although the APR would remain at a high level, it would still be relatively healthy.

The problem is that according to the experience of the Cosmos ecosystem, the official will participate in pledging part of the tokens from time to time and in varying amounts, especially the investors share, and will not be willing to be diluted by inflation.

Once the locked shares participate in the pledge, the APR will plummet, triggering a huge amount of unlocking selling. According to the experience of the Cosmos ecosystem, it takes 14 or 21 days for TIA to change from the pledged state back to the circulating state.

If retail investors do not know the above rules, they are likely to make investment misjudgments. Last spring’s Cosmos ecological EVM Evmos is such an example:

The high APR lasted for about 3 months, and then officials intervened in staking, causing the APR to plummet, which in turn triggered a strong sell-off. Even investors who did not choose to sell changed from a re-investment strategy to a dig-and-buy strategy.

In short, if the APR pledged after the chain is opened is very high and the official has not participated in the pledge, then as a non-long-term investor, you should be cautious.

Finally, let us talk about the reason why Celestia is so popular and what is the core technology DA behind it.

04 What is data availability?

Data Availability, referred to as DA, literally translates as data availability. But in fact, according to the Chinese context, DA does not refer to a certain nature. It is more appropriate to understand it as a method of verifying newly released blocks. Many friends fail to understand DA, and translation is largely responsible for it.

Most friends misunderstand DA as blockchain data can be retrieved (downloaded). To be clear, DA refers to the act of downloading a block when a block is added to the blockchain, and verifying whether the transaction data is correct. If the block is verified to be correct by many nodes, then the block is officially A consensus was reached.

In other words, data availability is relevant when a block has not yet reached consensus.Therefore, DA is related to blockchain security. If there is a vulnerability in DA, the block proposer can insert malicious transactions into the block and cause serious consequences. Optimizing DA can improve blockchain performance.

Ethereums DA is broadcast using P2P, which means that each full node must download and propagate new blocks, and also store Rollup data to ensure that the changes proposed by the block producers are completely consistent with the changes independently calculated by the nodes. . This method requires no trust;But it is inefficient and requires high node and network speed, which will affect the degree of decentralization.

Celestias DA technology introduces erasure coding and data random sampling to design a set of transmission and verification protocols. Unlike Ethereum nodes, which need to download the entire block data,Celestia only needs to download a small number of blocks to determine whether the blocks are correct based on statistical Fraud proofs.This will help reduce the requirements for hardware and network, and enable the settlement layer and execution layer of its services to have more decentralized operating conditions and high throughput performance.

DA is the technical route that everyone is targeting, and competition is fierce, including Ethereums Proto-Danksharding, Polygon Avail, zkSyncs zkPorter, and Eigenlayers EigenDA.

The implementation difficulty of each project is different. The technology used by Celestia is relatively mature and easy to develop and maintain. Therefore, this airdrop has established DA’s leading position in the track. The safety of DA, an emerging track, and the potential for further technology exploration will be followed. , it remains to be seen how Celestia’s mainnet will perform after it goes online.


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