Modular Blockchains Explained: Celestia and Data Availability

[00:00:00]If you have not been caught up,  Celestia’s mainnet has gone live,   making it arguably the first modular  blockchain network in the space.

[00:00:08]Celestia’s mainnet launch has managed to garner   itself a decent amount of hype.  Not to mention Celestia’s token,   $TIA’s recent jump in price likely means it’s  not gonna get any less attention for a while.

[00:00:22]But, what is a modular blockchain anyway, how  does Celestia work and why is it important?

[00:00:30]If blockchain innovation piques your interest,   you don’t wanna miss this video. As mentioned, Celestia, previously   known as LazyLedger, takes a “modular” approach  to addressing the scalability and decentralization   challenges faced by traditional blockchain  systems. But before we get into the tech and   explain “modularity”, let’s introduce  Celestia’s impressive founding team.

[00:00:43]First, Celestia Lab’s CTO is Ismail Khoffi,   a former senior engineer at  Tendermint and Interchain Foundation.

[00:00:52]Second, Chief Research Officer, John  Adler was previously a scalability   researcher at ConsenSys and known  for creating optimistic rollups.

[00:01:03]Last but not least, the mastermind  of Celestia Labs Mustafa Al-Bassam,   also the co-founder of Chainspace,  which was acquired by Facebook.

[00:01:12]He is also a security  researcher and hacker. In fact,   at 16 years old Al-Bassam was actually  the co-founder of hacker group Lulzsec,   infamous for numerous high profile breaches such  as Sony, Fox, FBI and even the CIA back in 2011.

[00:01:30]That resulted in Al-Bassam receiving a 2 year  legal ban from using the internet. Fast forward   to this day, he now has a Phd. in blockchain  scaling and is the CEO of Celestia Labs.

[00:01:43]Besides what is a strong lineup at the helm of  Celestia, the project is by no means lacking   in funding. The recent funding round in October  brought its total funding at about $57 million,   including backing by numerous notable  firms such as Galaxy, Bain Capital Crypto,   Binance Labs, and Coinbase Ventures. Having a solid team and funding is great,   but what exactly is Celestia doing to address  the challenges that most blockchains face today?   To understand, we first need to  recap some blockchain basics.

[00:02:19]Blockchains are made of several components: Execution, which deals with  processing transactions; Settlement, which deals with dispute resolution,  validity of blocks and acts as a bridging layer; Consensus, which orders transactions; and data availability, which ensures  data from new blocks is available and   published on-chain. Note that execution,  settlement, and consensus all require DA.

[00:02:48]Now, pay attention to the data availability  part as it’s important to understand later on.

[00:02:54]In “monolithic” blockchains, a  single blockchain performs all   of these functions on its own in a single  layer. Examples include Bitcoin, Ethereum,   or Solana (that is, excluding the layer 2s  and other scaling solutions built on top).

[00:03:13]This classic monolithic design is the  reason for the infamous blockchain trilemma,   which describes the problem where builders  can only pick 2 out of the 3 main properties   of a blockchain, and sacrifice the third, i.e.  security, decentralization, and scalability.

[00:03:33]Since blockchains cannot compromise on security,   the most common choice is between  scalability and decentralization.

[00:03:41]For example, increases in block size to increase  throughput leads to more expensive hardware   requirements for nodes to validate the blockchain,  resulting in a more centralized network as less   people can afford the hardware to secure the  network. This creates problems with scaling while   keeping the blockchain secure and decentralized. Now, let’s look at where modular blockchains come   into play. Modularity refers to designs  which split a system into smaller,   exchangeable or replaceable parts - allowing  for more flexible and customizable designs.

[00:04:21]Whereby monolithic blockchains need to  do everything which reduces efficiency,   modular ones can choose to specialize and  optimize on only a few functions instead.

[00:04:34]An example we are all familiar with are Ethereum  rollups, which are modular blockchains which focus   only on execution, while offloading settlement,  consensus, and data availability to the mainnet.

[00:04:49]What’s different with Celestia however, is that it  focuses only on consensus and data availability,   that is, ordering blocks and ensuring that  block data is really published on-chain.

[00:05:03]In traditional blockchains, how nodes ensure DA is   by downloading the entire block’s  data, which limits scalability.

[00:05:03]Celestia provides a solution to this by  introducing and implementing a new feature,   Data Availability Sampling or DAS, a concept  formalized by Al-Bassam back in 2018.

[00:05:18]As mentioned earlier, increasing  block size in traditional blockchains   compromises decentralization due  to higher hardware requirements.

[00:05:27]With the help of a data protection technique  called erasure coding (which we won’t get   into in this video) DAS provides a solution to  this by allowing easily-deployed light nodes   to randomly sample small amounts of block  data in order to verify data availability.

[00:05:46]As a light node repeatedly samples block  data, it increases the confidence that   data is available. Once the light node  hits a particular confidence level (e.g.,   99%), it then confirms the  availability of the block data.

[00:06:04]Furthermore, when the number of light  nodes involved in sampling grows,   so does the network's capacity to safely  manage larger volumes of data and thus,   enabling increases in block size without  increasing the cost to secure the network.

[00:06:21]This can all sound a little vague and  confusing, so we’ve linked a tweet by   Celestia COO Nick White which explains this  process with a simple coin flip analogy.

[00:06:34]All this provides a decentralized and  secure way to publish and store block data,   ensuring that the data is available  for anyone to read and verify,   which is crucial for maintaining the  integrity and security of a blockchain.

[00:06:50]Celestia’s modular approach also allows  different dApps or execution environments   to run on top of it without being limited by  the constraints of the underlying blockchain.

[00:07:02]This means anything from app-specific  chains or even general purpose layer 2s   which run on different VMs or programmed  in different languages can be built on   top of Celestia and benefit from  the data availability provided.

[00:07:17]Theoretically, the modular design  inherently addresses scalability   issues. Since Celestia only handles  data availability and consensus,   it can process and store large amounts of data  more efficiently than traditional blockchains.

[00:07:33]Celestia’s native token, TIA,   will be used by rollup developers to pay  for data availability on the network.

[00:07:41]Besides that, TIA can also be delegated  to a validator to secure the network while   earning staking rewards, as well as voting in  Celestia’s decentralized governance proposals.

[00:07:52]Celestia has established a total supply  of 1,000,000,000 TIA tokens at genesis   with an inflation schedule  of 8% in the first year,   decreasing 10% per year until reaching  an inflation floor of 1.5% annually.

[00:08:07]As for token allocation, 17.6% is allocated to  contributors of Celestia Labs, 35.6% is allocated   to seed and early investors, 26.8% allocated for  R&D and ecosystem, and 20% is reserved for public   initiatives such as Celestia’s Genesis drop. Although Celestia’s mainnet went live not long   ago on October 31st, its ecosystem is already  hosting an abundance of apps and services.

[00:08:39]At the time of writing, Celestia’s ecosystem  web page currently features 57 apps and services   with notable mentions such as Optimism’s OP  stack and Cosmos SDK as rollup frameworks.  Considering that Celestia's mainnet  has only recently been launched,   the full extent of innovation  and possibilities enabled by   its modular blockchain remains to  be seen in the unfolding future.

[00:09:05]Do you think modular blockchains like Celestia is   the answer we need to solve  the blockchain trilemma?

[00:09:12]Perhaps you would like to refresh your  understanding of how nodes in a blockchain   work. Check out our explainer  on blockchain nodes right here.