Celestia: the reasons for an early hype
It's the new blockchain craze. Officially launched on 31 October, Celestia continues to attract investors. A hype best illustrated by its cryptocurrency, TIA, whose price has risen by +500% since its launch just over a month and a half ago.
So how do you explain such progress?
👉 An innovative narrative
The project was officially born in 2019 under the name Lazy Ledger. One of its co-founders is Mustafa Al-Bassam. He is best known for having been a member of the LulzSec hacker group, which carried out attacks on the FBI and Sony. For his involvement, he received a 20-month suspended prison sentence in 2011.
Celestia is built using the Cosmos ecosystem SDK (Software Development Kit) and supports Inter Blockchain Communication (IBC). This protocol is intended as an interoperability alternative between blockchains to the traditional bridges, which are much criticised for the numerous hacks they are regularly the target of.
It is a so-called modular blockchain. In practical terms, it proposes to store only the data of other blockchains, which would then only have to manage the transaction execution part.
By way of comparison, Bitcoin and Ethereum are so-called "monolithic" blockchains, meaning that they manage both data storage and the transaction execution part. In their case, each node must verify the transactions in a block, which greatly limits the number of transactions per second and interoperability.
Clearly, this would greatly improve the efficiency of blockchains that rely on Celestia because they could focus solely on transaction execution.
"Before the arrival of these modular blockchains, it was difficult to envisage anything other than Ethereum and its EVM (Ethereum Virtual Machine) to enable blockchain interoperability. But things are changing," explains Stanislas Barthelemi, head of crypto & blockchain at KPMG.
👉 What is its TIA token used for?
If TIA is so successful, it's mainly because Celestia "is the only modular blockchain to have launched its cryptocurrency", explains Clément Aguillé, decentralised finance analyst (DeFi) at Meria, a French crypto investment platform. "At the moment, investors wanting to gain exposure to this type of technology can only do so with TIA," he adds.
The Celestia teams have also had the good idea of launching TIA just as the markets are recovering.
But other explanations can be found in its usefulness.
Celestia works on a proof-of-stake (PoS) basis, like Ethereum, meaning that it is possible to earn a return by participating in securing the blockchain. This is known as staking . We're actually organising a breakfast on February 1 on the subject, so don't hesitate to register !!
On Ethereum , you need to lock in at least 32 ethers, the network's native cryptocurrency, which can be quite limiting. At the current price, 32 ethers are worth around €60,000, so it's not within everyone's reach.
In contrast, Celestia imposes no barrier to entry. Currently, more than 46% of TIAs in circulation are staked for a return of 16% per year.
"When you choose to stake your TIAs, a three-week immobilisation period is imposed by the protocol. For the time being, this constraint is helping to prevent selling pressure on the market," notes Clément Aguillé.
The TIA is also a governance token, meaning that its holders will have voting power proportional to the number of tokens owned.
Beyond this property, which is fairly common in the crypto ecosystem, the TIA is also essential for launching these "celestiums", a kind of blockchain directly attached to Celestia.
👉 Binding tokenomics
At the moment, 7.4% of all TIAs have been distributed to "general public" users, i.e. excluding teams and privileged investors. In time, this figure will rise to 20%, which is still a relatively low figure.
The "professional" investors, comprising in particular the VCs and all the teams behind the project, will share the rest. The vesting period for them, i.e. the period during which they undertake not to sell their TIAs, runs until 30 October 2024.
Another factor could also be helping to drive investors to hold TIAs over the long term. "There is a lot of speculation that holding TIA will give access to the next airdrops of projects that develop in the Celestia ecosystem," notes Clément Aguillé.
On the other hand, Celestia will have to find its long-term business model beyond the hype. "Celestia's mechanism means that transaction fees will fall as its use increases. But today, there is no guarantee of this. It's also quite reasonable to think that the TIA price is overvalued at the moment," warns Stanislas Barthelemi.
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