Bigtime had already fallen by 12% before posting this article. Under the current market situation, the love for chain games has gradually faded. It’s not that I don’t love it, but I don’t know how to love it. Let it go slowly for now, let’s talk about Celestia under Cosmos today. I have always been very optimistic about Astro Boy. I have said before that I will accompany it until it reaches 300 (I will not make investment recommendations in the long term), so we must study it carefully when its ecology reaches 300.
The Celestia token is trading at a valuation of over $2 billion on Aevo. But as the first chain built specifically for data availability, its valuation has become the biggest public opinion, because there are no other products built in the same way as it. Messari also recently published an article thinking about triangulating Celestia's fair valuation with the amount of data users would have to pay to justify the now over $2 billion price tag.
Cel separates the three components of a blockchain (i.e. execution, consensus, and data availability) into distinct parts; within the ecosystem, rollups are responsible for the execution of transactions, and the base layer handles consensus and data availability for said transactions.
The closest equivalent on the market is Ethereum and its descendants; the Ethereum base layer handles data availability and consensus for the network, while Op and Arb specialize in execution. The only difference between the two designs is where transactions are settled. On Ethereum, transactions are settled on the base layer, while on Roll on Cel, transactions are settled on the sovereign Roll itself. However, settlement is more of a by-product of data availability, because as long as the chain can prove that transaction data exists somewhere on the chain, it can justify the transaction settlement sequence. Let’s break down the valuation into the problem, which is a bit GPU-intensive. But it’s still clear after careful calculation.
One logical way to triangulate Cel valuation is to draw on how the market effectively prices Ethereum and its aggregation; and as an extension of that valuation the relationship or ratio. Ethereum’s current transaction volume is close to 180 billion; all aggregates on Ethereum total close to 30 billion, including zkSync, Scroll and Taiko, which are not yet publicly traded. Imagine a universe where Ethereum only acts as a base layer for aggregation, and we then throw out the valuation of Ethereum for the base layer based on the level of TVL; the base layer is probably worth around $20 billion. Following this logic; if the market's aggregate pricing on Cel totals 1.5 billion; Cel should trade at 1 billion at the same ratio as above. I'll show you a photo and you'll understand.
Ethereum Roll now pays the base layer $65 million per year to acquire data; users pay more than $100 million in Roll to execute transactions. This is also consistent with what the Messari report suggests, and a logical extension of this would be to price both tiers based on FDV/fee multiples.
We know that the execution layer is valuable, otherwise op and arb would not exist; we also know that the data availability layer is worth billions of dollars, because Rollup is willing to pay to store data; but the availability of transaction data that occurs on the chain This is only possible through validators that provide consensus to the network.
If we think of fees as a representation of the value of each layer; we then consider the fees paid to validators to provide consensus for the network; because they are incentivized by network inflation or the issuance of native tokens to stake assets and secure the network. In other words, the network is literally paying validators to provide consensus.
The Ethereum base layer now also needs to pay more than 1.1 billion US dollars in interest rate rewards to validators to ensure network security; assuming that the current transaction price of ETH is 1.5k. Although validator rewards also come from other sources, such as tips, etc.; for this calculation, only native eth issuance is considered because it more fully reflects how much the network is willing to pay for the consensus itself.
However, we can separate the valuation based on the total value locked; a portion of the validator rewards issued to protect Rollups and assets on the base layer; assuming TVL is a rough but accurate metric that reflects the value of the network. The TVL of the Ethereum base layer is currently close to 23 billion, while the TVL of the main rollup is only close to 3 billion.
We then end up with Ethereum paying over $120 million per year to provide consensus for the rollup layer; in theory, as Layer 2 adoption increases, this number should grow as the TVL moved to rollup increases.
We can end up with a ratio of 3.6 to 1 between the services provided by each layer and the value paid for the base layer and execution. This effectively means that for every $1 spent, users pay for the execution of Rollups in the Ethereum ecosystem; data availability and consensus at the base layer cost $3.60.
The ratio of 3.63x is a rather static view and a rough estimate of how the market is currently pricing the data availability and consensus layer of the modular chain; it should theoretically be based on price movements of the underlying asset.
Let's improvise a bit and hope this logic becomes useful later. Since most Celestia rollups are not live yet, it is difficult to assign a fair valuation to the ecosystem; but we can use assumptions and numbers to triangulate the valuation.
We now know that in the Ethereum ecosystem, for every $1 of execution fees paid for the system to function properly, data availability and execution at the base layer will cost $3.60.
So, my first step was to estimate the execution fees paid for aggregation in the Celestia ecosystem.
Assume that there is a Rollup equivalent to Arb in the Celestia ecosystem, with a daily transaction volume of 500,000; and that Rollups price their execution gas fees as a function of data availability costs. In theory, after the 4844 upgrade, data availability on Celestia should be more competitive than on Ethereum; assuming Rollups' operating profit margin is 75%, the fee paid by effective users of Celestia Rollups should be less than 1 0.02 (1- 0.75).
As we have witnessed in the Cosmos ecosystem, sovereign aggregation has a very specific way of accumulating value from activity; let's just say that this way of pricing connects both sides of the equation and makes assumptions more valid, Because we are making assumptions after all. See picture for more details
If the above ratio in Ethereum also holds true in the Celestia ecosystem; this means that rewarding validators in the Celestia network would require a baseline of $8.9 million. Assuming that Celestia runs with a 5% to 7% reward rate like other PoS networks, and that only 10% of the total supply is used to secure the network in the early days of the network; this puts the valuation range closer to 1.2 billion.
Of course, this is a rough way of reverse-engineering Celestia's valuation based on what we're seeing in the market; more importantly, with Arb equivalent aggregation, Celestia would be worth $1 billion.
But also consider that down the road, for example, lower data availability fees from future upgrades will not lead to a downward revision of the base layer valuation; and will not make execution more valuable than the base layer.
Also the more aggregations are built on top of the layers; the more valuable the base layer becomes because it provides data availability services to more execution layers; so, as the ecosystem grows, the value of the consensus will be higher.
In fact, triangulation also has disadvantages, such as the total value locked cannot be determined, and the consensus rewards and aggregation are not based on a linear proportion. This method is still OK for cel. We will add conditional constraints for other projects later.
Finally, let’s talk about the current hot spot bigtime. Generally speaking, it has innovation, team, and funds. It’s good that tokens don’t participate in governance, but going back to the starting point, the current bear market is understandable. No matter what happens next, it will take time. It is a bit difficult to expect the hot spots from the last round to explode now. Because the liquidity in the bear market is indeed very poor, taking Pond's example, there may be 100 fools taking over in the bull market, but only 10 are left in the bear market.
It is not difficult to say because the essence of the currency circle is a technological revolution and a revolution in distribution methods. Now I think it is a melee between casinos, entertainment circles, and warlords. These characteristics have nothing to do with bulls and bears. There are so many people and so many interests entangled in it. , there will always be food to eat.
The currency circle will never lack stories of getting rich. There will always be projects and people from 0 to 100 million in the currency circle. The currency circle is so long, 24/7, and there is still a lot to go in the future. Of course I feel anxious when I see others making money, but when I think about it, I don’t seem to need too many opportunities. These fomo and misses may also be a kind of preparation. I just wait, pay attention every day, think about it every day, and wait. Waiting for my technician.
