Our experts tell you what you need to know about the Celestia modular blockchain and what's driving demand for its native token
The price of the native blockchain token Celestia (TIA) reached an all-time high of $20 on January 15. In less than three months of its existence, the token has increased in price almost tenfold. And the demand for it continues to be supported by the excitement around new projects in the network ecosystem.
Celestia Labs, the company behind the development of the Celestia blockchain network, raised $55 million in October 2022, led by venture capital firms Bain Capital Crypto and Polychain Capital. Following this investment round, Celestia's project achieved "unicorn" status with a $1 billion valuation.
The venture capital arm of the Coinbase exchange also participated in its funding. And the cryptocurrency arm of major market maker Jump Trading, Mike Novogratz's Galaxy Digital and a number of other venture capitalists and business angels. Prior to that, Celestia developers raised $1.5 million in a seed round in 2021. And in October 2023, the OKX crypto exchange announced its investment in this project.
Modular blockchain
Celestia Labs has been led by Mustafa Al-Bassam. As a 2019 PhD student in Computer Science at University College London, he published a paper titled "LazyLedger". And in which he presented a radical rethinking of the principles of blockchain. He described the possibility of separating the various functions of a distributed ledger. And in particular, how users request data, into separate "application layers". A key benefit of this approach would be to minimize the total amount of resources required to run the underlying blockchain.
Al-Bassam is co-authoring three research papers with Ethereum ecosystem co-founder Vitalik Buterin. In one of his 2022 talks, Buterin presented Celestia as a solution for scaling so-called rollups. These rollups leverage such "second-level" solutions in various forms. Such as Optimism or Arbitrum, and with their help users can make much cheaper and faster transactions than in Ethereum at the base level.
Celestia's primary use case is expected to be offloading the Ethereum blockchain from having to process the massive amount of data being produced by the rapidly growing ecosystem of rollup-based networks. Celestia's solutions further improve the efficiency of the Ethereum core network. while taking over data storage and streamlining transactions. And then further transferring that data to other blockchains to complete transactions.
Technically, the Celestia blockchain is used exclusively for these needs. It does not perform smart contracts or computations, unlike other blockchain networks. Instead, the Celestia model outsources these functions to rollups or other blockchains. And this is a key component of its flexible, modular design. That said, developers building applications on the Celestia network can combine different elements of its infrastructure while keeping them compatible.
Token launch
To use Celestia for data processing, rollup developers conduct a separate type of transaction on the network. And for which they pay a commission in native tokens - TIA. In September 2023, Celestia developers announced the launch of the token and its distribution as an airdrop to early users of the network. And who showed activity and participated in its testing in the early stages.
During the distribution of 60 million tokens TIA distributed to the wallets of 191 thousand qualified participants of the airdrop. And that amounted to about 6% of their total supply of 1 billion units. More than half of the existing tokens are distributed to early investors and developers. And another 140 million TIAs are allocated to fund future project initiatives. A significant portion of these tokens remain locked: early investors will receive tokens in several stages between October 2024 and October 2025, while developers will receive tokens until October 2026.
The token was listed by Binance, OKX, Bybit, KuCoin and other major crypto exchanges on its launch day on November 1, 2023. According to the results of the first day of trading, the price of TIA was fixed at $2.44 with a capitalization of about $344 million.
Less than three months later, in January 2024, the rate of TIA increased almost 10 times. On January 15, the token reached $20, and the size of its capitalization soared to 3 billion, which put TIA in the top 30 largest existing crypto-assets.
Why TIA token rose in price
Airdrop as a tool for attracting users has not only benefited Celestia itself. Developers of several projects that use its blockchain. They also announced the distribution of their own tokens to those who help Celestia to maintain its work, acting as a so-called transaction validator. And with this they provoked even more demand for the TIA token.
The TIA token allows application developers to use Celestia's blockchain without having to deploy their own validator network. Thus, those who act as validators by hosting their own tokens in staking. now play an important role in the ecosystem: they ensure that not only Celestia itself works correctly. But also those networks that rely on it for data availability.
Demand for the TIA token, as well as its price, began to skyrocket after two projects announced at the very beginning of 2024. They announced that they would airdrop their own tokens to all those who hold TIA in staking. The first of which was Saga. And its developers announced the distribution of SAGA tokens among 27 thousand participants in the list of those who until December 1, 2023 held in staking from 23 TIA tokens.
The Dymension project team soon announced plans to distribute 20 million DYM tokens to everyone who held at least 1 TIA in staking. The tokens themselves haven't launched yet. But qualified participants of the distribution are already putting them up for pre-sale on OTC services, where the price of a DYM token reaches almost $5.
Against this background, more and more market participants started buying and placing TIA tokens in staking. And expecting new giveaways from other projects.
Airdrops proved to be an effective marketing tactic for new crypto projects. Projects like Berachain, Monad or Manta, which also rely on the Celestia infrastructure, are expected to launch in 2024. And our experts note that everyone also expects them to distribute tokens. $TIA
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