Back in October 2022, Celestia, a first-mover in the Data Availability (DA) market, closed $15 million and $40 million respectively in a combined Series A and B round, and it was conferred a unicorn status with its $1 billion valuation. This brought visibility into DA-as-a-service, and it attracted competition in the likes of EigenDA as well as Ethereum’s own EIP-4844 upgrade to their native DA (Proto-Danksharding).

More recently, an up-and-coming DA service provider, Avail, has been gaining attention as it superseded Celestia’s fundraise by raising $43 million from its Series A funding round in June this year. Could this institutional interest in Avail signify investors’ confidence in Avail outshining its competitors, and is Avail’s recent token launch worth looking into?

The unification layer for Web3

Self-proclaimed to be the Unification Layer for Web3, Avail aims to be a modular technology stack that combines data availability, aggregation, and shared security, through three primary layers:

• Data Availability (DA) Layer: A purpose-built solution to provide data availability guarantees for scaling blockchain apps.
• Nexus Layer: A zero knowledge (ZK) rollup on Avail DA that consists of a proof aggregation layer and sequencer selection mechanism to unify rollups both within and outside of the Avail ecosystem.
• Fusion Security Layer: Unifying crypto-economic security by pooling different tokens and enabling multi-asset staking.

While there are no specific launch dates for Avail Nexus and Avail Fusion, Avail DA just went live on mainnet on July 23, 2024, together with the AVAIL token.

Token distribution and utility

Speaking of the AVAIL token, 16.775% of the max total supply of 10 billion tokens is already in circulation, with an inflation rate of 5% per annum. Over 65% of AVAIL’s allocation is dedicated to the community, with the exact percentages of AVAIL token allocation as follows:

• Unification Drop: 6%
• Public Allocation (Future Initiatives): 6%
• Ecosystem Development: 30%
• Community & Research: 23.88%
• Investors: 14.12%
• Core Contributors: 20%

For the tokens allocated to Community & Research, they will be distributed by the Avail Foundation, and will be allocated towards research and development initiatives, grant programs, bug bounty programs, educational resource development, community ambassador programs, to ultimately nurture the adoption of the Avail protocol.

As for use cases of the AVAIL token, developers streaming their blockchain’s transaction data to Avail DA to access DA services will pay their fees using the AVAIL token (same as TIA).

AVAIL can also be staked to receive staking rewards while securing the Avail Unification Layer.

Users can choose to either nominate validators, which requires a minimum bond of 1,000 AVAIL, or use nomination pools, which only requires 100 AVAIL. Currently, the 30 day average reward rate for staking AVAIL, which is derived from transaction fees and the controlled inflation of the AVAIL token supply, is over 20%!

Finally, the AVAIL token will play a role in Avail’s network governance, which is in the midst of a phased rollout.

Bull and bear cases for AVAIL

Despite just launching its mainnet, Avail has already secured over 110 partnerships, including the five largest L2 ecosystems (Arbitrum, Optimism, Polygon, Starkware, ZKsync). As blockchain transaction activity within these ecosystems picks up, demand for data availability services follows suit. Not only will this organically increase demand for AVAIL, but this will also serve to provide Avail DA with more fees and consequently, engender a more attractive staking reward rate which in turn increases buying pressure on AVAIL.

In anticipation of potential fudders claiming that Avail may not be able to handle a potential uptick in blockspace demand, it should be noted that Avail processed over 100 million transactions during its Goldberg Testnet phase, with Avail DA facilitating enough data submissions to satisfy the demands of almost all the L2s in 2023 (140 GB).

Moreover, it would not be a far stretch to assume that blockchain projects building on Avail will airdrop their tokens to AVAIL stakers. While some may point out that this is mere wishful thinking, the price of Celestia (TIA), pulled a 10x from $2 to $20 within 3 months of its launch as it allowed stakers to gain exposure to the airdrop narrative.

On the flipside, competition is strong within the data availability space, and Avail has to compete with Celesita, EigenDA and even Ethereum’s native DA (post Proto-Danksharding).

Furthermore, as aforementioned, Avail Fusion aims to unify crypto-economic security by pooling different tokens and enabling multi-asset staking in the future. By staking native assets from other major ecosystems (Bitcoin, Ethereum) alongside Avail’s native assets, demand for staking AVAIL could be less significant.

Finally, the profitability of running a DA layer remains to be seen. While we do not have data regarding Avail DA fees, we can observe how much revenue Celestia generated towards the end of 2023. As can be evidenced from the chart below, daily fees paid for blobspace on the Celestia network averaged around 5 TIA (not 5000, not 500… just 5 TIA). At Celestia’s price of ~$13 at the end of 2023, this works out to Celestia generating daily fees of ~$65 per day. Assuming this trend holds for Avail, there could be a possibility that running such a business model could be unsustainable.

Overall thoughts on DA

Back when I could not decide what application tokens to buy, I would opt for infrastructure tokens as a more attractive pick-and-shovel bet that could grant me exposure to all apps building on it.

While DA is an infra play, it is getting a tad overcrowded with the likes of Topia and Lattice joining the race, and it is hard for me to ignore the already competitive playing field that Avail is on: Celestia, the first DA service provider, has a first mover advantage that keeps Avail on the backburner, while EigenDA has inherently more robust security as it borrows Ethereum L1 security from restaked ETH via EigenLayer. If Avail had chosen to unify DA layers rather than be a DA layer that unifies rollups, I would probably be balls deep in it by now.

Overall, while Avail’s valuation ($300 million market cap, $1.8 billion FDV) is considerably cheaper than Celestia’s ($1.2 billion market cap, $6 billion FDV), I would give it a miss due to the oversaturation of the DA space.

However, the moment a project building on Avail announces its intention to airdrop its token to AVAIL stakers, I can see myself max bidding AVAIL and crossing my fingers that retail would expect more projects to follow suit and thus, deem AVAIL to be the next airdrop meta, leading to a run up similar to TIA’s.