Celestia has been in the spotlight lately, albeit a polemical one. On one hand, the surprise announcement of a $100 million fundraise is ostensibly bullish, but on the other, the threat of dilution stemming from huge upcoming unlocks at the end of October is as palpable as ever.

Contentions aside, notwithstanding TIA’s solid run up towards the end of 2023, Celestia did not rest on its laurels this year, and have instead been shipping hard with its Lemongrass upgrade and push towards 1GB blocks.

Unfortunately for TIA, this did not translate to an equally solid PA, with TIA down nearly 70% from its ATH of $20 in February.

This begets the question: is TIA’s drawdown a godsend, or should investors shy away from Celestia and its controversies?

Celestia - the mother of all data availability networks

Celestia is a modular data availability powerhouse, featuring data availability sampling that optimizes throughput. In other words, Celestia aims to facilitate builders in deploying their own chain with DA provided by Celestia, or in Celestia’s own words, ‘with Celestia underneath’.

Prominent protocols that are built with Celestia underneath include Eclipse, Kinto, LightLink, Manta, Movement Labs, ZKFair, and many more.

Some of Celestia’s competitors include Ethereum’s native DA (post Proto-Danksharding), EigenDA, and Avail.

TIA tokenomics - demand side

As Celestia’s native token, TIA is expectedly used for on-chain voting purposes. TIA holders can also stake TIA to operate their own validator to earn block rewards, or delegate their stake to earn a percentage of the validator’s staking rewards.

With the launch of liquid staking protocols on Celestia such as MilkyWay, liquid staking TIA has been a popular option among TIA holders.

Governance aside, builders pay to publish data to Celestia’s blobspace using TIA. Developers can also opt to bootstrap their chain by using TIA as the gas token and currency.

As Celestia pioneered the DA model, most new DA layers such as Avail copy adopt Celestia’s token use cases, with the exception of Celestia offering developers to bootstrap their chain using TIA. But to my knowledge, no rollup has done this yet. (I may be wrong, of course)

TIA tokenomics - supply side

Inevitably, the time has come to discuss the elephant in the room: TIA’s distribution. But first, let’s flesh out the allocation of TIA tokens, which has a total supply of 1 billion tokens:

• Public Allocation: 20.00% (Fully unlocked at launch).
• R&D & Ecosystem: 26.79% (25% unlocked at launch, remaining unlocked continuously over the next 3 years starting from Oct. 31, 2024).
• Early Backers (Series A & B): 19.67% (33.33% will be unlocked on Oct. 31, 2024, with the remaining unlocking continuously over the next 2 years starting from Oct. 31, 2024).
• Early Backers (Seed): 15.90% (33.33% will be unlocked on Oct. 31, 2024, with the remaining unlocking continuously over the next 1 year starting from Oct. 31, 2024).
• Initial Core Contributors: 17.64% (33.33% will be unlocked on Oct. 31, 2024, with the remaining unlocking continuously over the next 1 year starting from Oct. 31, 2024).

To visualize this, we can refer to Celestia’s documentation:

Effectively, over 175 million TIA tokens will be introduced into the market at the end of October, and this represents ~81% of TIA’s current circulating supply! Following which, just under 1 million TIA tokens will be unlocked everyday for the next 1 year, and there will be over 750 million TIA in circulation by Oct. 31, 2025.

TIA bears

This brings me on to TIA’s bear case; the overhang of TIA’s soon-to-be-unlocked supply is a valid reason for investors to be apprehensive.

Of course, bulls may highlight the potential for a bullish unlock, but the introduction of new TIA tokens into TIA’s circulating supply will cause a sharp rise in TIA’s circulating market cap, and can Celestia really command a higher valuation?

After all, as discussed previously in AVAIL’s token brief, the profitability of running DA-as-a-service remains to be seen.

TIA bulls

Credit where it’s due, Celestia has been delivering splendidly. For instance, Celestia’s technical roadmap highlights its objective to scale to 1GB blocks, which aims to enhance data throughput, thereby allowing developers to “build whatever”.

In contrast, monolithic L1s are unable to out-scale Celestia due to constraints such as execution layer overhead.

According to Celestia’s blog post, with 1GB blocks, they “will deliver the capacity of many Visa networks in parallel” to unlock “onchain applications and capabilities that were previously considered unviable”.

Celestia also recently underwent its first major upgrade: Lemongrass, which contains the following consensus layer changes:

• CIP-6: Enforce minimum gas prices for transactions to minimize spam.
• CIP-9: Enable IBC multi-hop to minimize bridging latency and overhead.
• CIP-10: Introduce faster and simpler network upgrade mechanisms for Celestia.
• CIP-14: Introduce Interchain Accounts to enhance interoperability.
• CIP-20: Disable Blobstream module, which has been deprecated in favor of zk-light clients, to simplify network architecture and improve performance.

Last but not least, Celestia just announced that it had raised $100 million in a funding round led by Bain Capital Crypto, with participation from Syncracy Capital, 1kx, Robot Ventures, Placeholder, and more.

Reading between the lines

Evidently, Celestia has been working hard to improve its network fundamentals, and it has even secured a substantial user base. But, coupling the low fees generated by Celestia’s DA service with TIA’s upcoming unlocks, these improved fundamentals are simply not enough for me to flip bullish on TIA.

And going back to the aforementioned funding round, rumors are floating on X stating that it was an OTC deal done a few months back which unlocks in October, and has a breakeven price of $7.50.

If this rumor is indeed true, then Celestia’s announcement of its $100M raise is clearly a surgical and well-timed manipulation tactic engineered to attract a wave of retail investors and pump the price of TIA, only for them to end up as VCs’ exit liquidity.

Still, it should be noted that this is just a rumor, and I am unable to verify the veracity of this claim. What I am sure of, though, is that the best time to buy TIA was in December 2023 when Dymension airdropped to TIA stakers, resulting in airdrop farmers falling over themselves to buy and stake TIA.

While TIA may be down from its highs, I don’t think buying TIA at this comparatively low price is a steal. Even if we were to disregard TIA’s upcoming unlocks and its alleged controversies, the inability to generate meaningful revenue from Celestia’s DA service is not particularly inspiring.

Perhaps, after the passing of the storm that is TIA’s upcoming unlocks, and if Celestia’s fundamentals keep improving to the point where it starts generating more substantial fees, I will revisit my bearish stance on TIA.