How to understand Celestia as a threat to Ethereum, another Ethereum "killer"?

Original Author: Haotian

Editor's Note: Celestia is one of the pioneers of modular public chains. Celestia takes an unconventional approach by launching Blobstream aimed at the Ethereum ecosystem, continuously penetrating Ethereum, and combined with the Ethereum Layer2 OP Stack, it has initiated one-click chain deployment. With this, Celestia has almost conquered territories, continuously invading the realm of Ethereum Layer2.

How should we understand the threat of @CelestiaOrg to Ethereum? Could it really be an Ethereum killer? In my view, Celestia's invasion will continue in the Layer2 domain, but the outcome of this war will not be a zero-sum game; instead, it will achieve a "win-win" situation. Essentially, this is an inevitability of the highly modular Layer2 market. Why? Next, let me share my thoughts.

If we break down the Ethereum blockchain system, there are two core components:

1) Data Availability;

2) Interoperability.

As for other EVM execution layers and POS consensus layers, while they are also important, when it comes to Rollup Layer2, we focus more on DA and interoperability.

DA corresponds to the validation capability of Ethereum's Validators. If Ethereum participates in DA, the state transition process submitted by Layer2 can be verified by the mainnet Validators to ensure security. If Ethereum's DA is separated, the mainnet calldata and Blob blocks become the bulletin board for Layer2's state transitions, with validity determined by third-party DA consensus. Even if a premeditated "bad debt" is submitted to the mainnet, the mainnet cannot make judgments or intervene.

Interoperability corresponds to the communication and interaction capabilities between Ethereum and other chains, mainly involving the security of asset settlement communication across chains and effective solutions for liquidity interoperability. Currently, there are mainly Restaking projects like @eigenlayer and some middle-layer projects focused on liquidity management.

These liquidity management solutions not only stabilize Ethereum's position as an asset settlement layer but also release Ethereum's overloaded consensus in a multi-chain environment. Crucially, they can export the security consensus capabilities of Ethereum Validators to other chains, opening up new territories for Ethereum's DeFi brand foundation.

As one of the pioneers of modular public chains, Celestia should ideally focus on public chains related to Cosmos IBC, as most chains based on Cosmos IBC emphasize lightweight design, and building a DA layer based on Celestia perfectly fits this.

However, Celestia takes an unconventional route by launching Blobstream aimed at the Ethereum ecosystem as an "external threat," continuously penetrating Ethereum, combined with the internal "disaster" of one-click chain deployment initiated by the Ethereum Layer2 OP Stack. With this, Celestia has almost conquered territories, continuously invading the realm of Ethereum Layer2.

As a Layer2 developer, the only consideration is the tradeoff between DA legitimacy and chain deployment cost.

DA legitimacy is relatively passive in the commercial market; it suits comprehensive Layer2 projects that care more about security consensus issues and have a certain brand foundation and market base. In contrast, some emerging small Layer2 projects, especially those quickly launched based on OP Stack, will try every means to minimize costs.

Therefore, third-party DA solutions like Celestia are naturally a better choice. Although EigenDA also provides Ethereum DA services, it does not reduce the actual costs for project teams developing Layer2.

For developers choosing to take shortcuts in operating Layer2, cost will inevitably be the primary consideration. The largest cost of Layer2 is Ethereum's DA cost, and opting for low-cost third-party DA to hedge against early operational market revenue pressure may be the preferred choice for most smaller developers.

Thus, whether Celestia poses a danger to Ethereum hinges on the future development landscape of Ethereum Layer2. If Layer2 gradually narrows down to comprehensive Layer2 led by the "Four Kings," then DA legitimacy will be the main theme. If Layer2 sees a surge of various Layer2 solutions emerging like mushrooms after rain, then cost considerations will always be a hard truth.

Although there is still the variable of the Cancun upgrade, the trend of Ethereum Layer2 is already quite clear; a large number of Layer2 solutions will inevitably emerge, and the reasons are not hard to understand:

The development of the Four Kings—Arbitrum, Optimism, Starknet, zkSync—has not met expectations, with issues like Sequencer decentralization, the 7-day challenge not landing, Prover system hardware acceleration, EVM compatibility, asset cross-chain escape hatch problems, governance token empowerment issues, and the difficulties of native DeFi development, among others.

It is not an exaggeration to say that the development of Layer2 has left a huge pile of problems, and any one of these issues, when paired with the Stack framework and Celestia DA, could become a powerful development direction with capital narrative potential.

I have mentioned in previous articles that the chaotic situation of Layer2 will truly unfold after the Cancun upgrade, leading the Layer2 market towards "diversified" prosperity. Moreover, OP Stack and ZK Stack are building a more open and inclusive era of Layer3 application chains. At that time, the traditional Ethereum Layer2 framework will become more blurred, and third-party DA solutions like Celestia will become a necessity for modular DA layers.

This is an inevitability of the commercial expansion trend in the Layer2 track and the fundamental reason for Celestia's persistent interest in the Ethereum Layer2 ecosystem.

However, this is not just a threat to Ethereum. As more and more Layer2 adopt third-party DA solutions like Celestia, while Celestia's market position becomes prominent, it will also drive changes in Ethereum Layer2:

1) Comprehensive Layer2 platforms will become the foundation, with liquidity, user base, application ecosystem, etc., occupying the brand high ground, and DA legitimacy will become the core differentiator to ensure their solid position;

2) Personalized emerging Layer2 platforms will become extensions, attracting explorers and treasure hunters with innovation, diverse gameplay, and market opportunities, where flexibility and freedom are their trump cards.

Based on this thinking, Ethereum's core Layer2 will become increasingly solid, and Ethereum's DA position will remain unshaken. Meanwhile, some more flexible Layer2 or Layer3, even if their DA is not on Ethereum, should not forget that as long as they are built on Ethereum based on the Stack framework, they will find it hard to escape the control of interoperability.

At that time, Ethereum, as the asset settlement layer and source of liquidity, will exert a softer liquidity control over these flexible Layer2.

If you don't understand what I mean, just look at the few transactions running on Celestia, which has been hyped to the sky, and you'll understand. While Celestia invades Ethereum, it will gradually lose its "comprehensive chain" attributes (which it never really had) and become a modular DA layer within the Ethereum ecosystem. So what if many Ethereum Layer2 adopt Celestia's DA? As long as the Stack and Rollup frameworks remain unchanged, these Layer2 will have to continuously "pay taxes" to Ethereum.

Compared to the loss of DA legitimacy, the rise of a diversified and prosperous Layer2 and Layer3 market will always make Ethereum the biggest beneficiary.