Since the early days of the crypto industry, researchers and blockchain developers have been all too familiar with the blockchain trilemma of scalability, security and decentralization. The trilemma posits that between these three properties, a blockchain could only choose two, and had to forgo one of the core blockchain properties. In the case of Ethereum, Ethereum prioritizes decentralization and security over scalability, leading to the scalability issues which the Ethereum Foundation and wider community has been working to solve over the recent years.
The source of the blockchain trilemma is largely attributed to the monolithic structures of the traditional blockchain. In most blockchains, all of the core functions of a blockchain: execution, settlement, consensus and data availability, are handled by a single chain. However, with a single chain handling all functions, this led to the emergence of bottlenecks when chain usage surged.
Modular blockchains proposed more efficient scaling via the separation of one or more functions of a blockchain into its own layer. These modular layers are customizable and specialized to the specific function assigned to them, creating a more robust and flexible system, as opposed to the traditional monolithic design.
The modular design has gained significant traction, especially with Ethereum’s rollups, such as Optimism or Arbitrum, which abstract the execution function to a separate layer, while Ethereum handles the rest.
But where does Celestia fit into all of this?
Celestia positions itself to handle the Data Availability and Consensus functions of the modular stack, enabling other projects and chains to build on top of its technology.
What Is Data Availability?
To understand Celestia, one must first understand data availability, which refers to the confidence that the data required to verify a block is available to all network participants. For Ethereum layer-1, full nodes can download a copy of all data in a block, and a block with missing data would be discarded.
On the surface, the solution seems simple. Just get all of the nodes to download all of the data from the blockchain. However, for modular blockchains, layer-2 rollups or light clients, the data availability problem refers to the scenario in which summarized transaction data that is being added to the blockchain really represents a set of valid transactions, without requiring all nodes to download all data. If a node is unable to tell if all data in the new block has been published to the chain by the block producer, a malicious transaction could be hidden in a block and propagated to the network.
As such, the alternative is an ingenious solution devised in a research paper by none other than Ethereum co-founder Vitalik Buterin and Celestia Labs co-founder Mustafa Al-Bassam. Their solution was data availability proofs, which essentially proves to a high probability that all data has been published to the network, but using only a small portion of the block. Data availability proofs are the foundation of Celestia’s technology.
How Does Celestia Work?
Data availability proofs are built on a technique known as erasure coding, which takes the current block data and expands it. For example, a 1MB block can be expanded to 2MB of data. The extra space in this block is filled with erasure code, which in this case, allows the entire block to be recovered as long as 50% of it is available. This means that if a malicious block producer wishes to omit a specific portion of the block, they will have to omit 50% of the block since any specific portion will be recoverable as long as 50% of the data is available.
With this in mind, nodes are able to request random small portions of the block to verify if the data is available. If they fail to receive the requested portion, they can conclude that their requested portion is part of the 50% omitted by the block producer. More importantly, by taking multiple random samples, the confidence that all the data has been published can be increased from 50% with one request all the way to more than 99% certainty with just seven requests.
Through data availability proofs, Celestia is able to ensure data availability for any chain that builds on top of Celestia. With this data, validators can agree on and order the transactions received, thereby providing consensus. Unlike most other chains, the validators are not concerned if the transactions are valid or not though. The rollups built on Celestia handle that independently via their own nodes.
Source: Celestia Docs
Beyond handling the validity of transactions, each rollup on Celestia is able to build their own virtual environment and customize the chain to fit their needs. Due to its modular nature, any language or virtual machine can be used to build on top of Celestia, although at the moment, the supported languages include Solidity, Rust and Golang.
While Celestia is still in its testnet, the team has been working with several teams to produce the next generation of modular blockchains.
Rollup-as-a-Service (RaaS) projects such as Caldera, Conduit and Eclipse have begun work to enable Celestia as a data availability layer for rollups deployed using their services. In fact, Celestia has also collaborated with the Optimism Labs team to take things one step further, enabling rollups built on the Optimism stack, including rollups from Caldera and Conduit, to use any layer as their data availability layer, be it Celestia, Ethereum or even Bitcoin.
Finally, Celestia’s co-founder, John Adler, is also a co-founder at Fuel Labs, a team working on the fastest modular execution layer. Fuel is still in its testnet and will be expected to launch later this year as well.
What’s Next for Celestia?
Today, Celestia is currently in the Mocha testnet and is building towards a mainnet launch in Q3 2023. They have also recently concluded a nine-week incentivized testnet known as “The Blockspace Race”, in which 1,000 applicants were selected as validators, bridge nodes, full storage nodes and light nodes.
Celestia is backed by some of the largest names in the space, including Bain Capital Crypto and Polychain Capital, which led their combined Series A and B fund raise in October 2022, raising $55 million for the project at a $1 billion valuation. Other notable investors in the round included Coinbase Ventures, Delphi Digital, Placeholder, Jump Crypto and Galaxy, among others.
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