Podcast Summary
Understanding Data Availability in Web 3: Data Availability (DA) is crucial for web 3 projects like Celestia and Tia, but it's uncertain if it will be profitable or lead to a race to the bottom. DA unlocks possibilities for web 3, and understanding it is essential for navigating the crypto market.
The constrained base layers of Bitcoin and Ethereum have played a significant role in their success as deflationary digital assets, but it's uncertain if this can be replicated with new projects like Celestia and Tia. Data availability (DA), a crucial aspect of these new projects, is valuable because it unlocks possibilities for web 3, but it's unclear if it will be a profitable business model or lead to a race to the bottom. The launch of Celestia and the upcoming EigenDA, along with projects like DBA and Eclipse, highlight the importance of understanding DA and its potential impact on the crypto market. While DA is a complex topic, it's essential for those looking to navigate the world of crypto and web 3. The guests on this episode, John Charbonneau from DBA and Neil Samani from Eclipse, bring valuable insights into the world of DA and the choices that roll up providers and consumers will need to make as the DA universe unfolds.
Exploring the Importance of Data Availability in Web 3 with TOKU and Mantle: TOKU and Mantle, each with unique solutions, highlight the importance of data availability in Web 3. TOKU simplifies token compensation and tax compliance, while Mantle's high-performance network reduces gas fees and volatility through data availability solutions.
Both TOKU and Mantle are playing crucial roles in the Web 3 space, each bringing unique solutions to the table. TOKU focuses on simplifying token compensation and ensuring tax compliance for various stakeholders, while Mantle is a DAO-led layer 2 ecosystem with a high-performance network and a significant treasury to support projects. Data availability is a fundamental aspect of blockchains, ensuring that all nodes have access to the necessary data to validate new states and maintain consensus. Both TOKU and Mantle, in their respective ways, emphasize the importance of data availability. TOKU ensures data availability for token grants and payroll tax calculations, while Mantle's use of data availability solutions like Eigenlayer reduces gas fees and volatility, making their network more stable for applications. John Charbonneau and Neil Somani, experts in their fields, have been at the forefront of exploring the role of data availability in network design. Their projects, DBA and Eclipse, respectively, demonstrate the importance of data availability in the context of decentralized finance and modular blockchain design. The broader conversation around data availability includes questions about its definition, importance, and future role in Web 3. Understanding data availability is essential for navigating the complex world of decentralized technologies, and the ongoing research and development in this area will undoubtedly shape the future of the Web 3 ecosystem.
The Importance of Data Publishing in Blockchains: Blockchains ensure data availability and publication for maintaining consensus and determining the current state of the world. Good data publishing guarantees, like verifiability and liveness, are crucial for large value transfers to prevent data withholding attacks, while standard Internet protocols may suffice for simpler applications.
Blockchains serve as a "truth computer" or a "trusted compute layer" by ensuring the availability and publication of data, which is essential for maintaining consensus and determining the current state of the world. The discussion highlighted the importance of data availability (DA) in blockchains, with a focus on short-term guarantees of being able to download and access data. The term "data publishing" was suggested as a clearer alternative to "data availability," as it accurately reflects the process of making data accessible on the blockchain. The distinction between good and bad DA was introduced, with good DA being verifiable and having better liveness properties, ensuring trust and reliability during the active finalization process. The context or application type plays a significant role in determining the importance of good versus bad DA. For instance, in the context of large value transfers, strong data availability guarantees are crucial to prevent potential data withholding attacks and their associated damages. However, for simpler applications like communications or content sharing, the standard Internet protocols might be sufficient. The discussion also touched upon the challenges of changing the name of "data availability" due to its widespread usage and association in the blockchain community.
Understanding Data Availability in Blockchains: Data availability is crucial in blockchains, but its quality and features vary among layers. Superior network effects, data availability sampling, and efficient verification are essential features to consider when choosing a blockchain solution.
Data availability is a crucial aspect of blockchains, acting as a foundational commodity and input to various systems. While all blockchains offer data availability, the quality and features of this data can significantly differ from one layer to another. For instance, withholding data in a blockchain can result in forks, compromised bridges, or invalid state commitments, leading to safety violations and forks. The stakes are particularly high for high-value use cases like peer-to-peer money transfers. Data availability is not just a commodity but has unique qualitative properties depending on the blockchain's underlying mechanism. However, it's essential to recognize that not all data availability layers are created equal. Some offer superior network effects, data availability sampling, and features that make data verification more accessible and efficient. Ultimately, understanding the differences in data availability among various blockchain layers is essential to appreciate the unique advantages each offers and make informed decisions when choosing a blockchain solution.
DAOs as essential components of blockchain networks: In the short term, having competitive features like data availability sampling and decentralized relays is crucial for DAOs. Long term, these features may become standardized and commoditized, with the cost of data on blockchains trending towards being a commodity.
Decentralized autonomous organizations (DAOs) are becoming essential components of blockchain networks, acting as a commodity and a fundamental baseline for blockchain functionality. In the short term, having features like data availability sampling and decentralized relays is crucial for competitiveness. However, in the long term, these features may become standardized and commoditized, with all DAOs converging towards similar functionality. Ethereum DAOs hold a special status due to the 4th choice rule, which defines rollups' choice of settlement on Ethereum, providing an advantage in terms of safety and liveness. The cost of data on blockchains is trending towards becoming a commodity, but it is not yet at the level of being virtually free. The race towards this theoretical equilibrium continues, with operational costs being a significant factor in the long run.
Cost of DA layers decreasing like other tech costs: Decreasing costs of DA layers will have significant implications for investors and users, potentially making blockchain a commodity, but specific app costs may still exist.
The cost of decentralized applications (DA) in the crypto space is expected to decrease significantly over time, similar to other collapsing tech costs. However, we are currently far from reaching this point, with only a few specialized DA layers like Celestia being in their early stages. This cost decrease will have significant implications for both investors and users. For investors, it raises questions about which DA layers will accrue value and where they fit in the value chain. For users, it means the cost of transacting on blockchains will decrease dramatically in the near and long term future, potentially making blockchain a commodity. However, the cost of using specific applications on top of cheap DA layers may still exist due to premium fees or the value of the shared state. This situation may be compared to the Internet's bandwidth era, where the cost of infrastructure approached 0, leading to an explosion of apps. The key difference is that, unlike the Internet, there are already players like Celestia and Solana positioning themselves to take advantage of the upcoming DA cost decrease.
The cost of data availability plays a significant role in blockchain development: Cheaper data availability enables further experimentation in layer 2 solutions, scaling, and competition in the crypto space, particularly for Ethereum and its layer twos
The cost of data availability (DA) plays a significant role in the development and capabilities of blockchain projects. The choice of using cheaper DA, like Celestia, unlocks new possibilities for applications such as central limit order books and less economical use cases like fully on-chain games and deep networks. Cheaper DA enables further experimentation in layer 2 solutions, making it possible to scale and compete with other crypto projects. This is particularly important for Ethereum and its layer twos, where most users, assets, and interesting state and applications reside. The ability to spin up new blockchains more easily with cheaper DA also opens up new opportunities for development. Overall, the cost of DA is a fundamental constraint that has been limiting the growth and innovation in the blockchain space, and the availability of cheaper DA is unlocking new possibilities and experimentation.
The Balance Between Customizability and Cost in DA Development: The future of DA development lies in the balance between customizability and cost, with cheaper alternatives like Solana offering limitations, and the decision of which DA layer to use increasingly being made by entrepreneurs and businesses.
The future of decentralized applications (DA) development lies in the balance between customizability and cost. While spinning up your own chain offers greater control, cheaper alternatives like Solana come with limitations. As the cost of DA development continues to decrease, the total aggregate economic activity in the crypto space is expected to scale up significantly. The challenge lies in determining the right order of magnitude for this terminal end state. Some argue that a smaller scale is sufficient, while others believe in an infinite, uncapped system. The comparison can be drawn to the internet's bandwidth, where there is always a need for more. In the crypto market, the decision of which DA layer to use is increasingly being made by entrepreneurs and businesses rather than users. Celestia was chosen by Eclipse due to its status as the only live, verifiable DA other than Ethereum L1, and the proximity of its surrounding infrastructure. However, the ultimate choice will be determined by Eclipse's governance. At some point, a migration to Ethereum might be considered due to its advantages, such as a larger ecosystem and more established infrastructure. The future of DA development is uncertain, but the potential for infinite scaling and continuous addition of new systems is a compelling prospect.
Directly connected to Ethereum's decentralized network: The speaker values the trust and security of being directly connected to Ethereum's network, and sees potential cost reductions and increased TPS as compelling reasons to use Ethereum's native data availability layer
The speaker values the trustlessness and security of being directly connected to Ethereum's decentralized network, and the simplification of having consensus and data availability in the same place. The speaker also mentioned that the cost reduction coming with Ethereum's implementation of proto dank sharding makes Ethereum's native data availability layer more compelling, potentially reaching up to 10,000 transactions per second (TPS) in its full form. However, the speaker also acknowledged that there might be increased competition for Ethereum's blob space, which could potentially drive up costs. The speaker also mentioned that they are aware of the general sentiment within the Ethereum Foundation that the cost for even protoDank sharding might not be as low as expected, and that their Eclipse nodes might consume a significant portion of the available blob space. Overall, the speaker sees the benefits of being directly connected to Ethereum outweighing the potential costs, but they are keeping an eye on the cost developments and the potential competition for blob space.
Competition between Ethereum and other solutions: Ethereum's progress might not meet market demands, and other solutions like Celestia, Eigendas, and Avail may outpace Ethereum due to their ability to adapt quickly. However, Ethereum could regain ground if proving costs decrease significantly.
The crypto industry may not reach the economic activity of 10,000 estimated by some, and Ethereum, in particular, will need significant upgrades like full dang sharding to remain competitive. Ethereum's current progress might not meet market demands, and other layer 1 and layer 2 solutions like Celestia, Eigendas, and Avail might outpace Ethereum in the long term due to their ability to adapt more quickly. The introduction of proto dank sharding is a step forward, but it will not be enough to move the needle significantly. The competition between Ethereum and other solutions will depend on factors like cost, ease of use, and the ability to handle large amounts of data. The trend is likely to continue with more chains moving to these alternatives, but if proving costs decrease significantly, Ethereum could become more economical and regain some ground. Ultimately, the market will determine which solution best fits the needs of various use cases.
Ethereum's high proving costs and potential solutions: Ethereum's high proving costs are a challenge, but improvements to general-purpose provers and Ethereum scaling solutions like Arbitrum are addressing the issue, potentially leading to cheaper alternatives for some projects while maintaining Ethereum's security and decentralization.
Ethereum's high proving costs are a significant challenge, leading to the exploration of alternative solutions like ZK coprocessors or provers. Proving is currently expensive on Ethereum, with each cycle of compute requiring approximately 100,000 to 1,000,000 cycles for every regular program cycle. This issue is not Ethereum-specific, but rather a result of the overall expense of proving. To address this, existing infrastructure like general-purpose provers is being optimized, with the expectation that the overhead for proving will eventually reduce by an order of 1,000. Arbitrum, a leading Ethereum scaling solution, is already utilizing this approach with its general-purpose prover. While Ethereum-specific ZK provers have been used in the past, the future lies in relying on existing infrastructure that will naturally improve as hardware gets better. This shift could potentially result in a crossroads where some projects continue to use Ethereum DA while others migrate to cheaper alternatives like Optimism, Arbitrum, and Polygon. Regardless, all these technologies are leveraging the security and decentralization of Ethereum, offering secure, fast, cheap, and friction-free Web 3 development experiences.
Factors influencing the choice between Ethereum DA and alternatives: Brand alignment, cost reduction, and security considerations play a role in deciding between Ethereum's data availability and alternative options. Ethereum-aligned projects prioritize brand and security, while cost-focused projects use alternative DAs.
As the blockchain industry continues to evolve, the choice between using Ethereum's data availability (DA) or alternative DAs will depend on various factors such as brand alignment, cost reduction, and security considerations. Ethereum-aligned projects like Optimism, Arbitrum, and Polygon, which use Ethereum DA, prioritize brand and security, while projects like Lyra and Evo, which use Celestia DA, focus on reducing costs. Over time, reliable and trustworthy operators will become normalized, making it easier for users to understand and trust the underlying technology. The trend is towards convergence, with Celestia DA potentially joining the ranks of normalized and trusted DAs. However, it's important to note that new and untested DAs may face challenges gaining user trust and adoption.
Using the same Data Availability (DA) layer across multiple rollups: Sharing a DA layer can lead to interoperability and network effects, but requires an off-chain builder market and consensus from validators for larger blocks.
Using the same Data Availability (DA) layer across multiple rollups can lead to network effects and interoperability benefits. This is because a shared DA layer can act as a shared sequencer, providing quick confirmations and helping to fix the fragmentation problem across different rollups. However, for this to work effectively, there needs to be an off-chain builder market that facilitates interoperability between rollups. Ethereum itself could potentially act as a shared sequencer for some rollups, but this would require someone running a full node for all rollups using the same sequencer and providing economic security to ensure atomicity of transactions. This complexity may limit the number of rollups that can be supported with this approach. Another network effect for DA layers is that as more people and organizations consume DA layers, there is better coverage of blocks, which can allow for larger blocks and lower costs. However, increasing block size requires consensus from the DA layer's governance, and the validators or chain runners may not have an incentive to do so if it increases their hardware requirements without a corresponding upside. Overall, the use of shared DA layers can lead to benefits such as interoperability and network effects, but there are also complexities that need to be addressed to make it work effectively.
Decentralized Autonomous Networks: Asset and State Create Stickiness: People prefer reliable and familiar networks like Ethereum due to asset and state stickiness, not future cash flows. Celestia's value is based on its asset and long-term potential, not cash flows.
While there may be theoretical benefits to having everyone use the same decentralized autonomous (DA) layer for better scaling and interoperability, in practice, people are more likely to stay with reliable and familiar operators like Ethereum. The asset and state within these networks are what create the most stickiness, and the valuation of these networks may not be based on future cash flows but rather the value of the asset itself. The Celestia network, for example, may not have a meaningful valuation based on future cash flows, but rather on the value of the asset and its ability to derive value in some form over the long run. The idea of a DA layer selling DA is different from Ethereum selling blocks, and there is a cash flow analysis that could be done for someone who sells DA. However, the stickiness is mainly due to the reliability, scalability, cheapness, and safety of the network, and the asset and state within it. The idea of a DA layer becoming "money" like Bitcoin or Ethereum is rare and may depend on the constraints of the base layer, making it deflationary and in high demand.
Economics of Decentralized Autonomous Businesses: Operational costs decrease, capital costs vary, congestion costs decrease, economic security vs total welfare, optimal pricing a function of economic theories
The economics of Decentralized Autonomous (DA) businesses are primarily driven by operational costs, capital costs, and congestion. Operational costs refer to the expenses of running the network, which are expected to decrease over time. Capital costs involve the return on investment for those staking large sums of money in the network, and these costs may vary for different assets. Congestion costs, which are currently a significant factor in Ethereum's pricing, are expected to decrease as more networks and layers become available. The prioritization of economic security in these systems may also change over time, leading to cheaper and more accessible networks. Ultimately, the optimal pricing for DA businesses is a function of various economic theories, and the focus may shift from maximizing economic security to maximizing total welfare.
Balancing economic incentives and non-economic use cases in DA businesses: The value of decentralized autonomous businesses is currently based on market sentiment and mindshare, but could potentially be justified through discounted cash flow analysis if they provide significant value as service providers in the crypto ecosystem. Potential scale impacts valuation, with significant growth potential justifying current levels.
The economics of decentralized autonomous (DA) businesses and their associated layers, such as Celestia and EigenDA, are complex due to the need to balance economic incentives with the desire to support various non-economic use cases. The value of these networks is currently determined largely by market sentiment and mindshare, but could potentially be justified through discounted cash flow (DCF) analysis if they can provide significant value as service providers in the crypto ecosystem. The potential scale of these systems, which could range from modest to massive, greatly impacts their potential valuation. While it's uncertain whether all of these projects will reach enormous scales, the potential for significant growth exists, making the valuations justifiable even at their current levels.
Long-term potential of Celestia and Tia for significant cash flow and monetary premium status: Speakers believe certain crypto projects, like Celestia and Tia, could generate substantial cash flow and potentially achieve monetary premium status due to network effects and large user bases. However, it's currently uncertain and high inflation rates don't align with this vision.
The speakers in this discussion believe that there is a strong argument for the long-term potential of certain crypto projects, like Celestia and Tia, to generate significant cash flow and potentially even achieve monetary premium status similar to Bitcoin and Ethereum. They suggest that these projects could become the hubs of staking in their respective ecosystems, leading to substantial network effects and a large user base. While it's challenging to accurately price these assets based on discounted cash flow models, the speakers believe that it's likely that at least some other crypto assets will join Bitcoin and Ethereum in achieving monetary consideration in the future. Celestia is seen as particularly well-positioned for this due to its unique architecture and potential role as a gas token in various ecosystems. However, it's important to note that we're currently far from this bull case scenario, and the high inflation rates of some of these assets don't currently align with this vision.
Potential of Celestia and similar projects to become money-like assets: Celestia and similar projects have potential to become significant players in crypto space but still far behind Bitcoin and Ethereum in terms of ownership distribution and monetary properties. If they reach massive scale, they could potentially become money-like assets with unique brand and monetary premiums.
While projects like Celestia have potential to become significant players in the crypto space, they are currently far behind Bitcoin and Ethereum in terms of ownership distribution and monetary properties. The ownership of these projects is still largely held by a small number of entities, and their monetary properties are uncertain. However, if Celestia and similar projects are able to reach massive scale, they could potentially become money-like assets. The brand and monetary premium of Celestia could differ significantly from that of Ethereum, especially if Celestia becomes the central network for data availability for a large number of roll ups. In such a scenario, Celestia and Ethereum's visions for the future of crypto would overlap, and Celestia's brand and governance power could lead to a monetary premium for the Celestia asset. The value of Celestia and Ethereum in this scenario would depend on the extent to which Celestia is used for scaling Ethereum roll ups versus creating its own native ecosystems. Overall, the potential for Celestia and similar projects to become money-like assets is promising, but they have a long way to go before they can match the qualities of Bitcoin and Ethereum in this regard.
The path to monetary premiums for DA involves distribution, hardening of monetary policy, and a credible neutral narrative: Two DAs, Celestia and EigenDA, are expected to come online this year, but cost difference may not matter significantly in the long run. Success depends on offering significant improvements beyond cost.
The path to achieving monetary premiums for decentralized applications (DA) is a long and complex process. It involves distribution, hardening of monetary policy, and the development of a credible neutral narrative. Two examples of DAs, Celestia and EigenDA, are expected to come online this year, but investors are still looking for a compelling reason to choose one over the other, especially when considering cost. The cost difference may not matter significantly once we reach very low costs. The main concern is whether Celestia will become expensive due to high demand and if that happens, other DAs may gain traction. From a builder and buyer perspective, EigenDA may have some novel angles, but it's still less differentiated than Ethereum native DAs. Avail, on the other hand, offers a marginal improvement in data availability sampling but is expensive to generate the CK proof. Overall, the success of DAs and crypto apps depends on their ability to offer significant improvements beyond cost.
Igindia's IgMDA and Solana: Comparing DA Layer Solutions: Igindia's IgMDA offers advanced token staking models and DA bandwidth reservation, setting it apart from Solana's high scalability but lack of verifiability and different North Star from Ethereum. Ethereum's DA scaling remains a question, with researchers exploring interim steps and potential blockspace financialization as possibilities.
Igindia's IgMDA has the potential to differentiate itself from other DA layer solutions through features like advanced token staking models and the ability to reserve DA bandwidth ahead of time. While Solana is highly scalable for data availability, its lack of verifiability and different North Star compared to Ethereum make it less suitable for implementing certain DA features. A significant question for the industry regarding Ethereum's DA post EIP 444 and before the potential future of dank sharding remains, with researchers exploring potential interim steps for scaling Ethereum's DA in a shorter time horizon. Another intriguing question is the development of blockspace financialization or celestial block financialization, which could hedge against blockspace pricing and has been a topic of discussion for a long time.
Exploring Data Publishing in Crypto with Asymmetric Pricing and Blob Market Proposers: Asymmetric pricing in data publishing can be risky, but involving blob market proposers could offer physical delivery as a potential solution. Crypto's inherent risks make it an exciting frontier for those willing to explore and understand the complexities of data publishing.
The asymmetric pricing in data publishing, which can vary wildly, makes it challenging for anyone to absorb the risk. However, involving blob market proposers could potentially offer physical delivery as a solution. This is an area of ongoing research. Crypto, including data publishing, comes with inherent risks, but it's an exciting frontier for those willing to embark on the journey. The Bankless nation encourages exploration and understanding of this complex and evolving space. While there is potential for loss, the rewards could be significant. Thanks for tuning in to the discussion on data publishing in the crypto world.
