In recent months data availability (DA) has become a trending narrative in Web3. Though it extends beyond Ethereum, the now Proof of Stake blockchain sits directly at the center of this topic. As such, this analysis will focus heavily on Ethereum and its role in the evolution of DA.

Last year at this time, gas fees on Ethereum were soaring. Then, L2s on Ethereum emerged and largely solved for the cost-prohibitive nature of L1 execution. In doing so, they created a separate issue with DA.

Though fees on L2s remain drastically lower than what they once were on L1 Ethereum, fees still remain higher on L2s than on many other alternative L1s. Why? It’s all about DA…‍

What is data availability?

Data availability is the guarantee that the block proposer published all transaction data for a block and that the transaction data is available to other network participants. It is something blockchains need to, and will always need to, guarantee. This is especially true for rollups/L2s as nodes on the L1 need to be sure that when a new block is produced, all of the data in that block was actually published to the network. This matters because if a block producer does not release all of the data in a block, it is impossible to detect if there is a malicious transaction hidden within it. If block producers misbehave and there are blocks with invalid transactions, there could be severe consequences for the L2 and its users. Given the necessity of DA, significant attention has been diverted to innovating around it to maximize benefits while simultaneously curtailing costs.

On monolithic chains, the L1 is traditionally responsible for guaranteeing DA. In current scaling solutions on Ethereum, all L2s post call data to L1 Ethereum to achieve DA guarantees. The reason for this is the security offered by Ethereum’s settlement layer. The value of Ethereum staked makes Ethereum the most secure L1 smart contracts network. This makes its DA guarantees exceptionally high. Given that historically DA fees have been inconsequential on Ethereum, little thought has been given to alternatives prior. With L2s, however, the need for iterating upon DA design became apparent.

Focal to considerations in this design space is a singular tradeoff: security vs cost.

Current DA designs each compromise somewhere in the tradeoff (for an explanation on what different DA alternatives look like, refer to this tweet). One alternative which stands out amongst the current DA offerings is Celestia.

Celestia is a modular blockchain that handles only DA and consensus itself. It leaves settlement and execution to other layers resulting in a high degree of optionality.

(see Celestia’s architectural design on the right). A more credibly neutral data availability committee (DAC), Celes- tia provides extra economic guarantees over traditional DACs because it exists as its own chain which serves as a general purpose DA layer. Permissionless and able to slash committee members for misbehaving, Celestia’s light nodes enable this via DA sampling and can quickly halt should a validator become malicious. Utilizing Tendermint Consensus, security around Celestia resembles that of most Cosmos chains. With its own sovereign validator set guaranteeing DA, Celestia’s solution best compares to Ethereum’s in terms of security.

As Celestia provides a viable alternative in terms of security, next to consider is its economics.Today, call data costs ~16 gas/byte to post to Ethereum. This is likely to continue for the foreseeable future being that as long as blockspace is being competed for on the L1, and the L1 is limited with resource pricing constraints, gas costs will impact end users. This is especially true in the case of rollups. Celestia, on the other hand, can grow with the number of nodes. Ethereum is bound by its number of data shards and therefore is met with capacity constraints.

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This allows Celestia to enjoy a cost advantage versus Ethereum that can be sustained with rising demand. Naturally, this makes Celestia a compelling alternative economically as well. Given Celestia’s strength in comparison to Ethereum on both sides of the cost:security tradeoff, it is positioned to carve out its own niche(s). Two clear opportunity areas exist for Celestia: an alternative DA solution to Ethereum and a foundational data availability layer for an ecosystem.

comprising various sovereign rollups, settlement layers, and execution layers: “the Celestia ecosystem.” The first off-chain DA solution whose design effectively competes with on-chain DA, Celestia is important in DA’s evolution.

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Though Celestia appears superior to Ethereum in ways like its cost model maintaining much greater resistance to demand than Ethereum’s, this will most likely not forever be the case. The supply side is what should be observed most closely in this context and it is dual-faceted. Being that the limitation currently driving costs on Ethereum is the scarce nature of a blockchain’s capacity to guarantee data availability, there are two ways to address this issue:

• Increase capacity / scale without adding incremental costs (like what Celestia has done).
• Reduce the amount of data (bytes) needed to be processed to ensure DA.

Should one or both of these occur, Ethereum will enjoy similar economic benefits to Celestia while also providing superior security guarantees. Though subject to change, it is presumed that Ethereum’s security will be superior due to the total value of assets staked on Ethereum’s settlement layer. As we know, more stake = more security. Naturally, this threatens Celestia’s market position, although the necessary changes to achieve this on Ethereum are not straightforward and will likely take years.

EIP-4844 (Proto-Dank Sharding) is Ethereum’s first step towards achieving a reduction in fees attributed to DA. Enabling a new transaction format which posts blobs of data to the L1, data blobs are “cut” after 1 month. This makes them available long enough for L2s to retrieve it but short enough to keep disk use manageable. Blobs not needing to be stored by L1 nodes are then able to be priced cheaper than Calldata, which is stored forever.

This is a major step towards full sharding and up to 100x reductions in gas fees for all rollups. Though the timeline for when full sharding will be enabled is unclear, EIP-4844 provides the following:

• The same transaction format needed in full data sharding
• All of the execution layer logic required for sharding
• All of the execution / consensus cross-verification logic required for full sharding

Reducing costs already and taking a major step closer towards significant reductions, Ethereum’s DA offering could soon challenge Celestia economically.

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With Ethereum being the unquestioned leader in security, it is incentivized to find ways to drive down costs to stay competitive. Due to this, it is expected that solving for the inefficiencies currently driving costs in DA today will render costs nearly non-existent in the long term. Though the cost vs. security tradeoff remains impactful until this occurs, security is poised to remain more impactful for longer. Once costs reach near-zero, other forms of differentiation might take the place of cost. For Celestia, other differentiators like sovereignty, design flexibility, and more should all contribute to its staying power.

Still, it is likely that security will be paramount in the DA space due to its importance. The evolution of data availability is fascinating and innovation has quickly accelerated around it recently. Though Celestia is one viable alternative to Ethereum, others like Polygon Avail, Eigen Layer, and more are also in the works. With security guarantees for each poised to be considered thoroughly by builders, staking remains focal in determining success.