Bankless - 211 - Is DA a Good Business Model? - Neel Somani & Jon Charbonneau

Episode Date: February 26, 2024

What’s Data Availability (DA) and what’s its Business Model? In this episode we’re welcomed by Jon Charbonneau, researcher-investor at DBA and Neel Somani, CEO of Eclipse. We unpack everything Data Availability from what it unlocks to its economics. We also get into the DA Market covering participants like Celestia and EigenDA. ------ 📣SUI | Register for Sui Basecamp https://bankless.cc/sui-basecamp  ------ 🎧 Listen On Your Favorite Podcast Player:  https://bankless.cc/Podcast  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2    ⁠  🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo    🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku    🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle    ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum   💸 CRYPTO TAX CALCULATOR | USE CODE BANK30 https://bankless.cc/CTC  ------ TIMESTAMPS 00:00 Intro 7:27 What is DA? 16:45 Is DA a Commodity? 23:40 DA Costs 30:23 What DA Unlocks 37:41 The DA Market 1:01:40 Network Effects 1:07:56 DA Economics 1:14:50 DA Value Capture 1:20:23 Celestia Monetary Premium 1:29:10 What’s Next for DA 1:34:29 Solana DA 1:36:01 Closing Thoughts ------ RESOURCES Jon Charbonneau https://twitter.com/jon_charb  Neel Somani https://twitter.com/neelsalami  Celestia https://celestia.org/   EigenDA https://docs.eigenlayer.xyz/eigenda/overview  ------ Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures 

I just think it's hard to become money. We only know two digital assets that I've ever done at Bitcoin, ETH. And I suspect that part of that is because of the fact that Eith and Bitcoin are constrained at the base layer. As a result, it forces this asymmetry of demand or incongruity of demand with respect to supply, and it forces it to be deflationary. So I don't know if it's possible for that to ever happen again. It seems more like a freak accident of history, where if you tried to deploy a constrained

base layer today, people would be like, why would I use that over Celestia, Solana, all the other guys. But that basically means that only Ethan Bitcoin will ever be money. Welcome to bankless, where we explore the frontier of internet money and internet finance. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Celestia just launched and is already worth over $20 billion at the time of recording. That's the 11th most valuable crypto asset. We also have eigenDA. That's coming out soon. And today, we're taking an in-depth look, an exploration of data availability. It's also known as DA, also known as data publishing. If all of that sounds like a lot, don't worry,

we spend the first 10 minutes of the episode actually explaining it and why it is so important to understanding block space and your broader crypto journey. So the topics today, number one, data availability. What is it? Why does it matter? Number two, what does cheap DA unlock for Web3? Number three, is it even a good business model? How valuable is it to be a DA provider? Number four, we get right into the heart. Tia is worth $20 billion. Why? And finally, the broader question, is D.A. actually a race to the bottom? Is this a race for a commodity? What does the future have in store for the entire market? There has been this growing hype and excitement inside of the Celessi ecosystem, now being packaged up in the Tia is modular money, a meme. This is partly an exploration into that

subject matter, maybe a prep for a conversation I'm going to have with Nick White from Celestia exploring that meme, unpacking that meme specifically. This, I think, is more of a third-party bird's-eye view exploration of the nature of DA. What is this business model? What are the margins like? What are the cash flows like? Why is DA valuable? What is the long-term future of DA? Why will DA consumers like roll-ups and other chains and other ecosystems, what choices will they make and why will they make them? I think the content in this episode is going to illustrate some of the decision trees that many roll-up providers, DA purchasers, are going to have to make in the coming years as this whole DA universe unfolds. We also, of course, get into conversations around

proto-dank-sharding and full-dank-sharding, and what is this difference between Ethereum-Native DA for Ethereum-Native roll-ups versus Alt-DA? There is a big choice. between choosing, electing to consume Ethereum DA versus non-Etherium DA, what is the nature of that choice? The two guests that we have on the episode today, John Sharbonneau from DBA. People will know, John. He writes insanely depth research articles all about different subjects inside of the Ethereum and broader crypto world. And also Neil Salmani from Eclipse. We've had on Neil once before. He is the guy building the Salonav Virtual Machine as a layer two on Ethereum consuming Celestia for DA. So both of these guys know a thing or two about the world of DA and the choices around that ecosystem.

As a disclaimer, before you get into the episode, we are advisors for EigenLayer, the producers of EigenDA, which was brought up a handful of times throughout this episode. And also, John's investment firm DBA is an investor in Eclipse, who the other guest, Neil, is the CEO of? So let's go ahead and get right into the episode, Is D.A. A good business model. But first, I want to talk about some of these fantastic sponsors that make this show possible, especially Crackett, our preferred exchange for crypto in 2024. If you'd not have an account with Cracken, consider clicking the links in the show notes getting started with Cracken today.

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all built on top of Mantle's first core product, the Mantle Network, a brand new high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution, instead of the expensive Ethereum layer 1. Not only does this reduce Mantle network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle treasury is one of the biggest Dow-owned treasuries,

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decentralize Mantle. If you want to get started working with the first Dow-led layer-2 ecosystem, check out Mantle at mantel.xy-Z and follow them on Twitter at Zerox Mantle. Bankless Nation, I'm so excited to introduce you to John Charbonneau, a researcher investor at DBA. John is known for writing some of the longest and deepest research pieces out there, exploring the frontiers of all of the leading ecosystems that we have in crypto-Etherium, Celestia, Solana, wherever there are interesting research topics. John is out there sifting for gold.

John, welcome back to Bankless. How's it going? Good to be on again. Neil Soleini is the CEO of Eclipse, a project of bringing the SVM to an Ethereum layer two. Eclipse uses Ethereum for settlement, Solana VM for execution, Celestia for data availability, and risk zero for proof verification. And Neil, like John, has been on the forefront of the modular design space. And if you couldn't tell from how Eclipse is constructed, he has a thing or two to teach us about the role that data availability has to play in the world of network design. Neil, also welcome back to Bankless.

Thanks for having me, guys. So there is a broader conversation, I think, going on right now about more or less what the hell is DA, what the hell is data availability, and not just from a technical perspective, which we will also just answer that 101 question, but also qualitatively, what does it mean to have good DA? What does it mean to have bad DA? Is DA a commodity? What is the future of DA? Is it the bandwidth of Web3? What is its future role and trajectory as the future of DA expands? But in order to really just nail down the 101s,

I want to just define data availability. It's a weird term. It's one of these weird terms that the crypto industry comes up with. Normies will hear it and they're like, this is whatever podcast I'm listening to is not for me. Maybe John, you can start by kind of laying down some foundation. What is DA? How is it a part of just blockchain?

and why is it important? Sure. Yeah, one of the many unfortunately named things in blockchain, which we've kind of realized after a couple of years still isn't super clear. So, I mean, it's kind of helpful to start with the basic idea of like,

what is a blockchain in the first place? It's like some way for us to agree on some form of shared state and like we can update that thing and then we agree on the new shared state of the world. So like fundamentally what you want to have there is everyone knows what the state of the world is and then like knows what it's correct.

And kind of fundamentally to do that, you both need to be able to like verify that this like new state that you've been told is correct and also just to like have all the data there in the first place just to know that and understand what it is. So what you should also realize from that is like we always talk about it in the roll up context for the most part, but fundamentally every blockchain ensures data availability, like that is just a fundamental guarantee of them. Rollups just kind of highlight it and that we kind of like strip it out and think about it separately, which is why we've just always kind of like taken it for granted that every blockchain

ensures data availability by default of full nodes just download all the data. And If all the data is there, then you know that the data is available. If the data is missing, then you shouldn't sign off on that block. And that's like generally how any traditional blockcham at work, whether it's Solana, Bitcoin, Ethereum, et cetera. For roll-ups, like the area where it gets highlighted and we see it differently is they are posting their data to another chain, to a chain like Ethereum, and you will see data availability.

You need it, for example, like the clearest example is for optimistic roll-ups. You know, you can't make a fraud proof to show that like some state transition was invalid if you don't have the data available. So while it's something that we're not. we kind of like highlight and see differently in the roll-up world that is just fundamentally a guarantee that like any blockchain needs to have is, hey, if we're all going to agree on what like the state of the world is and everything about it, you need to know what the data is. So it's just like a very fundamental guarantee for any blockchain. So John, this is a core fundamental guarantee of

blockchains. What do they do? They tell you whether the state of the world is true or not, right? Okay. So and then we have in kind of these modules, sort of the, what we've talked about is the consensus layer, the data availability layer, and then the execution layer. One framing of this that I've had is like the consensus layer tells us like what's just happened or like what's true. I think that like that like that. And the DA layer is like what's happened in the recent past. It's kind of like there's some history sort of archive associated with it. Tell me if that framing works for you or how you modify that in terms of what we're actually concretely talking about here. So it's not so much the history. And this is part of the reason why I would say data availability was

a kind of unfortunate name in hindsight because it does sound like that. But we're really referring to just a very short-term guarantee of I am able to download this data and I know that it's available. It's not a guarantee that you can go get the data from five years ago that Ethereum had or anything like that. That kind of historical storage requirement is a little different. John, Dankrad has called it data publishing. Yes. Do you like that a little bit better? So I definitely do think it is clearer.

A lot of the other data availability people are also in favor of Mustafa and Celestia. I think they're generally in favor of it. I think it is just so hard to change the name of it at this point to something. that is probably a little bit better, but it's just been memed into this gigantic thing over time. But that is a clearer way to think of it. And that is actually how the idea was kind of described in the first place, like back in Bitcoin world, basically is this. When we say data publishing is maybe clear, because I guess that's what, in fact, we are doing. When I think most normal people, they hear the word publishing, they think about it in a non-blockchain

context. So they think about, like, publishing to the web, or I'm publishing my blog, where I'm publishing this podcast to my RSS feed, right? But when we're talking about data publishing or aka data availability, we'll use those terms interchangeably through the rest of this episode. We're talking about publishing that data to the blockchain, right? So, and again, what do blockchains do? It's sort of a truth computer for us. It's a truth engine.

It's a trusted compute layer. So that's what we mean in this context of data publishing, yes? Yeah. And that is a helpful way to think of it. Yeah, you could also publish to the internet. And that would be some form of data publication. It's just very bad DA as opposed to a blockchain, which is the gold standard. Okay, bad DA.

Bad DA. Can we like unpack that a little bit? Why is that bad DA? And can you like frame it up as like, okay, in crypto, did we invent good DA? So Neil, what did you mean by bad DA? And then maybe you can also go into what is good DA. So to me, good DA is something that's one, verifiable. So anyone could determine whether DA was performed properly and whether the data was actually published.

and second, it has better liveness properties, meaning that on the internet, theoretically, whatever web server you publish that too, they can refuse to serve you that block. And that's okay for archival data just because you don't actually need that to determine the Fork Choice Rule and to determine the current state of the chain, as John was pointing out, once you've already finalized a particular tip or a particular history. But for good DA, it's probably better to optimize on good DA for things like when you're in the active process of finalization. So, Neil, when you say good versus bad, right, we're starting to add some subjectivity to this, I think, and like maybe the question is like, good for what or bad for what? Because I think the way I publish, you know, my newsletter is probably fine for the purposes of a newsletter. It's just content that I'm trying to. I don't need sort of the trust guarantees of a blockchain. But maybe you might argue is bad for use cases like, let's say, transferring millions of dollars, large amounts of value. So with what kind of kind of

or what types of apps are you judging DA through this lens of good versus bad? Is it basically internet of value types of apps? You need stronger DA guarantees, whereas like just communications, regular old internet, copy paste, JPEG type apps, it's fine to just use the protocol layer of the internet. Tell me about that. I think it's more about what's the threat if data were to be withheld. And sometimes that's a more meaningful way to think about DA in the context of a data withholding attack, meaning if someone didn't give you this data, what's the worst damage they could cause? And for example, for a blockchain, once something is already finalized, if they withheld historical data, that might mean it's harder to bootstrap a new full node, and you can't replay history

from the beginning of time. But at the end of the day, you know that there was some safety guarantee given by the fact that the whole quorum voted off on something and you had consensus at some point. Whereas if something has not even been finalized in someone without data, then you could actually have forks, you could have safety violation. and then it's much more meaningful to have good DA in those circumstances. So what can happen if the data is withheld? I guess the stakes are higher with high value use cases, like actual peer-to-peer money transfers, that sort of thing?

So it depends on the blockchain. So for an L-1, if you withhold a data, then the blockchain would literally fork. And then you'd have two sets of participants, some which have seen the blocks and some which have not. And then it depends on who you're connected to in terms of what state you're going to be receiving. But if you're an L2, then that means that the Ethereum Bridge could literally be compromised in the case of an optimistic roll-off, where the executor could publish an invalid state route.

And then theoretically, if the block were withheld, then no one would be able to wipe that invalid state commitment and would eventually be finalized. So it somewhat depends on what the blockchain construction is to determine what's the worst-case outcome of a data withholding attack. Okay, John, I'm just mining for data here. Do you have anything else to add to just explaining data publishing and data availability? ability to Normies. What else would you add to kind of tie us off? And then we'll get into the deeper subjects here. Yeah, I think we covered it well there. I would just finish it with like that simple mental model and description of publication probably is the right one for most people to think of it in the same way that, you know, you can publish something to any website. And based off of that,

we can have some reasonable assumption that like everyone saw that data. And if it was there for long enough, everyone should have been able to download it. But it's not a guarantee that like if you publish something that, you know, a year later, the website, you know, has taken it down or something else. But your data was published. And it's just a matter of like that strength of guarantee and that everyone saw it and then we could all verify that together. I actually do really like bringing in the Web 2 database conversation here just as a frame of reference where we have like our censorable substack or like our bankless YouTube that was actually taken down one time and deplatformed. Our data was withheld from us. And this has caused issues in like the Web 2 space. Like we call it

de-platforming. And then when you apply a new technology called a Blueprintforming, and then when you apply a new technology called a blockchain that introduces property rights and settlement guarantees. Withholding data, it's a similar problem, but now we're talking about that data was actually your money, like not just your YouTube videos. And so maybe that can help listeners come in and reframe this conversation for data availability. John, talking about it from an economics standpoint, data availability is a commodity. All blockchains have them, just like you said, It's a core part of every blockchain. If you are a blockchain, you have data availability.

Your blockchain has qualitative properties. Therefore, the data availability of your blockchain also has qualitative properties. Bitcoin is data availability with a proof of work mechanism. Ethereum is proof of stake with Air Tuesday. How, but like data availability? It's a commodity. Like, it's a resource. How do we categorize this thing?

Yeah. I think that's a good way to categorize it, is that it is effectively just kind of a base commodity that is kind of an input to most of these systems. the way that most people will use that term then is to kind of try to make the point of, oh, it's a commodity, like these different things are all the same, whether I use Slestia or Avail or I can DA or Ethereum, whatever, that it's just a commodity. You know, they're all kind of the same thing. That is the part that I would, in practice, at least, kind of disagree with and push back on,

is that, like, I would agree that in the limit of, like, if we have all these perfect systems and everyone is like, yeah, there's a bunch of perfect DA layers that have all the guarantees you want, then, yeah, it should be, like, relatively fungible between them. practical reality is there is a very large difference, I would say, in the quality of block space that is being provided by one DA layer versus another one today. Because otherwise, you can take this to the extreme of, we're actually back to the web two, of, like, posting your data online, you know, is data availability in some sense. Like, why don't we just put all of this on ADWBS? Like, why do we need a blockchain in the first place? And so there very much is like this kind of spectrum of like there is different, I would say, qualities of block space.

And there's different features that come along with them of whether it's, you know, certain network effects of being in the same ecosystem together. Others lend themselves much better data availability sampling, which means that people can more easily verify it. So are these kind of like different features that definitely do differentiate in practice, like one DA layer versus another. In the short to medium term, I think that's true.

I think in the long term, pretty much all these folks like Avail, Celestia, IG&DA, the features like data ability sampling and having really good decentralized relairs will essentially become table stakes. Because if they don't have those baseline features, even things like soft confirmations to better support based roll-ups, these constructions will become so popular that if you don't offer the features that are conducive to those constructions, you'll just be non-competitive.

So that's kind of how I'm thinking about it in the long term. And then Ethereum DA obviously is in a category of its own, assuming you're using Ethereum for the Fork Choice Rule, just given that now your trust minimized with respect to Ethereum. Okay, so there's so many things we just brought up there. So David's base question is, is DA a commodity? And your answer to that, both of you, I think you guys would say, yes, it's a commodity.

And bankless listeners have heard us talk about block space as being sort of the core commodity that this entire revolution has created. Like the thing that we made was block space. And is it accurate to say, John, that DA is just like one component of block space? And in fact, inside Ethereum on kind of like main net, before it sort of modularized and it sliced out DA is a separate part. It basically included DA as part of that block space. And just DA is just one component of the main net.

the larger superset commodity, which is block space. Is that correct? Yeah, I would agree with that. Yeah, really data availability and then consensus over that is kind of like the fundamental baseline of what any blockchain is like looking to, that you need to have and to provide for them. Okay. And then, John, you were making the argument that not all DA is the same. So like some DA commodities have different properties than other commodities. But Neil, you were just saying, well, well, actually, that's true right now, but over time they'll sort of fuse together. They'll become kind of like a baseline. This is the set of functionality and features that all DA has, and it will, I guess maybe, in other word, is commodify,

right? They'll all become kind of similar to one another. But then you made an exception there, Neil, and you said, but Ethereum DA might be in a category of its own. Can you say more about that? Like, why is Ethereum DA have any special status? So it's mostly because of the fact that roll-ups typically define their Fork Choice rule on Ethereum. And this is actually something that we were chatting about with the Celestia team just recently. They said, why don't you just define your Fork's choice rule directly on Celestia in some way. And the reason for using Ethereum is that now, assuming you also offer forced inclusion on Ethereum, then theoretically your roll-up could operate, even if Celestia goes down. And that's a pretty big advantage. So by using Ethereum for

DA as well, it means that even in the happy path, you're only relying on Ethereum. And there's no risk that Celestia going down could impact the safety or liveness of your roll-up. So that's the reason why it would be different. But for example, if you were to have a roll-up that's settled to Solana, then I'd argue you should also use Solana for DA, because that would be the trust-minimized construction for that kind of roll-up. Is what you're saying just there, Neil, is there's like a resonance between using the same layer for DA and settlement? Like, if you're using both and the both are the same, there's just some greater than the parts that emerges when both the DA and a settlement are the same layer? It's essentially avoiding the same issues that come with bridging. Because in order to use

Celestial DA with Ethereum settlement, at some point, you have to read it. relay some data from Celestia, which is a signed data route. So everyone's posting their transactions to Celestia. Celestia quorum signs off on some succinct representation of that, and that has to be relayed to Ethereum. And doing that in a decentralized and trustless way runs into the same exact issues that bridging runs in too. Understood. Neil, you've also used this term for choice rule. Could you just unpack that a little bit for listeners who might not be familiar with that term? Just explain like I'm five what that means. So let's say I have some set of transactions, and then I have an alternate

set of transactions and they lead to different state routes, how do I decide which one is canonical? As a fork in the chain? That's a fork, yeah. And then choosing which fork you should go on or which fork is canonical is the fork choice rule. Okay. Understood. Getting into just more of the qualitative nature of this DA conversation, both of you have said,

like, yeah, DA is a commodity. And then also there's this set of features that all DA providers will need to be able to provide in order to be competitive at all, which means to me that there's like this natural convergence towards some conclusion about all competitive DA layers, which also kind of sounds like it's a race. It's a race to this end conclusion. And it's also like data is cheap in the grand scheme of things. Like hardware, you know, one terabyte is like not that much money these days. It's like $25. Is that a fair comparison? And data on a blockchain is the cost of this approaching that level of commodity like nature where just DA costs are approaching, you know,

zero. Is that a fair conclusion to arrive at? John, I'll start with you here. It definitely is a race towards this kind of like theoretical equilibrium of exactly what you described of. It should basically approach like what is the cost operationally for the most part of like providing this service in the long run. And I do think it will continue to trend closer to that over time. The question is like there are many things that in crypto are in practice. This is the equilibrium and you end up here and then like, you know, everything is In practice, though, you don't actually get there, at least for a very, very long time. There's a lot of markets.

I mean, like, the same thing as like proof of stake mechanism. In theory, the equilibrium is like one person has all the stake and that's it. But generally, in practice, there's going to be a very long road to, like, actually get to the systems and it might not actually get there. For this, I would expect that in the long run, the cost of, like, using one of these DEA layers does get pretty close to, like, some reasonable multiple on, like, what is the operational cost of like, literally providing this, like, X amount of bandwidth that is, like, replicated across, and nodes and however many times. I do think that you should approach that over time. But in practice today, I mean, like, we're so far away from that of, like, in reality, there is one specialized DA layer that is live today.

Like, it's Celestia, and everyone else is, like, on the time span of, like, years. When does it actually get to something similar than that? And even Celestia is in its, like, very, very initial state where, like, their current state now is nowhere near, oh, yeah, we can just theoretically provide all the bandwidth that everyone needs, and, you know, it's going to cost three X of, like, whatever the bandwidth cost is. Like, it needs to scale, like, a thousand times more. more to start even getting close to those kinds of numbers. Okay, John, so your long-term prediction is that the cost of DA is going to decrease,

right, similar to other collapsing tech costs, like something equivalent to maybe like Moore's law and that sort of thing, but that will take some time to play out is, I guess, your prediction. And let's connect some dots for listeners right now about the implications of that, right? So there's kind of, I guess, two stakeholders we could talk about. One is the implications for value accrual and sort of investors who are looking at DIA, layers themselves, like if you're looking at something like Celestia or you're trying to invest in Igan, DA, the question is, well, this accrue value over time. Where in the value chain is,

so there's a set of questions for investors. But there's also a set of questions and answers for users. And I think one implication will just connect some dots very quickly is the cost of transacting on blockchains is going to decrease a whole lot in the near future and then a whole lot more by orders of magnitude in the long-term future. Maybe let's just talk about the users because there's always going to be more users than there is investors here. And so is this effectively crypto's broadband moment

when we see DA costs collapsed almost nothing? That means blockchain as a commodity, the usage of blockchain sort of collapse towards zero. What are the downstream effects of that for users? So it should mean at least the base input cost of spinning up one of these systems should approach zero? or approach some reasonable multiple

and like the literal operational cost of providing it, it doesn't necessarily mean that the specific application, the cost of using something has to go to zero. There is still stickiness and value in like a specific piece of shared state on top of what may be a very cheap piece of DA. So like if you have an application that is super in demand and that is on top of a DA layer that is like super, super cheap, great, your input costs are effectively zero.

But there still can be obviously a cost to interact with that application if it is valuable enough that they just. aside to like trajectories and now there is some premium on execution. Yeah, I get that. So it's definitely understood. I'm just wondering if you kind of like hold with Chris Dixon's take on this. And he calls himself sort of an infrastructure determinist, right? So when he sees the cost of infrastructure approaching zero, then he's like, oh, there's going to be an incredible app ecosystem. And like, I don't even need to know what apps are built on top of this. I'm just going to invest in the thing that is, you know, the infrastructure whose cost is approaching zero, right?

And so his take on this would be like, look at bandwidth scaling on the internet, right? And for some listeners getting involved in the internet, I mean, it's the era of dial-up modems, right? And the 56K modem. And then we had our bandwidth era on the internet. And that didn't mean that the apps we used on top of the internet approach zero. But the bandwidth of those apps was effectively multiplied by orders of magnitude. Do you like that analogy? Does that kind of work here?

Are we about to enter a high bandwidth era with DA costs going so low? I think to some degree it's about like rewriting the software so it can take advantage of bandwidth increases. That's what Dong Sharding is essentially doing, or the upgrade known as Dong Sharding is doing for Ethereum. And I think the phenomenon you're pointing out is essentially Nielsen's law. Every year, there's some percent increase in bandwidth year over year. But I guess my point is that I don't know that before then there's anyone who's really properly positioned to take advantage of those bandwidth increases. So there's Celestia, Solano, who claim that they're well positioned at. to take advantage of it. I think there's this informal, like, upper bound on how much bandwidth

a blockchain can reasonably support, because you need light nodes to actively verify the bandwidth. So to put it another way, if you look at Bitcoin, CPUs kept increasing over time. Like, we have Moore's Law. That's a true thing. Yet Bitcoin doesn't use more CPUs and the execution of programs, and that's intentional. It's because there's a security constraint that, like, those CPUs are used for civil resistance for Bitcoin, and they're not trying to use as many cores as possible. So similarly for blockchains, like some blockchains might have an informal design goal that they don't want to expand bandwidth too much because that can potentially compromise the security of the bandwidth or the blocks that are being propagated. I think if we do this episode,

well, the original motivation for this is really to understand the economics of selling data availability as your business. And if we have a bunch of DA providers, like, where do they end up on coin market cap? It's really like the role I'm trying to get here. And we already kind of talked about the race towards what John, I think alluded to as, like, limited margins. And, well, I think we'll return there later. But first, in order to really answer one half of this question, I want to talk about the by side, which is the question of, like, what does DA unlock? With cheap DA, what are we able to do in crypto that we weren't able to do before? Like, what new fertile ground does cheap DA provide us? And Neil, your project at Eclipse, like I said in the intro, chose,

elected to use, like Celestia DA for DA because Celestia's got the cheapest DA. So what did that choice unlock for you? Like, what were you able to not do before, and now you are able to do? And I think this conversation with Eclipse is actually will be the first of like a blossoming conversation for the future of roll-ups and even cheaper D.A. But let's start with Eclipse. Like, what could you do because you elected to choose Celestia D. I think that's the right framing. Because if we were able to, we would have just used Ethereum DA if we were able to support the use cases that we wanted to.

And I think that in the long run, we probably will migrate to Ethereum DA. But those use cases are things like central limit order bugs. For a market maker to effectively use that and to submit cancel orders, transactions have to be on the order of one one hundredth of a penny. And even one-tenth of a penny is possibly doable, but beyond that there's no way it's economical. So that's one use case. Things like less economical use cases, such as fully on-chain games,

deep-in networks, even certain types of social networks. Like I'd argue the experience of using Frentech could have been potentially smoother if there was just more abundant block space and therefore transactions were able to flow through more easily. So those are categories of apps that I think are better enabled when you have really cheap DA. That kind of just invokes memories of 2017 to me when we could daydream up anything

about some sort of crypto project. And it was all very high in the sky. It was all turned out to be like ICO mania at the time. But in hindsight, there were still like lots of nuggets of very broad, very grandiose ideas of what we could do with blockchains. and maybe DA was actually a fundamental constraint to every single one of them. There's a growing motivation for further experimentation in layer twos.

Really, like the last two, three, four years of layer two experimentation has been relatively constrained. Maybe one of those constraints has been, well, we don't have the DA to really experiment with. Like, John, maybe I'll ask you to kind of carry this conversation forward. Like, cheap DA. Like, what can the roll-up landscape really do with cheaper DA? It basically enables all of these types of applications of it. It is similar to any layer one being cheap and scalable. It is fundamentally very similar to that.

It's mostly that L2s in particular have been the area of crypto that has had a very challenging time to do that. Like, technically, anything you could do on a roll-up or an L2, like, you could just do on a centralized server. So it's a matter of being able to do it in the context of that type of chain, and particularly like L2's for Ethereum, where in practice, that is still where the majority of users and assets, an interesting state and applications are, is built in some form on top of Ethereum. Ethereum, Ethereum, Malayor 2s.

And so trying to scale that to be cost competitive with everything else in crypto is obviously just a gigantic part of crypto, because that's still where most of the value is. So I would say disproportionately, it's enabling a lot of the Ethereum world, those types of assets. And then also, while there have been other cheap blockchains, it's also particularly when it is the DA is catered towards, OK, spinning up a new blockchain on top of this. That is enabling a kind of new type of development that wasn't really possible. possible before, where basically making it easier to spin up your own chain and the things that go

along with that. So there is a difference in the entire design landscape of what can I do if I could just spin up my own chain and design it however I want and then don't worry about DA versus if I can just, you know, make a smart contract on Solana that is theoretically like very cheap to execute, but I don't have all the customizable and control over. I may want to do something else with the execution environment. And that historically wasn't possible to like very easily spin up. I can't remember the name. I think there's a name for this, but I remember this conversation started in Bitcoin land, in the big block for a small block debate, where the small blockers were like, if we just have big blocks, people will just fill them up again, and then the fees

will return to where they were in the first place. And that kind of, I think same effect might happen and will happen, hopefully happens with cheap DA, whereas we just like, you know, lower the cost of DA by one one thousandths. But then what do we do? We just have one thousand or more times the total aggregate economic activity going on on blockchains, which is the bulk case, Right? Like imagine having 10,000 more times economic activity happening in the grander, like, crypto sphere. Maybe this was why Ryan called it like crypto's like broadband moment where like you scale down costs, but then you scale up total aggregate usage even more. Is this where you think this is going, John? Yeah. The difficult part of it is that I think it's just almost inherently possible

for any of us to reason about like what is the right order of magnitude of this terminal end state of there are people who will make reasonable arguments that, you know, the end state of what you really need to scale the 99.9% of value in crypto is like 100,000 pps or something like that, which you could very reasonably provide on like probably like one chain. And I think there's a very reasonable argument that it's like, no, it's like a hundred trillion. And these are just like orders of magnitude that are just nonsensical. And they're just both are like reasonable in a sense of like, okay, but what if like everything is on a system similar to this? And you end up with like pretty radically different outcomes, obviously between those two. Like, I tend towards the latter and that you're going to have many of these types of systems over time and that you will be able to kind of continuously like horizontally scale these systems and have more of them. When you say like hundreds of thousands of or even greater like TPS numbers, to me at that point, once we start to break that metric, it just means infinity. Like uncapped demand, uncapped limits constraints on transactions. Like, oh, do we need more? Spin up a new chain and then also new data will come online and be ready for you. Is that maybe another articulation?

Yeah. I would agree with that. And I think there is a reasonable argument that that doesn't happen. Like, there is some reasonable argument to that that like 99% of the value really is in that handful of size that we can like reason about and understand this is like a few chains can really handle this versus the latter outcome is what I actually expect. It gets to that point of like, okay, beyond this point, it's we need to scale for infinity. Like, that's what you need to build these systems for effectively is just to like keep adding more to it. And I think that's in practice much more likely. It's kind of like asking what's the terminal endpoint destination of internet. of like, do we have enough yet? Like, no. We can never have enough. Because once we have more. Yeah, it always is. I never have enough data in my mobile plan either. Neil, I want to go back to you something that you were saying earlier.

And this goes to the kind of the question at the Genesis for this podcast in general, which is where does value accrual for, you know, like where does Celestia or any other asset kind of end up in the coin market cap? And you've got a unique vantage point in that you are a buyer here. Like you are buying DA, aren't you? And it's very interesting because, like, it's not actually the users that decide what DA to buy, at least, you know, like not anymore. It's sort of the entrepreneurs. It's kind of like the business owners, if you will.

It's sort of like eclipse saying, we're going to use Celestia rather than some other DA layer right now. And I want to go into, like, why you chose Celestia, for example. And then you made another statement when you were talking a minute or two ago about at some point we might migrate to a which has an interesting implication of like what's different versus Celestea versus Ethereum and why might you want to migrate to a different DA provider like Ethereum? What advantages does it have for you? Can you talk about your decision of where to go buy your DA? Yeah.

In the long run, the choice of DA would be decided by eclipse governance. But to start, we chose Celestia primarily because it's the only live DA that exists right now other than Ethereum L1 that is considered. actually verifiable DA. And then the second reason was that a lot of the surrounding infrastructure either was already built or was very close to being built. So the name of their relayer is called blobstream, and that's the part that relays that signed data route over to Ethereum. And to have a live relayer that's actually credibly trustless, I place a high premium on that because I know how difficult it is to build that. And that's the one part about these modular systems that everyone points to it

as a downside. Luckily, it's something that we're all very aware of, but it's the amount of relaying that you have to do, eclipse in Ethereum, Ethereum and Celestia, eclipse in Celestia. So having all of that in place was one consideration. The second reason was that to me, like I was saying earlier, being on Ethereum DA natively versus anything else is relatively zero one to me. So the difference between eigen-DA versus Celestia DA is relatively marginal compared to the big jump in security you get by just being directly on Ethereum. So to me, it's unlikely that we had migrate away from Celestia in the short to medium term, unless there was something fundamentally unsuitable about it, meaning that it was just too congested, or eigen-DA had some fundamental and that new innovation

that Celestia just can't incorporate for whatever reason. But those are the reasons why we'd migrate to another Alt-D-A, which to me, the set of those reasons is pretty limited, whereas migrating to Ethereum-Native DA is much more compelling, if it were economical to do so. Why? Why is that more compelling? Why is Ethereum-Native DA more compelling to you? Mostly about just keeping consensus and DA in the same place. And then we can avoid that relaying. And it also means that it's less complexity for the Eclipse full nodes to run. Because right now the Eclipse full nodes have to run a Celestia node and Ethereum node.

They have to do a lot of, like, the verifiers need to check in multiple places. Forced inclusion becomes a very complicated design. Whereas if we were just using Ethereum for everything, it vastly simplifies a lot of those considerations. Okay, got it. And, you know, obviously for the cost. So you're saying if Celestia, D.A. and Ethereum, DA were the same cost, basically you'd prefer Ethereum DA. But Ethereum DA is not going to be the same cost, like maybe ever.

And so I'm curious how cheap would it have to get for you to actually port some DA to Ethereum or maybe it's an all or nothing decision? I don't quite understand. But like one upgrade that's coming probably in the next six weeks to two months or so is Ethereum's implementation of EIP 4844, which is proto-dank sharding. So I think you're referring to dank sharding earlier in the episode. maybe you're referring to it in its final form. Proto-Dank charting makes DA cheaper on Ethereum.

I don't know that it's cheap enough for you, though, Neil. Maybe you can talk about the decision about how cheap Ethereum DA would need to get for you to consider migrating. So if it could achieve that relative order of magnitude of one one hundredth of a penny per, let's say, an AMM swap or a clob order, then that's definitely compelling. I also think that things like Blobs face fractionalization and financialization make this a little bit easier. right now there seems to be, I don't want to say consensus, but there's a general sentiment within EF and on ETH research that the cost for even protodong sharding is going to hit the floor. They feel that those blobs are going to be mostly empty, at least to start. So that's promising. I don't know if that's true in practice, because the reality is if they were empty, eclipse is going to eat all of them. Or at least we would have ambitions to use a lot of that blob space. Okay, yeah, that's, I guess the other consideration here is that you might have more bidding on Ethereum blob space. versus other DA layers, because you're not the only builder, you're not the only buyer of DA, are you? There are many roll-ups who actually want to go purchase DA, and so that could drive the cost of Ethereum DA upwards if it's more in-demand versus other DA systems. Is that right?

Yeah, and I wouldn't be surprised if there's DA spam, like inscriptions and things like that that'll pop up relatively shortly. Just curious, what do you think of while we're on the subject of Ethereum and Proto-Dank Sharding and Danksharding, which is just like these are Ethereum terms. Ethereum developer terms for basically the massive expansion and cost reduction, let's say, high bandwidth of Ethereum's, you know, like native DA layer or data publishing layer, maybe we should get back to that framing as well to remind folks. What do you think of their strategy there, Neil, do you think that full-dank sharding will

kind of get you what it needs, or is this just sort of an infinite game where we can never have enough data availability on Ethereum? Well, with full dang sharding, that gets you to 10,000 TPS in its full form. And that's assuming no additional increases from Nielsen's law and no additional upgrades afterwards. As a layer two, not the layer one. Yeah, on the layer two's. Yeah, the layer two's. Yeah, the layer one would not increase as a result of dang sharding. But I think that that's pretty compelling just because if you look at even the highest throughput

blockchains like Solana, the amount of real economic activity that occurs on Solana, even right now, this is a very like bull market type speculative market for Solana as it exists. It's less than a thousand TPS. and if you were to fix the fee market on Salana, that is if you removed all the spam and things like that, it's going to be in the order of hundreds of TPS. So I think 10,000 is a pretty generous overestimate of the amount of meaningful economic activity that occurs in crypto.

So if you go in John's version of events where we just fill up all the block space that's available, then of course we'll have to continually adapt. And to speak to that point earlier, I think that we would need some kind of net new upgrade that better takes advantage of the increases from Nielsen's law rather than just capping the number of blobs at 64 or 32. I think with the introduction of proto-dank charting, it will be a big step forward for Ethereum and data availability.

I think we get three blobs per block, yet also in perfect Ethereum fashion, it will be far too little for what the market actually wants at that present moment in time. It's really going to be full dank sharding that I think is really going to finally move the needle. And full-dank sharding is a 2026 thing, maybe. I don't think anyone really knows the answer to

when full dang charting is coming. But John, do you have any sort of indication about, like, how competitive full Ethereum layer one dang sharding will be with, like, a more specific DA layer like Celestia? Like, will it be one-to-one competitive? Will it still be relatively constrained? Do you have any, like, numbers or indication about this? I'm a bit more on the side of, I think that most of these other DA layers are probably going to meaningfully outpace Ethereum I'm going to DA-Bam with in the long term. I mean, in theory, there's nothing that Ethereum can't do, that these other chains can do. In practice, it is really hard to steer the moving ship, as we see with stuff like 4044 and

taking quite a while. And reasonably so, like, they're going to be more conservative. And just as a result of that, I think that you are going to see just kind of by default, by the time when these upgrades start to ship over time, it is going to be not enough to actually move the needle on where do new use cases go. I think that that is going to be the continued trend of, I think that stuff like forward four-foy-4. is going to certainly be helpful to chains like optimism and arbitram that are existing on Ethereum.

I don't think that that or probably even future upgrades are going to be enough that will move the needle materially of, hey, if I'm spinning up a new chain like Eclipse, by default, where do I go for that kind of chain? I think that most of those are still going to go to the Celestias, the eigen Dei, the avails the whatever the world. My guess is that they will still be materially cheaper. I think that would be very different if this equation was, okay, we get like the first, whole, like, pretty much extent of what's a reasonable dang charting today of, like, cool, we have 16 megabytes of useful data per block. If that shipped, like, tomorrow, I think that's a very different world. My inclination is there's, like, a pretty meaningful path dependence of this,

and assuming that takes a few years, the game has probably just shifted materially by that point. I think the interesting question would be then is to kind of what you're talking about before, like, okay, let's see that something of that order magnitude shows up in, you know, two or three years from now. Does it make sense for someone like eclips or other chains to kind migrate back. I think that it would be very dependent on the use case. I mean, the reason why, in theory, it would be interesting for someone like Eclipse and comparable chains is, like, if you have a presumption that the majority of assets on this kind of chain are, like, they are eth denominated. It's a lot of ETH that's in the bridge there. Like, fundamentally, it is that kind

of zero to one of the best thing possible is always to have ETH DA if you're using ETH on and L2. But I tend to think that you're not going to see most of that activity moving back. The trend that we see now is, like, more likely directionally to keep unfolding. So one other direction that can move in is if proving costs go down. Right now, proving overhead is something like 100,000 times to a million. But if you could get down to, let's say, 4,000 times overhead, then pretty much all roll-ups, I think, would transition just being ZK roll-ups. And then you just post the state diff, which is far more economical than the amount of data

that optimistic roll-ups have to post. Because from Eclipse's perspective, our trade-off was basically what's cheaper, the cost of proving every transaction or the cost of posting every transaction. And ultimately, right now it's obviously publishing every transaction is way cheap, cheaper, just given the existence of Celestia. But I could totally see risk zero becoming way more economical, and then we would just prove everything. Just to unpack that a little bit. Okay, so we have posting and proving. Once something is proved, like that's a ton of computation in order to make that proof, and that's the cost. Or you post and you just consume the data, and that's the cost.

It's like pre or post, just to unpack that a little bit. And pre is like the ZK roll-up side of things with a lot more research and hardware acceleration is something that we still need to unlock here. And a lot of, you know, activities on optimistic roll-ups who are doing posting, data posting. And we actually have a solution here for that. It's called Celestia. Just to unlock. Is that kind of the right framing for that, Neil? Yep.

Okay. Yeah. Basically, you're posting some amount of data in either scenario. It's just that if you are ZK, you have this option to pretty meaningfully reduce potentially, depending on the use case, the amount of data you need to post because now you don't need to throw everything on there. you could just post state deaths, which is like material. And so what you're saying to Neil is that proving is very expensive on Ethereum right now.

I'm just curious, like you mentioned Risk Zero. They've been on the podcast before, but I'm sure bankless listeners will have long forgotten that episode in that context. So like what is this alternate path to scope that out really quick? How does proving costs actually go down on Ethereum? Like what is this another solution that needs to be injected? Is there sort of like a need for a celestial of proving? or something like this? What sort of solutions does this actually look like in practice?

So it's not really like an Ethereum specific issue. It's just that proving overall is pretty expensive, and there's a lot of overhead for doing so. So usually the way you measure it is, for every cycle of compute, how many cycles does that correspond to in your prover? And right now it's somewhere on the order of 100,000 to realistically about a million cycles for every cycle in your regular program. So what this would require is basically folks such as access, XOM, Risk Zero, other ZK co-processors or Provers, just to drastically optimize what they're doing. And I think that in the direction of EVMs, typically they've had their own ZK Provers that are specific to their EVM implementation, and that's what folks like ZK Sync did.

For Eclipse, we were generally erring toward general purpose provers, and the reason for that is my suspicion is that the overhead for general purpose proving will eventually reduce the order of thousands. So that's the reason why we figure why build your own circuit, if you can rely on some existing infrastructure, which is going to naturally improve as Harbor gets better. Arbitrum is the leading Ethereum scaling solution that is home to hundreds of decentralized applications. Arbitrum's technology allows you to interact with Ethereum at scale, with low fees, and faster transactions. Arbitrum has the leading defy ecosystem, strong infrastructure options,

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But Sellow is a community governed protocol. This means that Sellow needs you to weigh in and make your voice heard. Join the conversation in the cello forums. Follow Sellow on Twitter and visit cello.org to shape the future of Ethereum. Going back to something that John made me think of when he was giving his just like the migration of consumption of DA down to like the cheaper and cheaper DA like the Celestia's away from like Ethereum DA because Ethereum's going to be slow. But he said, John said, you said, like, you know, it's going to be the optimisms and the arbitrums and like the polygons that are going to stay using Ethereum DA. And I'm kind of imagining two lines here, two lines that get crossed. Like one is the Ethereum DA line.

Like you either are or aren't using that. And then in the next section and you cross. one line and you're in, like you're using an Alt-D-A, right? You're using Celestia, you're using eigen-DA, Polygon-Avel, like, whatever. And then you cross that line and then you start to like use maybe something like Arbitrum AnyTrust, where you're using maybe like a consortium of like Web 2 databases, like Google, Amazon, whatever. Like Arbitram AnyTrust is like kind of the WBTC model, except instead of a multi-sig for an assets is like a multi-sig for DA. But really you're just using like five or six like centralized like databases. And then those are the three like

data availability sources, or you could just go in straight to like one single server. So maybe that's a... AWS is on the far end of that aspect. Right. Like we're back in Web 2. So maybe these are like the ways to carve it out. And you have like the back onto the Ethereum DA side of things. What makes the choice of a roll up to use Ethereum DA or hop into an Alt DA might just have

to be like brand, right? Are you, are you aligned with Ethereum? Right? Like how like you said like how much ETH is in your roll up bridge? Like, are you Ethereum denominated? Like, optimism, arbitram, Polygon, these are all people in heavy competition to not just, like, you know, scale themselves, but to scale Ethereum. Because they all want you to think that they are Ethereum. So maybe it's like brand that is really the motivating factor for some of these choices.

And for the other ones, like the Lyra's and the Avo's that have spun up their OP stack chains, but they're using Celestia DA. They don't necessarily need to have that strong of brand affinity with Ethereum. They need to really, like, reduce their costs. And so they've chosen to be, like, using Slusia for DA. And that's kind of going to be, like, the long tail. And so maybe what proto-dank charting and then full-dang charting does, John Neal, check me on this. It's just like, it opens up that room.

It opens up the room to have to actually use Ethereum DA, the fat tail, and have that, like, strong brand and security alignment. Like, I actually don't store any of my assets on layer twos that aren't, like, arbitram, polygon, or optimism because of just security reasons. Like, if I use a nap chain, I use it, and then I get out. just because, like, yeah, you guys are using an Alt-DA. You guys aren't using Ethereum. And so there's like the security properties of Ethereum are retained by this fat

tail. There's high brand alignment affinity with Ethereum. And then more of like the quicker application specific stuff, the super cheap stuff, you're starting to use like the long tail of Alt-DAs. That's like kind of my qualitative nature of some of these things. Does that resonate with you, John? Does that make sense? I agree with that.

I just think that directionally that effect is going to even out much more over time and kind of weekend of it's that kind of brand and simplicity and reliability and all of those things of like you can just tell someone oh yeah we're in a theorem roll up like we just use a theorem it's very simple for a user to understand they don't have any follow-up questions oh cool it's secure i get it i understand it as you start telling people like oh yeah we're doing like any trust and there's this like 11 of 12 and if like two of them say no then we fall back and you just start going through all those things and people's eyes just like start to glaze over and they're like right, man, like, it's my money safe or not. Like, what is this thing? And my pretty strong assumption is, like, over time, the top notch of, like, reliable ones will become very normalized. Once you have a dozen chains that are meaningful and people are using chains that are, like built on top of eclipse, that are two. It's like eclips and others that are like, yeah, we use of Celestia. And that is like, people, like, people are like, yeah, Avo is Celestial. Eclipse is Celestial. Like, all these things are Celestia. And that becomes, like, another simple, understandable brand for these people. And you get really comfortable with those things.

And I think that there's just going to be a slow trend of those things. And I can't DA will probably hit that at some point, too. But you can't just do that if you spin up some random DA layer today of like, oh, don't worry, like, I forked Celestia. It's exactly the same. Like, trust my chain. It's like totally cool. Like, you're not going to get people to move over to that thing.

So I think that directionally, we will keep moving in this direction. And people will get more comfortable with this, like, understandable group of, like, very reliable good operators. And like, people like, are increasingly falling into that bucket. If, like, people are, like, understanding now what this thing is. Okay, I can get my head around it. This feels safe. I use a bunch of stuff on here.

Neil, anything you want to add? Yeah, totally agree with it. I think the architectures will converge, as John's describing. If you look at the layer one blockchain landscape, there were so many novel architectures that were postulated, and it ultimately did converge on pretty much tendermint. Like, everyone uses tendermint if you're spinning up a new L1, including Celestia, and I wouldn't be surprised

if something similar happens with roll-ups. Though I'd say that there's one more technical reason why you might care about using a specific DA layer, and that's that there are occasional cases where there are network effects for using the same DA layer as another roll-up. And there's cases without involving bridging. That's generally less built out. But there's also just a simple case of a shared sequencer,

where a shared sequencer is effectively a DA layer that just provides really quick-soft confirmations. And that's what espresso is effectively building. So that has unsolved complexity as well, where for that to actually work, you need this off-chain builder market, which is actually not stateless. So you would need something a little bit more than just. vanilla, celestial out of the box to facilitate that. Okay, yeah, is it the case, Neil, just to dig into that, we just recorded an episode with Justin Drake that came out before this episode is going to be released called the

fixing fragmentation, and he was just very bullish in making the case for decentralized sequencers and even using Ethereum as sort of a shared sequencer to sort of help fix the growing problem across Ethereum roll-ups, which is this fragmentation problem. Are you saying, Neil, that using the same kind of DA layer is, you know, useful towards interoperability across all of these roll-ups. There's some sort of like a network effect present there. And maybe you could describe that a little bit more. Yeah, and that's a really interesting point that just made about Ethereum itself being

used as the shared sequencer for some kind of based roll-up. And I think on some time frame for Ethereum DA to remain competitive, they would have to implement some kind of upgrade like that. But the complexity that I was referring to is for this to actually work in practice, let's say you want to have two roll-ups, you deposit USDC on one side, and then you want dye to come out on the other atomically. So the cases you really don't want is you deposited USDC and die did not come out, or conversely you did not deposit USDC and die did come out. And what that requires is that someone at some point needs to run a full node for all of the

roll-ups that are using the same shared sequencer, and they need to give you some assurance. So typically some kind of economic security or they need to put some stake down, that might be slashed. And that's what's required in order to provide that kind of interoperability and shared sequencers in general. There's other shared sequencer constructions like what Rome protocol is doing. But in general, that's how shared sequencers work. And my view is that there's like upper bounds on how many roll-ups you can reasonably support with that kind of off-chain builder market. So I generally find the constructions like that don't scale very well. I want to unpack something you said, Neil, about the network effects around data availability.

Are there any, really, is the question. So Celestia, Like, we have one layer two pivoted from its DA from Ethereum to Celestia, the first one to go. And then like the second one followed just thereafter. From what I hear, there's going to be at least a few more. And all of a sudden there's going to be some sort of aggregation of Celestia data availability consumption. What are the tailwinds for many, many, many people, organizations, networks, consuming one like DA layers, DA versus just a few? Like what kind of network effects, composability effects does one DA layer get if it captures? like most of the consumers.

So a really clear one for Celestia in particular is if we're just all running light notes, such as on every laptop, every cell phone, then that means you probably have pretty good coverage of those blocks. So to that point I was making earlier in that there's security reasons why you would not want to just arbitrarily scale the bandwidth and increase the blocks for full notes. If you have very good confidence that there actually are a lot of non-duplicative light nodes that are auditing these blocks, then that might be able to allow you to scale the blocks bigger.

and therefore they're going to be less saturated and the cost will go down. So that's one network effect that you'd hope will play out in practice. I think the only concern there is, does Celestia governance have the incentive required in order to actually increase the block size? Because that's something that they're going to have to vote for. And ultimately, the biggest Celestial token holders, it's going to be delegated to the validators or the guys running the chain. And they might say, why are you making me increase my hardware requirements if I'm not getting

any upside from that? Like, I get that that's better for the network and the fees will go down. But on average, I might actually end up making less money if you do that. Interesting. John, anything you want to add here? I definitely think that Celestea will continue to increase their block size over time would be my guess, mostly because, I mean, it's kind of just my general view of where does the value in the system probably go to. So I don't think DA is particularly sticky in the long run, or even in the short run,

really on any time span. I think we've seen that kind of clearly from all these roll-ups that have, like, once the first one goes, there's this wave of, all right, yeah, like, if Celestea is acceptable, I'm not going to stick around in EFDA and, like, charge my users, like, 10,000 X more fees because now I'm not competitive. I mean, people will move over to that. I think that there is stickiness within a group of people understand that these are reliable operators that they're comfortable with. So I think that today, like, people are going to go, it's not like, it is reasonable for someone to say, oh, yeah, I'm moving off of Ethereum DA and I'm going to go use Celestia DA. It's not reasonable for someone

to say, oh, we're switching out EFDA, and I'm going to use, like, this random chain that you've like never heard of for DA. So I think within that realm of like, this is a reliable operator and brand that people understand. People will stick around that. But I don't think that there's going to be this long-term effect of everyone really needs to be on one shared DA layer. The points that Neil made are accurate of like you do get theoretically better scaling properties of when everybody is sampling on the same DA layer as opposed to splitting it up across many ones. The math does work out better there. Also, you do get better trustless interop between, or at least the ability to do better trustless interrupt between chains

on the same shared DA layer. In practice, I don't think that we have seen much of revealed preference for people to care that much about that of this trustless bridging between them. People are like generally okay with like a reliable bridge between them and like that's not really where the risk is. So I tend to think that most of the network effects on that will be like relatively loose over time. It is just going to be the brand and like this is reliable, it's scalable, it's cheap, people understand this, it's safe. That's what, like, people will use, they'll stay within that realm. I think most of the stickiness is really just in, like, the state and the assets, which is why I think that, like, if you look at the cash flows of something like Celestio, and this is something

that people, like, rightfully pointed out, is like, it's making, like, $75 a day or something like that. The whole network is making $75. Yeah, yeah. Yeah. And the background context here, John, is, like, the fully diluted value of Celestia is, like, $18 billion or something like this, right? Exactly. So, I think that we could say, I mean, like, like, okay, clearly the cost of this thing is not based on, like, a DCF of future cash flows, most likely, unless you actually have people who are just thinking like, oh, yeah, but at some point in five years from now, oh, yeah, but this is going to go to like a billion a year run rate. And then so, like, the valuation makes sense. Like, I don't think that people are doing that. I don't know that people ever will for most of these. I think most of the stickiness is in, like the asset itself. And that's what you see with Ethereum itself, too. Of, like, people are pretty willing to switch DA to be like, okay, Celestea is reliable, it's cheap. I'm switching off. Ethereum DA, I'm going to use Celestea DA. People still want the asset and all of the state that is there. And that tends to be the stickier thing in my mind. And that is why I also think it probably makes, I think it is like probably important for something like Celestia that the token is able to derive

value in some form of like money like way, whatever that means over the long run. Because I don't think that you're going to get like a meaningful valuation on this thing based on the DCF of future cash flows in the future. Yeah. I guess to be fair, like Celestia had to launch prior to rollups posting to it, just by nature of the fact that it's a proof of state chain. So they have to launch that token even before the cash flow start coming in. Though I just think it's hard to become money. There are very few assets in general that have become money. We only know two digital assets that have ever done it, Bitcoin, ETH, and I guess USDC borrows the moniness of the US dollar. And I suspect that part of that is because of the fact that ETH and Bitcoin are constrained

at the base layer. So as a result, it forces this asymmetry of of demand or incongruity of demand with respect to supply, and it forces it to be deflationary. So I don't know if it's possible for that to ever happen again. It seems like more as like a freak accident of history, where if you try to deploy a constrained base layer today, people would be like, why would I use that over Celestia, Solana, all the other guys? But that basically means that only Ethan Bitcoin will ever be money, according to that theory. Oh, this is the heart of the conversation that I think we want to have with you. There's probably a few things we've got to lay out first. Yeah, I have an episode scheduled with Nick to unpack this whole, like, modular money.

Meme that the Celestial people would love for you to think that TIA is modular money. I think we'll start to open up that conversation, but I think that's going to be a multi-episode conversation. Bankless listeners will be familiar with this, infinitely familiar with this line from bankless. Blockchain sell blocks. What does Ethereum do? Produces blocks and sells them. What does a DA layer do? DA layers sell DA. And so there is a cash flow analysis that could be done for someone who sells DA. It's different than just a typical like Ethereum monetary premium because of all the reasons that we've described on bank lists thousands of times before. But I really want to unpack just the raw economics of the DA business. How does DA make money?

How does producing and selling DA make money? John, you talked about a little bit earlier that you kind of expect the margins to approach pretty slim over time. But that's also, you know, compensated for by volume. Can you just unpack what you think about the economics of the business model for DA? Yeah, the simplest framing, which I'll copy and start with, is from Sareram, I believe, is basically breaking down the simplest way to think of it, I think, is you can think of, like, there's basically, like, kind of three fundamental components of, like, what is the cost for DA to provide it? One is the operational cost of, like, literally, like, what is it cost to run the boxes? Two, is the capital cost for economic security of, hey, like, if I'm going to put up, you know,

X billion dollars of stake, like, I need some return on that. Like, what's the return on that. And then the last thing is congestion, which is like primarily what all of Ethereum is today, of like, you know, there's just not enough space for all the demands. Or like price has to go up. That's just how the market works. In general, like what we see today for, other than Celestia, but what we see for, at least for Ethereum is that pretty much all pricing is like congestion based of like the cost of Ethereum DA is in no way representative of what is the actual cost of running the network for these nodes and like, okay, I need X return on my each state. It is entirely representative of.

of there is X amount of DA, and people want a lot more than X. So price goes up. That is, like, in practice, how everything is priced today. My general assumption that we've kind of talked about is, I don't think that's sustainable or that works over time. I don't think that the stickiness in demand for one layer is going to just, like, vastly outstrip the supply of it in, like, the super long run, because I think we'll just get more supply that's, like, reasonable, and people will go over to Celeste, or go over

to Avail, go over at eigenDA. So what you kind of end up more with is like some function of the operational and capital cost is what like actually matters. I think the operational costs of running most networks is going to approach being like relatively low over the long run. It doesn't actually cost that much for like, you know, some set of 100 or 1,000, whatever participants to like run the validators, like actually operate the network. And so then lastly, like, it's mostly capital cost.

These systems like shouldn't be expensive to run. So then it's the question of like economic security. How much do you care about economic security? is that like a real thing? And that's kind of what it comes down to a bit at the end. If you believe that congestion costs mostly go away, operational costs are pretty low. It's like, okay, if you want $20 billion stake of economic security, like, there needs to be some return on that capital of, you know, what is it, like, 4% a year or like whatever the number may be for the different asset. And the capital costs will vary for different assets.

I mean, like, this is part of like eigenDA and eigenlayers, like, this is exactly why they designed the way that they did. I was like, they think that this is the fundamental biggest cost at the end of the day. So how do we get a cheap capital cost? We just reuse the same capital that's already being used for Ethereum. There's no, like, perfect solution to this because, okay, we're reusing that capital. But in some sense, that means you're diluting the economic security, like, across more applications. But you can make the other argument that, like, okay, but pooling economic security is better. So it's like a nonlinear amount.

Like, it's unclear. It kind of just basically depends on, like, how much do you actually care about the economic security in your system? Is that what you're prioritizing off of? My general view for the long run of most of these systems, I think the prioritization of economic security will go down because I think that people will at least realize that the current numbers of economic security today, I don't think are accurately representative of the current state

when it's the simple idea of practically, like, pretty much all stake is delegated. So I think that the like practical amount of economic security, I think the people will start to care less over that over time. And you start to see these systems getting cheaper and cheaper and cheaper and cheaper over time, I think the operational costs are just going to get better and better, and they're already not that high. Congestion costs will go down because we have a lot of this available and capital costs.

I don't think that people are going to be willing to pay some DA layer based on like, oh, I need X billion dollars of economic security, and that one's not enough. So I'm going to charge my users 10 times more to use this one that has X billion dollars of economic security. I don't think that's going to happen in practice. Those are really the three main components, and pretty much all of them I see trending down over time. I think that's what we'll continue to see. Yeah, the optimal pricing is somewhat a function of what, theory of pricing you're using. So for Ethereum in general, it's optimizing total welfare. And that

means that it's literally saying let's maximize who gets the goods should be based on who wants it the most. And whoever supplies the goods should be whoever is able to supply it at the cheapest. But if you look at the optimization function on layer two's, I think that objective is fundamentally more complex because there's this informal goal of also wanting like many non-economical use cases to still be possible. And then on the other hand, the layer two also needs to be economically incentivized to exist, meaning that, like, in order to compensate whatever surrounding hardware there is to keep the layer two running, it can't be like paying too much to the base layer. So that's like fundamentally at odds with providing some baseline rate of return for the L1 who needs to pay for

its economic security. Something that's unique about the DA business model is that DA as a commodity, can be like, quote unquote, minted out of thin air, right? Like, there's actually no one stopping you from making more DA. And so it's like having, you know, a money printer with Fiat money, but no one's stopping you from printing all the money. And that's kind of the whole point about DA layers, competitive DA layers, is that if we need more, we can supply more. And so that makes me kind of think that the economics, to go back to what you've been saying this entire time, John, it's like, the economics are just that. DA just gets cheaper and cheaper and cheaper. And the margins also get slimmer and slimmer and slimmer. Yeah, that's the direction I see it going. Yeah.

Okay, so then there's kind of a question here, which is like really the big question I think in everyone's mind and David already alluded to this is like, how does this all pan out? So we look at Celestia right now. It's actually number 11. I just look this up in terms of fully diluted market cap. Number 11. Okay, so we're talking 18 billion dollars. That means it's surpassed arbitram, actually, at the time of recording. Arbitrum is just a hair under the value of Celestia, right? And certainly we've seen massive categories of infrastructure, you know, chains and that sort of thing spring up and, like, suddenly be worth the tens of billions of dollars, right? So this isn't the first time it's happened. But the question is, is this like a flash in the pan?

Is this sustainable? Is the DA category going to increase? We also see with eigenDA, something similar. I mean, it's like not, you know, trading right now. But the amount of frenetic activity is just like restaking and like in search of eigenlayer points, right, is like points to evaluate. maybe in the double digit billions as well. So how do you explain this, John? Right? So like basically, if you think of it in some ways, the entire genesis of bankless

is trying to figure out how we value crypto networks. And I feel like we've made some strides towards that, and we also still have the same unresolved questions outstanding. But basically it's kind of like the bankless thesis is like there's three kind of asset superclasses. You have capital assets that are discounted cash flows. You have these things called commodities. And then you have things with,

monetary premium associated with it. And I don't know if that's how you think of the framing of where value is going to accrue. But can you explain why this network is worth $18 billion and give maybe a bullcase for why it should go higher? It's worth $18 billion because there's more buyers or sellers. It's probably the best answer out. It's a hot air drop target. Yeah. I mean, in practice, I think we could say that the vast majority of these types of projects are really priced off of like mine chair.

Like especially in the short term, like that's what they're priced off of not kind of any kind of DC. obviously there's a big difference between, okay, what is it worth now and what's it going to be worth in 10 years? And I think the latter tends a bit more towards like, okay, what are the fundamentals of the kind of thing? And both systems in the bull case certainly do make sense even from a cash flow perspective. If you make the argument that, you know, something like Celeste or EG and DA, like, a single system can provide a, like, massive amount of DA bandwidth such that, like, it actually comprises, like, a very meaningful service, a large part of crypto, that kind of thing. Even, even, at a modest multiple on operational costs. If there's like millions of TPS going through this thing, well, like a modest margin on that is... So you could make the DCF, the capital asset sort of case for this? Yeah. If you assume just really big numbers.

Yeah, exactly. And that, like, actually is like a pretty understandable thing in the long run of like, yeah, okay, there's a million TPS through the system that's like going through this thing and it's able to charge like some margin over the operational costs. and at enough scale that is a lot of money, and that actually makes sense. The obvious reality is like most systems won't achieve that scale. I think this is a fair argument that some of them won't be gigantic. So that is like a relatively simple understanding of it.

But I mean, like obviously this is one of those order of magnitude things where I think you can make a reasonable case that it stays within a couple orders of magnitude of today or could go like a million times higher. And then like then the valuation makes sense. So I mean, at this kind of stage, no one's trying to do I think any kind of practical DCF of like, okay, I can underwrite to this. One person thinks it'll be 100,000 TPS. The other person argues it'll be 100 million TPS going through the system.

Like, you have no idea. But there is a reasonable argument for that. I mean, for the restaking stuff, I mean, I would say it's not so dissimilar to liquid staking. And, like, those will start to converge to, like, staking services are actually, like, one of the very few pretty cash flow generative businesses in most of crypto. Like, there's a lot of cash flow that's going through the system to the extent that you have, like, meaningful network effects or, like, a good operator in the space,

like, being able to charge, like, some margin on top of that. is actually a sensible business model in the long run. Again, it's one of those things where you can make a very rational argument for the correct order of magnitude of this business in the long run to be, you know, somewhere between like a million times apart of like, what is the scale of this thing going to be? Like, you have no idea. Like, there's a reasonable outcome that like it ends up issuing the main asset and is like the hub of most staking in like the entire ecosystem. And then it's gigantic, you know, because taking a small percentage off of that is a lot. In practice, I don't think that's what most of them are priced on in the short term. Like, most of them priced in the

short term. Like, what is the mind share of this thing? Like, where is kind of the money going in the ecosystem? That's what most of it is, like, particularly on the short term. Neil, you look like you want to say something. Oh, no, I guess when I think of trying to price crypto assets based on DCFs, the irony is that the few assets that actually do generate cash flow seem to be underpriced relative to non-crypto alternatives, and then all the ones that don't generate cash flow are doing quite well. Fundamentals are bearish in crypto. Everyone knows that. Arbichrome was doing like nine figures ARR just kind of recently. So I thought that was good. Of course, it's still by a web two SaaS multiple that would land it in like the billions or something, not in the tens of billions.

But yeah, I generally don't, I just don't think about price too much. Well, but John, I want to ask the question then back to kind of like modeling this. Is there any element you think that Tia is being projected forward as having some sort of monetary premium? I think Neil earlier in this episode said, and there's some special things that happen with Bitcoin and like maybe it was replicated. Bankless has long argued that's been kind of replicated with Ethereum that is sort of this pristine collateral. It's accruing this monetary premium. Do you think the same as being assumed of Tia and Celestia and some of these DA providers? And do you think that's actually a viable path here.

Yeah, I do. Yeah. I mean, like the DCF aspect of it, I think while someone can get their head around it, I mean, like, as a personal investor in both Celestia and Eganlayer, I can promise you, I've never even tried to do a DCF of either one of them because I'd I should not think that that is a sensible way to be trying to evaluate these at all. Like, it doesn't make sense. So I would definitely say that head and shoulders above everything, Bitcoin and Eath, are the only two assets in crypto that have, like, approached any level of, like, serious monetary consideration, decentralization, all of these types of things.

I do think that this is a reasonable argument that other assets will be able to do that in the future, though. I think it's more likely than not that at least something else will get into that category. I don't know that they'll be soon. I don't know that there will be many of them. But I think it is reasonable to assume on a long enough time span that other ones or some handful can get into that. And Celestia is unique in that I think that at least architecturally,

it is reasonably well positioned of like what is something that could potentially get into that category that makes sense, particularly just the way that the asset will be naturally kind of used throughout the whole ecosystem, like maps pretty reasonably well to Ethereum where a lot of why Ethereum has taken office because it's used as this asset throughout across a many chain ecosystem in particular with chains like Eclipse being the perfect example.

Like by default, hey, I spin up a new chain on top of this thing. People want to use ETH. Okay, cool. ETH is going to be the native gas token for my roll-up because that's what people want to use and that kind of just like becomes self-reinforcing. I think there's a reasonable likelihood

that in the world where Celestia is quite successful that you will see chains that by default, like they launch without a token, they use TIA as the gas token, and stuff becomes denominated in TIA, stuff like that. In the, like, ultimate bull case where, like, okay, this is where the trend keeps going, and there's a lot of those chains that keep doing that, you end up in a world where, okay, now there's a substantial amount of activity where, you know, it's users using Tia,

stuff is denominated in Tia, et cetera. I think that today we're obviously nowhere near there. If for nothing else on the one, the simple monetary properties of, like, yeah, it's a high inflation rate, like, that doesn't really map well to something that people can understand and, like, be consistent with. And the more important part is honestly just ownership distributed. And that's the biggest part again, where, like, Bitcoin and Ethereum are just, like, so far apart is, like, the ownership of this thing and the practical direction of it is driven by so many people versus something like Celestia or pretty much any other layer one in existence today for the most part is just like, okay, it is still held in large part by like a reasonably small amount of entities. The monetary properties are like not quite there. You're not as sure of what they're going to be. So it is a very long path for like anything else to get in that category of the two of them. But. If we think that a few of these systems are going to reach unbelievable scale,

I think it's reasonable to expect that at least something can get into that category of being a money like asset. So I think they're reasonably well positioned among the candidates. But I mean, certainly compared to Bitcoin and Ethereum today, like, I mean, orders of magnitude apart and like the types of qualities of the asset. Yeah. Yeah. Seeing a roll-up to use TIA as gas or Tia to denominate the ecosystem, I think would be

evidence of that theory, which I haven't heard of any roll-ups doing yet. And then the other weird thing about Tia is that it's kind of like inverse money in the sense that people are buying it, staking it, and then waiting for air drop. So they kind of want to get free stuff for not spending it. Whereas ETH is like something that you actually leave your money in. That's why I think that the ETH community should continue to lean into the original narrative of programmable money, because that's what's unique about ETH, especially even compared to Bitcoin. No one's really doing stuff in a programmable way with Bitcoin at this point. Interesting. I can actually envision some properties of Celestia to put on a Celestia Tia is money

cap. Some amount of cash flow is great. But like imagine in a world where like I think we all can assume that there's going to be more rollups on Celestia using Celestia for DA than what there are today. Call it 100, call it a thousand. And then the cool thing about Celestia and Ethereum is that the overlap for their vision about the future of crypto, it overlaps decently well. Like Celestia allows for more Ethereum rollups. I'm super into that idea. And say we have like, you know, we start to into the thousands and tens of thousands of roll-ups deploying their data availability on Celestia. And maybe Celestia's margins and the DCF model just doesn't look good for all the reasons that we've discussed. There's still some brand power, some governance power that Celestia has over these

roll-ups because so many people are using Celestia for data availability. Like the value of governance is the ability to direct stuff. And if that is this one central network that has this one brand called Celestia, and the brand is a trusted brand to place your trusted DA, that brand and monetary premium, actually there's not too much difference between those two things. So I can start to see, like, the shape of this nebulous theory start to fold form together,

even though there are plenty of also reasons to be skeptical. John, Neil, anyone, any other of you want to reflect on that? So I think the brand and monetary premium actually will be quite different things. Like, using Eclipse as a good test case of this, like the theoretical architecture here is like, Eclipse is going to very likely pay more in cash flows to Celestia than it will to Ethereum on a steady-state basis going forward. I would also argue that Eclipse, like, actually accrues significantly more value to ETH than it does to TIA, like, by a very wide margin, even that it was paying, like, more dollars to Celestia. So I think in the world where the majority of Celestia use cases are chains like Eclipse, where they are, like, primarily Ethereum-centric L-2s, where most of the activity is denominated.

underneath, that's what people use, that's like the money like asset in the system. I think most of that value actually goes to Ethereum in that world. I think the world where Tia can like kind of sustain that own value of itself is if Tia as the asset starts to become used much more in those ecosystems where Celestia isn't just for scaling Ethereum L2s. Celestia is for making Celestia roll-ups, where Tia is kind of the asset, they are much more native to there. I think that's where it will actually derive more value if that starts to happen.

because in the other one, where it's like mostly the eclipse type architecture of the world, I think it's mostly just like a background service provider that like makes sense as a business, but then is much more of like, okay, well, what do the cash in the system? Because I'm not using it as money. It's not this thing that I use all the time. It's like, okay, like, what is the thing for? So I think getting the asset used throughout the ecosystem is like actually what matters a lot. And so like where that goes, I think we'll determine a lot of it on like a longer time scale.

I agree. And seeing that usage to both of your points, right? and Neil saying a roll-up kind of did an ominating the gas fees in TIA, that would be an indication that there's some broader acceptance as a monetary premium here. Like the monetary premium thing

is just so mysterious, right? Because like when you boil it all down, you're just like, what is the path to achieve monetary premiums? Like enough people believe that it's the money. Right? I mean, like, if you boil it all down, it just sounds nonsensical and stupid,

but that's kind of what we're talking about here. Now, if it follows the same path that Bitcoin and Ethereum did, has to go through this kind of distribution type era. To your point, John, has to get it out of the hands of VCs and whales. The full supply has to cover the market. You know, Bitcoin did this famously through proof of work, fair distribution. Ethereum had a lot of years of going through proof of work.

Also has to go through its like ultrasound money phase. I mean, there was a time where Ethereum was a lot worse at being money than it is today. And it's gotten better over time. It's kind of a hardening of its monetary policy and the credible neutrality of that. and also kind of the narrative that surrounds it. So it's a long path, but there's a needle that it could possibly thread there, I guess, is interesting to see. What else would you say on kind of like DA in general?

And like, what can we expect to see in the next one to three years in this category? We've talked about Celestia. Igen, DA is going to come online. I think that's going to be probably large. I don't know what you'd say about that. But what should investors look for in the DA category, John? The main thing I'm going to be curious to see is, so Igen-DA expects it seems like sometime around, middle-ish of this year. It's kind of the expectation of it, and then avail some time as well.

The thing that I still have not gotten a great answer for it is, okay, when these systems are live, what are they actually going to get to use them and why over something like Celestia? When Celestia is going to have this like one-year head start and like a meaningful amount of like reliability and just kind of like understanding of like, this is kind of the default of like, okay, I'm, like, I need to reduce my cost. It's an L2. Like, this is what I go use. People understand that. I haven't seen a great answer for like, okay, why is the next thing going to pick Egin, DA or a veil instead of Celestia on the go forward?

The most common argument is just like cost. And the thing that I have not been super compelled with so far is that once we start talking about these orders of magnitude, does the cost matter anymore? And my intuition is, like, probably no of, I think the cost matters a lot when you're talking about like going from Ethereum to Celestia where it's like, okay, you go from $2 a swap on one of these current like Ethereum rollups often to, okay, you're on the order of like fractions of a penny. But does it matter when you go from, let's say that Celestia is, you know, a tenth of a penny and Igen, DA is a thousandth of a penny? Is that going to matter for a lot of use

cases that will actually attract them? I think the first jump is like a very material difference because it's a very user-facing and present thing of like, okay, this is a clear pitch for me. obviously it was way better. My intuition is like there's probably pretty decreasing returns on that. So I don't know that that's going to be a meaningful pitch. So that is the main thing that I'm really looking for still is like what is going to be the pitch of these new ones that's been up? The simplest thing that would change that is like, does Celestia just get expensive at some point? Does it start to like actually fill up because it becomes the default thing and it actually can't scale enough? If that starts to happen, then you'll definitely see this happen immediately.

Like obviously, people will leave Celestia if Celestia, it starts to get expensive. The whole point of Celestia is supposed to be really cheap. So that's kind of the main thing I'm looking for. That would also be very bullish crypto and crypto apps. That means we were very successful, hopefully, with something. Neil, what would you add to this? We would have so many Ponzi's. Yeah. Neil, what would you add to this? Maybe from a builder, a DA buyer's perspective. So I think IGDA is a little bit more differentiated than Avail relative to Celestia, just given that the trust assumptions are different, though I think it is still pretty marginal compared to ETH Native DA. Avail, on the other hand, what they've basically done is they're giving a ZK

proof of the erasure encoding to make sure that the block was extended correctly. And it's a pretty marginal improvement. It's also pretty expensive to generate the ZK proof. So I don't think that it's possible for it to really get cheaper per se. And then that exact optimization was mentioned in the original data availability sampling white paper that was co-authored between Mustafa and Vitalik. So that's all to say that. I think avail is fundamentally less differentiated from a positioning standpoint compared to Celestia. Whereas Igen, I could see having some novel angle, but I agree that it'd have to be something different than cost, unless for that edge case where Celestia got really expensive. The things that I think in practice that I've seen that are probably the most likely to be differentiated, I agree with that also that, Igan Dia is the one that is far more likely to be meaningfully differentiated. I don't see a strong width of veil. I think it will come down to like BD.

and stuff like that if avails to gainage. With eigenDA, although it's super early and I haven't seen any meaningful details on it, but things that they have talked about that are interesting. One is the idea of potentially having the ability to kind of like reserve DA bandwidth ahead of time. I don't know how you do that in a not super trusted way, but the idea of being able to like,

okay, for the next year I want to buy X amount of DA at this cost and like, great, now I can set that aside. Like, I don't have to worry about prices changing around the future. That's very interesting. They seem to at least be looking into that. The other obvious one that I think is much easier to implement, and people will almost certainly use, is different forms of like dual token staking, which is kind of interesting of like you can have a rollup that is using IGDA, but also like have a dual token staking model where like maybe you are a rollup also needs to be staked. And my intuition is that there will be certainly enough change, at least want to play around with that and kind of just like, you know, whether that's like perceived added utility for their own token or whatever it is, people are more likely than not play around with that. So I think that like simple economic tweaks that are not available with Celestia are things that people, I think, will reasonably want to play around with.

And then the obvious of just like this is the one that is at least perceived as more of like an extension of Ethereum. Like that's what people will look at it for. We haven't talked about Salon in this entire episode. Can Salana be used as a DA layer? Do you think that's a possible future at all? Does it have good DA or bad DA? That one's for you, Neil? They definitely have a lot of it.

They have a lot of DA, but I don't know if it's really good in the sense that there's no DAS. and I think that they probably wouldn't implement something like DAS, just given that the Solana North Star is so different than the Ethereum North Star, and therefore I'm starting to realize that it's not as suitable for roll-ups as a base layer or settlement layer. And it's mostly because their North Star really is performance. I think it's a great goal, maximize throughput, minimize latency. It's missing that constraint of verifiability in the same way the Ethereum ecosystem has. And that's to say that when it comes to things like fraud proofs,

which do require additional commitment data to be posted, or in the case of ZK proving the entire chain, you have to pay that cost. And if it's not internalized by the chain's economics, then someone has to pay it. So that's all to say that it's unlikely that Solana would do those things if they were to adversely impact costs, which they will. And therefore, it's probably best suited to almost someone like a clips

to build in those kinds of features. So I think Solana Turbine is like very scalable DA in the sense that they're trying to approach the cost of bandwidth. and so is Celestia, but the erasure encoding that they're using is not suitable for DAS. And that erasure encoding is optimized just to pump as many blocks through as possible, as opposed to the Celestia enraiser encoding, which, as mentioned, is like this 2D erasure encoding, which is just fundamentally less efficient. DAS data availability sampling.

It's like a mechanism for scaling DA. Neil, John, I have learned a ton in this podcast. It's exactly the podcast I wanted to produce. A lot of my questions have been answered. but are there further questions out on the frontier? Like, what big questions for the industry kind of remain in the DA space would you say? Do you have anything? Like, if you could just snap your fingers and get a question answered, like, what would it be?

John, we'll start with you. We're looking for bankless episode ideas here. The thing that I'm very interested to see and don't have any strong fuse on still seems early is, what is the path for Ethereum DA post-EIP 444 and pre-EIP? the potential future of dank charting. Is there a meaningful interim kind of steps that you can take that will be valuable and that will actually be pursued and be practical on like a reasonable time span? And there's definitely at least some research around that, like stuff like the Pyridaz papers.

So people are looking into it. It seems still rather early stage of like it's not going to be prioritized in like the next fork, Pectra after 4-104. But is there a reasonable path to like actually scaling Ethereum DA pre the like full optimal dang sharding design in a shorter time horizon. I think that would be quite interesting, but still quite early on that. Neil, what big questions do you have? To add to something that John was saying earlier as a differentiator of eigen-DA, which is the reserve pricing, I'm hoping that the market solves

block-spaced financialization or even Celestia block financialization, so that'd be hedging, mostly. But I know that a lot of people talked about block space financialization for a long time, block-space derivatives, and that never really got built out. And it's partly because of the asymmetry of the pricing, because the block space price can vary, very wildly. And there's no one who can really absorb that kind of asymmetric risk. But if you can somehow involve the blob proposers, then maybe there's some way to offer physical delivery. But that's an area of research that I've been following pretty closely. Well, guys, this has been absolutely phenomenal. Thank you so much for joining us today and

explaining the world of data publishing. We'll conclude on that note, try to mean that into existence. And thank you so much, guys. Great. Thanks for having us on. Bankless Nation, got to let you know. Of course, crypto is risky. You could lose what you put in. But we are headed west. This is the frontier.

It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.