Key Points

  • Modular blockchain introduces a multi-layered approach that optimizes the network’s scalability, security, and customization.

  • Modular blockchains separate execution, settlement, consensus, and data availability into separate functions to increase throughput while retaining decentralization and security.

  • Projects such as Celestia and Dymension are exploring the potential of modular blockchain structures to address challenges associated with the blockchain trilemma (i.e., the balancing act between security, scalability, and decentralization).

Introduction

The blockchain space has come a long way since its inception, with developers continually seeking ways to improve scalability, security, and decentralization. The traditional all-in-one approach of a single chain handling all tasks often faces challenges in terms of scalability, upgradeability, and hardware requirements for validator nodes. In response to these limitations, the concept of modular blockchains has emerged as a promising alternative.

What is a modular blockchain?

Unlike the monolithic blockchain model, the modular blockchain uses a multi-layered architecture that divides each major task into specialized functions. By assigning specific functions to different layers, the modular blockchain can create a more scalable and customized system without compromising decentralization or security.

How does modular blockchain work?

Modular blockchains usually run four main functions separately, namely execution, settlement, consensus, and data availability. Execution involves transaction processing, settlement ensures the security of the transaction target address, consensus verifies the authenticity of the transaction, and data availability is responsible for the storage of transaction data. This modular design is more flexible and efficient, providing an effective solution to the scalability of the blockchain trilemma.

Introduction to Modular Networks

There are many different implementations of modular blockchains, each with its own characteristics. Well-known ones include rollups, validium, and sovereign rollups.

  • Aggregation is the execution layer that processes transactions, and then publishes the data to the Layer 1 network (L1).

  • Validium is another form of aggregation that processes transactions off-chain before submitting data to L1. Validium also relies on a network of Proof of Stake validators.

  • Sovereign rollups are unique in that they are both an execution layer and a settlement layer, with data blocks published directly to the rollup. Sovereign rollups do not require L1 smart contracts for verification.

Advantages and disadvantages of modular blockchain

Modular blockchain architecture offers significant advantages over monolithic designs, such as greater scalability, flexibility, and interoperability. But in addition to the above advantages, the construction of modular blockchain will be more complicated. For users and developers, the learning threshold is still not low.

advantage

1. Enhanced scalability: Modular blockchains excel in scalability by distributing resource-consuming tasks to different layers, thereby increasing overall throughput without compromising decentralization.

2. Flexibility and interoperability: The modular base layer is designed to be highly flexible and facilitate interoperability between multiple Layer 1 and Layer 2 chains. With this flexibility, developers can run the Ethereum Virtual Machine (EVM) or other virtual machines of their choice.

3. Multi-functional application development: The modularity of blockchain supports the development of general applications, reducing the obstacles for users in the blockchain ecosystem. With this support, secure and efficient multi-functional decentralized applications (DApp) will emerge in an endless stream.

4. Customizable technology stack: Developers can freely choose virtual machines that suit their needs, providing a customizable computing stack, which helps create an environment that is easy for developers to operate and more flexible.

shortcoming

1. Development complexity: Building on a modular blockchain is more challenging than building on an integrated blockchain. This complexity makes it difficult for users and developers to learn, which may slow down the speed of application popularization and development.

2. Limited testing: Unlike integrated networks such as Ethereum or Bitcoin, modular networks are not sufficiently tested in practice. Mature chains have undergone extensive testing and verification, while modular networks are not comparable, and people can't help but worry about whether the network can adapt smoothly in a high-traffic real-world environment.

3. Early Development: Modular blockchain development is still in its infancy. Although the market has shown great interest in modular networks, the fact is that these networks lack the extensive real-world testing and validation required for mature networks. Modular blockchains are still in the early stages of development, and their long-term stability and effectiveness remain uncertain.

An example of a modular blockchain

Celestia

Celestia is a modular network within a modular blockchain that allows secure scaling of blockchains without compromising performance. Rollup and Layer 2 networks can use Celestia to provide transaction data to anyone with fast and efficient data availability. To achieve this, Celestia implements features such as data availability sampling and sovereign rollup. Celestia can scale up block size through data availability sampling as more nodes join the network.

Dymension

Dymension is a network of modular blockchains called "RollApps" that are easy to deploy quickly. Dymension works similarly to traditional full-stack web applications. The RollApps network acts as a front-end for user interaction, while Dymension acts as a back-end, coordinating the entire ecosystem. In addition, the Data Availability Network acts as a database, providing data when necessary.

Conclusion

Modular blockchains are versatile and interoperable, laying the foundation for improving the efficiency and security of decentralized ecosystems. Modular networks may eventually support more DApps and use cases, which is expected to push DeFi to new heights. The development team will continue to focus on solving the scalability trilemma, and the application of modularity in the cryptocurrency field is expected to expand.

Further reading

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