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The primary sensible contract blockchain, Ethereum, was monolithic by design, which means it manages its personal execution, settlement, consensus, and information availability. Through the years, new decentralized purposes developed, resulting in elevated demand for blockspace. When the demand for blockspace is greater than its provide, the constrained availability restricts the vary of potential purposes, inflicting a major obstacle to utility and widespread adoption.
This limitation known as the scalability trilemma or, in a nutshell, the concept no public blockchain can concurrently obtain most decentralization or safety to realize optimum scalability. To beat the restrictions of the scalability trilemma, modularity has emerged as a approach of outsourcing core elements optimized to resolve important features.
The modular blockchain thesis facilities on function specialization. It proposes decentralizing conventional blockchain features—like execution or information availability—throughout specialised networks. By segmenting these features from a singular L1 into distinct layers, blockchains may be tailor-made for optimum efficiency in particular areas, considerably boosting customization, effectivity, and, the place essential, decentralization, safety, and scalability.
Given the varied vary of use circumstances, these features may be totally different. A modular community might be specialised to push oracle value feeds, present zero-knowledge proving providers, make accessible information, or allow a extra scalable execution layer on prime of one other underlying blockchain.
The necessity for modularity within the crypto business
Ethereum exemplifies the gradual transformation right into a modular world. The chain was first launched with a monolithic design, following within the footsteps of Bitcoin. Arbitrum, a layer-2, represents the success story of rollups in separating the intensive computation wanted for scalability off-chain whereas settling again on-chain. Many extra initiatives have adopted this design because of the useful resource effectiveness and less expensive design of processing transactions utilizing rollups.
It doesn’t cease there. Networks that assist builders see and unlock the worth of modularity have been on the rise. Celestia is a superb instance of fixing an apparent drawback: the numerous value of storing information availability (DA) again to Ethereum. Whereas rollups permit for larger throughput, the price of transacting continues to be comparatively excessive as a result of it in the end is dependent upon the storage value of the settlement layer. An answer to this drawback is to supply an alternate DA layer.
The conclusion {that a} single monolithic design can’t meet at the moment’s blockchain calls for and not using a trade-off is why the house is shifting in direction of modularity. Ethereum is probably the most safe blockchain with sensible contracts however has continued to face numerous shortcomings with processing transactions and fuel charges.
Along with fixing blockchain’s architectural challenges, it’s changing into clear that further providers are essential for enabling new use circumstances and pushing for web3 adoption. Examples of such add-on providers embrace oracle providers, decentralized RPC, ZK prover networks, AI, to call just a few. Nevertheless, blockchains can’t assist these providers natively because of the further overhead, {hardware} necessities, or technical incompatibilities. Given the composable nature of the modular structure, blockchains don’t must assist every thing themselves anymore—every thing may be plug-and-play like legos.
For instance, one unsolved drawback that this house will carry on tackling is round confidentiality. A lot of the extensively adopted blockchains at the moment are clear and can’t add on-chain confidentiality with out requiring resource-intensive {hardware} for his or her validators when using cryptography methodologies similar to zero-knowledge proofs (ZKP) or totally homomorphic encryption (FHE).
Past the prevailing 4 blockchain layers (execution, settlement, information availability, and consensus), a confidentiality layer on prime of present dApps is a important lacking piece that may allow internet new use circumstances that aren’t possible on prime of clear blockchains. Inco is an instance of a modular protocol that acts because the fifth layer—confidential computing—by introducing totally homomorphic encryption (FHE) to Ethereum and different blockchains with out altering the bottom protocol.
Right this moment, modular protocols are gaining traction, and with the widespread adoption of decentralization, they may doubtless turn into the usual for constructing in web3. This normal will undoubtedly disrupt the vertically built-in strategy of monolithic chains and faucet into particular Lego blocks that may be matched to create distinct modular stacks. This implies initiatives will use the modules they want for his or her particular wants as an alternative of making an attempt to do every thing.
It will unlock infinite scalability as a result of a community might rely on Ethereum for safety, Transfer because the execution atmosphere, Celestia for information availability, and Inco for confidential computing. The final word purpose is for disparate ecosystem modules to coexist and develop collectively.
The panorama of blockchain expertise is poised for vital growth with the arrival of modular architectures in 2024 and past. These novel blockchains delegate a minimum of one of many quintessential features—settlement, consensus, confidentiality, information availability (DA), or execution—to a different distinct blockchain framework.
