Can modular blockchains be the next bull story What makes them special?
Can modular blockchains be the next bull story What makes them special?
Originally published by Ignas.lens | DeFi Research, compiled by The Tao of DeFi.
Modular blockchains could be the key to unlocking a whole new crypto world. It's a growing story for the next bull market.
What makes modular blockchains different and why should you care about them?
Bitcoin and ethereum are monolithic blockchains.
In a monolithic blockchain, a single layer handles all three core functions.
- Consensus: Ensure agreement on the current state of the blockchain.
- Data Availability: Transaction Data
- Execution: Transaction processing
The problem with monolithic blockchains is that the nodes need to perform all 3 actions at the same time. This is not an easy task.
It leads to the blockchain trilemma. For example, Ether L1 sacrifices scalability to achieve decentralization.
This leads to high gas costs and slow transactions.
This is where the modular blockchain comes in handy.
Modular blockchains focus on only a few functions and offload the rest to a separate layer.
It allows for better specialization and optimization of specific tasks.
Modular blockchains consist of multiple layers, each with its own specialized functions. For example, one layer can handle execution, while another layer handles data availability and a third layer handles consensus.
For example, Rollups handles transaction execution by bundling multiple transactions into a single transaction. The data is then published to the consensus layer 1.
This is how Optimistic rollups (Optimism/Arbitrum) or zkRollups (zkSync/Starkware) work.
To further improve scalability and maximize data availability, Ether will use a sharded design.
In short: shards can process transactions in parallel or act as a storage "repository" for different blockchain data blocks.
This allows nodes to store only the data published on their sharded chains, thereby reducing storage requirements and improving performance.
This is a complex topic, but this blog post is a good introduction to.
Thanks to rollup and sharding, Ether is becoming a modular blockchain.
The slice is being developed in phases - the next upgrade, EIP-4844, will be available in mid-2023.
It reduces the cost of L2 rollup by a factor of 10-100!
BitDAO announces another modular design
BitDAO will launch "Modular Ether Layer 2" with three layers.
- One level for transaction execution
- Another layer for transaction finality
- Third is data availability
Gas fees will be paid in $BIT
In addition, modular blockchains allow for easy start-up of new blockchains as they can leverage existing modular blockchains for their offloaded functionality. This reduces deployment time and minimizes costs.
Cosmos SDK already allows for simple deployment of application-specific blockchains.
However, these Cosmos Hubs (dApps) do not share security - but that will change with the introduction of Atom 2.0 and Interchain Security!
Another example is Celestia, which bills itself as "the first modular blockchain network".
It focuses on consensus and data availability, offloading execution to a separate chain. It doesn't even have smart contracts.
Celestia's "vision is to combine Cosmos' sovereign interoperability zone with rollup-centric Ether with shared security".
In practice, this means that applications/chains can be started quickly using their own governance rules, while sharing security guarantees.
Overall, modular blockchains offer advantages over single designs, such as improved scalability to solve the blockchain trilemma.
Delphi Digital calls it a paradigm shift: "We expect their network effects to become increasingly evident in the coming years."
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