modular blockchain: pluggable solutions drive performance breakthroughs

Monolithic blockchains are known for their comprehensiveness, independently handling various aspects of the network, from data storage to transaction validation. In contrast, modular blockchains can provide performance support and a smooth user experience on specific functions by separating the different functionalities of the blockchain into independent modules, addressing the "impossible triangle" problem to some extent.

Ethereum, as the first blockchain platform to support smart contracts, provides fertile ground for modular design. With the development of blockchain technology, the Bitcoin ecosystem has also begun to explore modular possibilities by adding new modules to achieve more advanced functions, such as improved privacy protection, more efficient transaction processing, or enhanced smart contract capabilities.

Modular technology represents a more "soulful" approach to pluggable products, with more flexible and customizable Blockchain solutions expected to emerge in the future, where various services and functions can be easily inserted and removed like Lego blocks. This flexibility allows developers to quickly build and deploy Blockchain solutions based on the specific application scenario requirements.

modular blockchain analysis

When we discuss modular blockchain, we must first understand the concept of monolithic blockchain. Monolithic chains like Bitcoin and Ethereum are known for their comprehensiveness, independently handling various aspects of the network, from data storage to transaction validation, and on to smart contract execution. In this process, monolithic chains play a versatile role, engaging in all stages.

Taking Ethereum as an example, a mature monolithic Blockchain can generally be roughly divided into four architectures:

• Execution Layer
• Settlement Layer
• Data Availability Layer/ DA Layer
• Consensus Layer

Through this analogy, we can more clearly understand how the various architectures of Blockchain work together. A monolithic Blockchain executes all functions on the same chain, while a modular blockchain is a new type of Blockchain architecture that breaks down the Blockchain system into multiple specialized components or layers, with each component responsible for handling specific tasks such as consensus, data availability, execution, and settlement.

A modular blockchain is like a group of experts, focusing on deep exploration and technological innovation in their respective fields. This focus allows modular blockchains to deliver exceptional performance and user experience in specific functions, for example, they can provide faster transaction processing speeds at lower costs.

In terms of node architecture, monolithic chains rely on full nodes that must download and process the entire Blockchain data copy. This not only places high demands on storage and computing resources but also limits the scalability of the network. In contrast, modular blockchains use a lightweight node design that only needs to process block header information, significantly increasing transaction speed and network efficiency.

A notable advantage of modular blockchain is its flexibility and collaboration. They can outsource non-core functions to other experts, creating a synergy that significantly enhances overall performance. This design philosophy is akin to Lego bricks, allowing developers to freely combine different modules according to project needs, creating diversified solutions.

Despite the advantages of monolithic chains in global control, security, and stability, they also face challenges in scalability, upgrade difficulties, and adapting to new demands. Modular blockchain stands out with its high flexibility and customizability, simplifying the creation and optimization process of new Blockchains.

However, modular blockchain also faces its own unique challenges. Its complex architecture increases the workload for developers in design, development, and maintenance. As an emerging technology, modular blockchain has not yet undergone comprehensive security testing and market volatility challenges, and its long-term stability and security still need further verification.

Advantages of Modular Blockchain

Why is modular blockchain technology receiving widespread attention and being predicted as the "future trend"? This is closely related to the well-known "impossible triangle" theory in the blockchain field.

The "impossible triangle" of Blockchain refers to the difficulty for a blockchain network to optimize the three core attributes of security, decentralization, and scalability simultaneously.

• Scalability focuses on the network's ability to handle a large number of transactions and its capacity to operate efficiently and cost-effectively as users and transaction volumes grow. It is typically measured by TPS (transactions per second) and latency (the time required for transaction confirmation).
• Security involves the cost and difficulty of protecting the Blockchain network from attacks. For example, Bitcoin's POW mechanism requires an attacker to control more than 51% of the total computing power of the network, while Ethereum's POS mechanism requires more than ⅓ of the nodes to collude.
• Decentralization describes the operation of the network not relying on a single central node, but rather being distributed across numerous nodes. The more nodes there are and the wider the geographical distribution, the higher the degree of decentralization of the network.

The core idea of the "impossible triangle" is that it is difficult for a blockchain system to optimize all three characteristics. For example, among many public chains, Bitcoin and Ethereum stand out in decentralization and security due to their widespread node distribution and sufficient number of nodes.

However, they sacrifice a certain degree of scalability, resulting in slower transaction speeds and higher transaction costs: Bitcoin's block time is about 10 minutes, Ethereum's TPS is approximately 13, and during times of high transaction volume, Ethereum's transaction fees can reach hundreds of dollars.

It is against this background that modular blockchain technology has emerged, addressing the challenges of scalability and transaction costs faced by traditional public chains by allocating different functions to specialized modules. For example, Bitcoin's Lightning Network and Ethereum's Rollup technology are both embodiments of modular thinking.

The advantages of modular blockchain lie in its layered architecture, allowing each layer to be optimized for specific needs. The data layer can focus on data storage and verification, while the execution layer can handle smart contract logic. This separation not only enhances performance and efficiency but also promotes interoperability between different Blockchains, providing a foundation for building an open and interconnected ecosystem.

In summary, modular blockchain technology provides a new way to address the limitations of traditional public chains. It achieves higher scalability and lower transaction costs while maintaining decentralization and security, which has far-reaching implications for the widespread application and long-term development of blockchain technology.

Modular Blockchain Project Analysis

A modular blockchain can be divided into different types based on its architectural characteristics. Among these types, the data availability layer and the consensus layer are often designed as a unified whole due to their close interdependence. This is because when a node receives transaction data, it typically also determines the order of the transactions at the same time, which is the core of blockchain security and immutability.

Based on this design principle, we can understand the different projects of modular blockchain from three aspects: the execution layer, the data availability layer, and the consensus layer, as well as the settlement layer.

Execution Layer: Layer 2

Layer 2 technology, as an extension of the execution layer in blockchain architecture, embodies the concept of modular blockchain. It aims to enhance the scalability of the main chain by building off-chain networks, systems, or technologies on top of the underlying blockchain.

Layer 2 solutions allow for faster and more cost-effective transaction processing while maintaining the security and decentralization features of the underlying Blockchain. According to the dune dashboard created by @0xning, the gas consumption for Layer 2 verification and settlement on the Ethereum ecosystem averages less than 10%, significantly saving users on transaction costs.

Rollup technology is currently the most mainstream solution for Layer 2, with the core idea being "off-chain execution, on-chain verification," where computations and other tasks are executed off-chain and then the calldata is uploaded back to the main network.

off-chain execution

In the Rollup model, transactions are executed off-chain, while the underlying blockchain is only responsible for verifying the transaction proofs in the smart contracts and storing the original transaction data. This design significantly reduces the computational burden on the main chain and decreases storage requirements, allowing for more efficient transaction processing.

To further reduce costs, Rollup adopts transaction bundling technology. It can be compared to cargo consolidation in logistics; sending each piece of cargo separately would incur high shipping costs. The Rollup technology significantly lowers the cost of each transaction by bundling multiple transactions together, requiring only one "transport".

On-chain verification

On-chain verification is key to the security of Layer 2 networks. Layer 2 networks must provide cryptographic proofs to resolve potential divergences on the underlying Blockchain. Currently, the two mainstream proof mechanisms are fraud proofs and validity proofs, which respectively support Optimistic Rollups and ZK Rollups.

The proof of error of Optimistic Rollups

Optimistic Rollups adopt an optimistic assumption that all transactions are valid by default unless there is clear evidence of an error. This model relies on a challenge period for fraud proofs, where any network participant can submit proof to challenge the state of the smart contract, ensuring the fairness and transparency of the network.

According to data from L2BEAT, there are currently 16 Layer 2s using the Optimistic Rollups mechanism, such as: certain trading platform, certain platform, Base, Blast, etc.

Validity proof of ZK Rollups

Unlike Optimistic Rollups, ZK Rollups adopt a more cautious approach, requiring all transactions to undergo validity proof before being accepted. This proof mechanism is similar to a verification process, ensuring that every transaction and computation in the Layer 2 network is accurate.

In short, validity proofs are the cornerstone of ZK-Rollups, which require each batch of transactions to be accompanied by the corresponding proof, thereby ensuring that the smart contracts on the underlying Blockchain can verify and approve state changes. For validating nodes, ZK Rollups provide a zero-error settlement mechanism, as each transaction must pass strict validity verification.

According to data from L2BEAT, there are currently 11 Layer 2 solutions that use the ZK Rollups mechanism, such as: Linea, Starknet, certain DEX, etc.

Data Availability Layer

Celestia

Celestia, as a pioneer in the modular blockchain space, is essentially a data availability layer that provides a solid foundation for the development of dApps and Rollups. By deploying on Celestia's data availability layer and consensus layer, application developers can focus on optimizing execution logic while leaving the complexities of data availability and consensus mechanisms to Celestia.

Celestia's architectural design provides diverse solutions for modular scalability, and its architecture mainly includes the following three types:

• Sovereign Rollup: Celestia provides a data availability layer and consensus layer, while the settlement layer and execution layer are independently implemented by their respective sovereign chains.
• Settlement Rollup (e.g. Cevmos project): On top of the DA and consensus layer provided by Celestia, Cevmos provides settlement layer services, while the application chain takes on the role of the execution layer.
• Celestium: The data availability layer is managed by Celestia, while the consensus layer and settlement layer rely on the robust network of Ethereum, with the application chain continuing to focus on the execution layer.

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