Blockchain technology has rapidly advanced in the space of less than 20 years. From a Bitcoin P2P system to a fully-fledged digital economic system. The technology ushered in an age of trustless, transparent, and secure transactions not experienced before.
Nevertheless, despite the strides blockchain technology has made, it still faces challenges when trying to scale and become efficient.
This article dives deep into one of the solutions that tackle these challenges – Modular Blockchains.
What are Modular Blockchains?
Modular blockchains are a new type of blockchain architecture in which components such as consensus, data availability, and execution, are separated into different individual layers.
This approach allows blockchain networks to scale and be efficient because each module handles a specific function independently.
Modular blockchains also enable greater interoperability since different modules can be mixed and matched to suit different use cases and preferences.
Pros
- Modular blockchains are highly scalable since they can achieve higher throughput and lower latency, as each layer can optimize for its specific function.
- They are more efficient because they separate the main components of a blockchain, reducing the complexity and redundancy of the system.
- Modular networks are composable because they modularize the components of a blockchain
Cons
- Splitting the components of a blockchain introduces coordination and communication problems to modular networks.
- By adding more components to a blockchain, modular blockchains increase the complexity of the system.
- Increased diversification of the blockchain components creates new problems for modular blockchains such as:
- Dealing with the heterogeneity and fragmentation of the blockchain ecosystem.
- Dealing with the governance of cross-chain transactions.
- The complexity of modular blockchains makes it difficult for new blockchain users to use the system.
How Do Modular Blockchains Work?
A modular blockchain network works with the help of four main parts: execution, settlement, consensus, and data availability.
Each of the components has a different role and responsibility in the blockchain system.
???? Execution
This component processes the transactions and state changes on the network. This is the layer that enables you to interact with the network.
Whenever you see the prompt to sign a transaction on Metamask, it is this part that enables that feature.
Execution can either occur on-chain or off-chain. For example, a rollup is a type of off-chain execution layer that bundles many transactions together and periodically submits them to the blockchain for verification.
????⚖️ Settlement
This layer verifies the execution of rollups. If there are any disputes during or before execution, this is where they are resolved.
This layer is non-existent in monolithic chains, such as mainnet Ethereum, but is an optional part of the modular stack.
To better understand settlement, consider the U.S. court system. The settlement layer is the U.S. Supreme Court, providing the highest and final arbitration on disputes.
???? Consensus
The consensus layer arranges transactions by finality. Consensus is determined by a network of nodes that follow a set of rules and can be achieved through proof-of-work, proof-of-stake, or proof-of-authority.
Consensus ensures that the blockchain is consistent and secure and that no one can tamper with or censor transactions.
It is this layer that confirms your transactions before they become permanent blockchain records.
???? Data Availability
The Data Availability (DA) layer is where the data required to verify transactions and state changes is published and stored.
The DA is key for the security and integrity of the modular blockchain because it prevents malicious actors from hiding data that could invalidate transactions.
The DA layer makes sure data is available through various techniques, such as erasure coding, fraud proofs, or data availability sampling.
Top Modular Blockchain Projects to Invest in Today
Modular blockchains are still in their early stages of development and adoption, but they have already attracted significant attention from the blockchain community.
Some of the most notable projects exploring modular blockchains are:
1. Celestia
Celestia is a modular blockchain that focuses on data availability and provides a scalable, secure data layer for any execution layer. It uses erasure coding and data availability sampling to ensure that data is always available and verifiable.
Users who choose to use Celestia as their DA can choose their preferred execution and consensus mechanisms. Celestia is compatible with a wide range of roll-up solutions, such as Optimism, Arbitrum, and zkSync.
The modular network has secured itself as a core component of the Internet of Blockchains.
2. Avail
Avail is a modular blockchain that focuses on consensus, providing a scalable and secure consensus layer for any execution layer.
The network uses proof-of-authority and fraud proofs to ensure that transactions are ordered and finalized. Users who choose to use Avail as their consensus layer are free to choose any execution and data availability platforms they like. Avail is compatible with Fuel, Hermez, and StarkNet, and aims to become a universal validator for the Web3 ecosystem.
3. Polkadot
Polkadot is perhaps one of the oldest, and first modular blockchains to exist. However, Celestia’s hype overshadowed Polkadot’s light.
The Polkadot network focuses on interoperability, providing a scalable and secure interoperability layer for any blockchain. It uses proof-of-stake and parachains to ensure that transactions are relayed and validated across different chains.
Polkadot users can create and customize their own blockchains with their preferred execution, consensus, and data availability platforms. The network works well with Ethereum, Bitcoin, and Cosmos, and aims to become the go-to platform for cross-chain innovation and collaboration.
Final Thoughts
Modular networks can enable new and diverse use cases and applications, as well as empower users and developers with more options and control over their blockchain experience. Modular blockchains are the future of blockchain technology, and they are here to stay.