New Frontier: Modular Blockchain
Modularization — Future of Blockchain
Blockchain technology has been gaining a lot of attention in recent years for its potential to revolutionize a wide range of industries. However, traditional blockchain models can be inflexible and difficult to scale. In his Endgame article, Vitalik described what he believed to be the ultimate form of Ethereum, and spent a lot of space describing a new Ethereum built by rollups and data availability layers. Undoubtedly, to some extent, it points out the way of breaking the situation of Ethereum in the next ten years — modularization.
At Gate Ventures, this is where we see opportunities from the modular blockchain space come in. Modular blockchain is a way to build blockchain networks that can be customized to fit specific business needs. Instead of using a single, monolithic blockchain, modular blockchain allows for the creation of multiple, independent blockchains that can be connected and disconnected as needed. Modular blockchain solutions nowadays are centering around the data availability layer to enhance scalability and decentralization. Besides Danksharding, rollups functioning as data availability layers and dedicated data availability layers like Celestia are both such modular blockchain solutions to revolutionize the status quo dominated by monolithic blockchains.
The Monolithic Loop
A monolithic blockchain is a single, unified blockchain that is used to perform all functions and transactions. Monolithic blockchains like Bitcoin, Ethereum, and Solana have a fixed structure with four essential functions: data availability, consensus, settlement, and execution, where all nodes in the network have the same capabilities and perform the same functions. This can make it difficult to scale and adapt to specific use cases, as all nodes must process all transactions and data.
Blockchain industry is stuck in an endless cycle of new monolithic L1s replacing the old L1s for each improvement discovered. Each new L1 attempts to solve the problems of the previous ones, but they end up following the same business strategy. To break free from this cycle, we need to focus on modularity, which is a key feature of blockchain technology. By prioritizing modularity, we can create blockchain platforms that prioritize data availability and consensus, while leaving the execution chain to other layers. This approach will allow developers to easily build blockchains that are optimized for specific use cases, rather than forcing them to conform to a monolithic structure.
Modular Blockchain for Trilemma
In a typical blockchain, the consensus layer, execution layer, and data availability layer are all compressed into a single monolithic structure, which limits scalability. For instance, to achieve high scalability, one might increase the block size and reduce the number of nodes, but this would lead to less decentralization. Conversely, adding more nodes would require more hardware and result in slower transaction speeds.
A modular blockchain is a network of multiple, independent blockchains that can be connected and disconnected as needed. Each module or blockchain can be customized to fit specific use cases, allowing for greater flexibility and scalability, efficient use of resources, and improved performance of the overall network. By separating the execution layer from the consensus layer, and ensuring data availability through techniques such as data availability sampling (DAS), it is possible to achieve high scalability and functionality without sacrificing security or decentralization. Modular solutions, including rollups that function as execution and data availability layers and dedicated modular blockchain layers such as Celestia, seek to address this problem.
Ethereum’s rollup-centric roadmap leads to the current ecosystem of many Optimistic and zk-rollups. The trilemma challenge of achieving high scalability, security, and decentralization in a blockchain has been addressed through approaches such as sharding at the Layer 1 level, or through the use of Layer 2 solutions such as rollups, where the execution layer is separated from the main blockchain, and consensus is assured by the underlying blockchain.
While rollups are mostly recognized as solutions for the execution layers (e.g. Optimistic and zk-rollups), some rollups work quite well as data availability layers (e.g. zkPorter and Polygon Avail). Ethereum has conducted extensive research on DAS and its ability to support Layer 2 solutions, and Vitalik Buterin has noted that if a blockchain can publish and guarantee the availability of a sufficient amount of data, it can support Layer 2 protocols and achieve high scalability and functionality, even with limited computational capacity.
Rollups were the early-form of modular blockchain solutions to address data availability issues where L1s use rollups as their DA layers. This way, it is L1-centric without losing power to 3rd-party DA solutions until the inception of Celestia. The concept of modular blockchain was later heavily advocated by Celestia, which wants to be the center of modular blockchains with Ethereum and other L1s using Celestia’s own data availability solutions as default. Through a layered architecture explained below, Celestia delegates execution and validation to other modular layers, and focuses solely on providing a data availability layer for transaction ordering and data availability guarantees through DAS.
Layered Modular Architecture
In the modular blockchain space, the layered modular solution involves separating the consensus/security layer, execution layer, and data availability layer.
The execution layer is responsible for quickly processing transaction orders while ignoring data availability or security. Its primary function is to extract data, execute it, and send it to the appropriate security or data availability layer, depending on the platform’s structure. Common examples of execution layers include Layer 2 solutions like Starkware’s Validium/StarkEX, Offchain Labs’ Arbitrum, Matter Labs’ zkSync, and Optimistic Rollup.
The security/consensus layer represents the fundamental layer of a blockchain network, and it presents significant technical and non-technical challenges for implementation. Non-technical challenges include path dependence and historical precedent. Bitcoin and Ethereum are the only two consensus layers that are considered globally recognized due to their widespread adoption and established security track records.
The data availability layer serves as the standard layer for storing and organizing data. It can be implemented in a decentralized, semi-decentralized, or centralized manner and is responsible for accepting new data and transaction layer changes.
The settlement layer is responsible for verifying the execution of rollups and resolving disputes. The settlement layer is an optional layer, and its role is similar to that of the U.S. Supreme Court in the court system, providing final arbitration on disputes.
By adopting the layered modular solution, as seen in Optimism, transactions can be dramatically accelerated without compromising security or falling into the scalability trilemma. The mainstream monolithic design runs all layers together, but Layer 2 solutions and Celestia separate the execution and the data availability layer from the others, marking the beginning of the age of modular blockchain.
Execution and Consensus Modularity
The execution layer aims to get transaction orders to execute quickly, regardless of data availability and security. Layer 2s are typical modular execution layers for Ethereum, such as Optimistic rollup, ZK rollups, state channel, sidechains, Validium, etc. Due to their on-chain data model and inherent decentralization, Optimistic and ZK rollups have gained the most traction in the industry so far.
The security layer is where consensus is achieved. While Bitcoin and Ethereum have established global consensus, other Layer 1 solutions, such as Cosmos, have adopted a different approach to security guarantees. Rather than relying solely on the security of the Cosmos Hub, each Tendermint hub/zone contributes to the security and consensus of the system. Although single-chain security may be diminished, the overall security of Cosmos remains high compared to high-performance monolithic chains. Additionally, if a single chain fails, other chains within the Cosmos ecosystem can assume similar tasks without being affected, contributing to the resilience of the network.
Avalanche stands out as a monolithic chain that exhibits modularity in its architecture. Unlike other Layer 1 chains, Avalanche employs a hybrid approach with its P Chain, C Chain, and X Chain architectures. The contract chain © is responsible for deploying applications and is fully compatible with Ethereum EVM. On the other hand, X Chain facilitates asset issuance and funds transfer. Meanwhile, the P Chain serves as the authentication node coordinator and subnet creator and tracker, enabling the assembly of AVA nodes into custom chains. Through the P Chain, Avalanche can support hundreds of chains without having to construct a separate underlying network. While Avalanche’s modularity differs from the current mainstream modular narrative, it remains significant.
Although modular execution and consensus solutions are crucial in addressing the trilemma, we are seeing more modular blockchain innovations on the data availability layer to ensure improved storing and sorting data and accepting new data along with transaction layer changes.
Data Availability Solutions in the Modular Landscape
To tackle data availability issues, Ethereum has danksharding to improve the scalability through an enhanced data availability layer. Validum and other layer 2s functioning as data availability layers like zkPorter, and Polygon Avail are alternative solutions, with Celestia adopting new approaches via a dedicated data availability layer to support higher block sizes.
1.Posting blockchain data on-chain and Danksharding
In order to ensure data availability in the current blockchain landscape, one common method is to post blockchain data on-chain. However, rollup implementations, which use Ethereum mainnet as a data availability layer, face a significant challenge. Currently, Ethereum’s architecture relies on full nodes to guarantee data availability by downloading the entire block. As block sizes increase, this leads to increased hardware requirements for full nodes, which in turn can centralize the network.
Ethereum’s solution to this issue is to move towards a sharded architecture in the future, which would utilize DAS to secure the network using both full nodes and light clients. However, this only partially addresses the problem. Rollup architecture presents another fundamental issue, which is that rollup blocks are dumped to Ethereum mainnet as calldata. This becomes problematic at scale as calldata is expensive, leading to bottlenecking for L2 users at a cost of 16 gas per byte, regardless of rollup transaction batch size.
Danksharding is a promising development in the Ethereum roadmap. It is designed to transform and optimize Ethereum L1 data shards and blockspace into a “data availability engine.” This engine will enable L2 rollups to implement low-cost, high-throughput transactions. Danksharding has the potential to significantly improve the scalability of Ethereum by creating a more efficient and effective data availability layer. By utilizing this new approach, rollups can achieve faster transaction processing times while maintaining the security and decentralization of the Ethereum network.
2.Validium and rollups functioning as data availability layers
StarkEx Validium, with transaction speeds of 9,000+ TPS, is an alternative solution to achieve increased scalability and throughput while ensuring data availability. With Validiums, granular transaction data is sent off-chain (with respect to the origin) to a data availability committee, PoS guardians, or data availability layer. This allows for data availability to be shifted from Ethereum calldata to off-chain solutions, which bypasses the fixed byte gas costs associated with increased rollup usage. By doing so, Validiums provide a means to improve scalability and reduce costs without sacrificing data availability guarantees.
While StarkEx Validum is the only validium currently used in practice, there are other solutions such as Volition, zkPorter, and Polygon Avail:
Volition— Like a zkRollup, volitions commit state roots and proofs to Ethereum. However, unlike a rollup which posts transaction data to the same L1, a volition lets users choose their alternate data availability solution like Validium.
zkSync/zkPorter — zkSync has introduced a solution called zkPorter to address data availability issues. By utilizing off-chain data availability, zkPorter is able to support transaction speeds of 20,000+ TPS, which is much faster than current rollups. The upcoming zkSync 2.0 will include both zk-rollups, which use on-chain data availability, and zkPorter, which uses off-chain data availability. The processing scheme of zkPorter is similar to Starkware’s Volition, in which users can choose between on-chain and off-chain data availability. Volition allows for on-chain or off-chain accounts to be specified for each transaction, as Starkware previously did, while zkPorter must specify on-chain or off-chain accounts in advance. To ensure data availability in zkPorter’s accounts, a guardian system has been introduced. Guardians hold the zkSync token and participate in the PoS network to provide data availability support. Any failure to provide data availability will result in a slash, and a guardian attack can only lock funds in the network, rather than steal them, greatly reducing the incentive for attacks. This security feature cannot be achieved by optimistic rollups, where attackers can transfer funds through the fraud-proof model.
Polygon Avail — Polygon Avail is the data availability layer of Polygon. Polygon Avail represents the future of modular blockchain by providing a data availability layer that enables each chain to take on different roles, delegating execution to other layers while focusing on data availability (and consensus). To address data availability concerns, Polygon Avail utilizes DAS to allow light nodes to participate in block verification. This innovative approach ensures the validity of transactions within block bodies without requiring fraud proofs, even when light nodes only track block headers. KZG commitment, a polynomial commitment scheme, is a special cryptographic method used by Polygon Avail to achieve this.
3.Dedicated data availability layers — Celestia
In the modular blockchain space, the rollup architecture has led to a new perspective that blockchains don’t necessarily need to provide execution or computation functions. Instead, they can focus on ordering blocks and ensuring the data availability of those blocks. This design philosophy has been embodied by Celestia, the first modular blockchain network that was previously known as LazyLedger.
Celestia is a “lazy blockchain” that delegates execution and validation to other modular layers and focuses solely on providing a data availability layer for transaction ordering and data availability guarantees through DAS. Its core premise is a combination of centralized block production and decentralized block verifiers, which allows even mobile phones to participate as a light client and help secure the network.
Thanks to the properties of DAS, rollups that connect to Celestia as a data availability layer can support higher block sizes (and hence, higher throughput) as the number of Celestia light nodes increases, while still maintaining the same probabilistic guarantees. This approach opens up new possibilities for scalability and decentralization in the blockchain space.
Future of Modular Blockchain
In summary, modular blockchain is a promising approach to addressing the trilemma of scalability, security, and decentralization, by separating the different layers of a blockchain into modular components, and enabling the use of Layer 2 solutions such as rollups to achieve high scalability and functionality while maintaining security and decentralization.
Despite the many benefits of modular blockchain, it’s important to note that it’s a relatively new technology, and there is still much research to be done. The future might be one that involves a multitude of modular app-specific or purpose-specific chains that are both scalable and interoperable, instead of just one. Modular blockchain architecture is still nascent and we are yet to see them implemented at scale, especially on the separation of execution and consensus where many problems like security and cost-minimization would occur.
However, with the increasing demand for more flexible and scalable blockchain solutions, it’s likely that we will see more and more businesses start to adopt modular blockchain in the coming years, and at Gate Ventures we will continue to support the early-stage startups in the modular blockchain space. After all, modular blockchain technology like DAS is clearly a visible path for Ethereum to achieve its Endgame future of anti-censorship and decentralized validation.
Author: Gate Ventures Richard Li
This article represents only the views of the researcher and does not constitute any investment suggestions.
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