What is Modular Blockchain?

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4 Jan 2024

Scalability is still a major problem for blockchain to achieve mass adoption. The monolithic blockchain structure is one of the causes of the low level of scalability. Now, modular blockchain is starting to be developed as a solution to overcome this scalability problem. What exactly is a modular blockchain? And how can the technology be a solution? Check out the complete review in the following article.

Article Summary

⛓️ A modular blockchain is a blockchain that separates tasks into specific layers, as opposed to a monolithic blockchain that runs everything in one layer.
♻️ Modular blockchain is a solution to overcome the blockchain trilemma, namely the challenge of balancing scalability, security and decentralization.
👍 The main advantages of modular blockchain include better scalability, flexibility for the development team, and efficiency in transaction processing.
🚨 Modular blockchains also come with some challenges such as high complexity and potential security risks.
🎯 With the increasing need for scalability and flexibility, modular blockchain has the potential to become the foundation of future blockchain technology.

What is Modular Blockchain?

Before discussing modular blockchain , we will again remember the structure of the layers of a blockchain : execution , settlement , consensus , and data availability . Generally, blockchain carries out its duties on the various layers as one whole, or what is known as a monolithic blockchain.

Therefore, recently modular blockchain has appeared as a solution to this problem. Instead of carrying out all tasks as one unit, modular blockchain breaks down these layers and carries out their tasks separately according to their respective specializations.

To make things easier, let's first understand the "tasks" of each layer:

Execution. The layer where transactions are executed as well as placement and interaction with smart contracts.
Consensus . The layer where the contents and orders of a transaction reach agreement.
Settlements . The layer where transactions are completed, resolves disputes (if any), provides validating proofs , and bridges betweendifferent execution layers .
Data Availability . The layer that stores and ensures the availability of data to be used as a reference for all transactions.

By separating and each layer carrying out its duties, the block chain can be more effective. So, the resulting block space will be larger, the validator's job will be lighter and they will simply focus on shards . Ultimately, this can improve transaction processing on a blockchain .

How Modular Blockchain Works

As more and more dApps are built on monolithic blockchains , several problems arise. Starting from limited flexibility for the development team to congested networks causing costs to increase. As a result, building modular blockchains has become an approach to try to overcome these problems.

As the name suggests, it works on the principle of modularity. Simply put, it separates a system into several parts which can later be combined to achieve certain goals. Modularity depends on specialization, meaning that each component can only do a few things, but only well. For example, modular components are similar to Lego which can be combined to form various structures.

A modular blockchain has components in the form of a modular stack that can be combined. It acts like a disassembled module, so it can be replaced or combined according to needs.

The modular blockchain architecture consists of three layer structures that run independently. Each layer can be developed, updated and replaced by the development team, making the blockchain more flexible. Considering that each layer has its own specialization, its performance will be more optimal. So, it can increase scalability and reduce dApps costs.

Difference between Modular and Monolithic Blockchain

As explained previously, the main difference between modular and monolithic blockchains lies in the layer structure and the way each one accomplishes its tasks. With a monolithic architecture, blockchain performance will be much limited because everything is done by one unit. Meanwhile, in a modular architecture, each layer is separated, making performance more optimal and enabling specific use cases .

Advantages and Disadvantages of Modular Blockchain

Advantages of Modular Blockchain

⚡ Scalability : The problem of scalability in blockchain cannot be separated from all activities carried out simultaneously on one layer only. By separating activities and layer structures, modular blockchains can increase scalability by modifying components that need updating.
🧩 Flexibility: It gives complete control to the development team when creating applications. They can create mechanisms, rules, and so on according to needs and principles. This is different from a monolithic blockchain where every mechanism and rules have been determined.
🤝 Shared Security : Modular blockchains no longer require development teams to create consensus mechanisms and validators from scratch. They can get both of these things from other networks in the same ecosystem. By having the same security aspects, it can help create secure bridges between chains . An example is a modular Layer-2 network.

Disadvantages of Modular Blockchain

🌀 Complexity : It has a more complex architectural design. For example, the execution layer must have mechanisms such as fraud proofs and validity proofs to allow the security layer to enforce valid state transitions off -chain . It also needs to consider composability for the applications that will be built on it.
🔐 Security : It cannot guarantee the quality of their own security levels. If the security layer (generally controlling consensus and data availability ) is not effective, then it is at risk of failure.
🪙 Value Tokens . Some modular blockchains will have difficulty creating value in their native tokens due to minimal use. For example, if the focus layer is aimed at consensus and data availability , then its utility token will have a lower value than the utility token at the execution layer .

Example of a Modular Blockchain

Example of a modular blockchain. Source: Volt Capital

1. Layer 2 Ethereum

One effort to increase scalability on the blockchain is to use rollups. The technology is used by Ethereum Layer 2 (L2) networks such as Arbitrum and Optimism. The concept and way rollup works makes it similar to modular blockchain.

The reason is, rollup as L2 works by separating the execution layer from the main network (Ethereum). Then, Ethereum as L1 continues to carry out the settlement, consensus and data availability layer functions . As a result, Rollups can optimize the execution layer by having faster block times and larger blocks , but without sacrificing Ethereum's security and decentralization aspects.

However, the rollup scalability solution still leaves one main problem, namely the data availability layer which depends on Ethereum. This means that when the Ethereum network is congested, gas prices on the L2 network will also increase. Additionally, development teams cannot create DApps that are not supported by EVM.

2. Celestia

Celestia is the first modular blockchain network created. It offers an easy and cheap process for creating blockchain and dApps by providing a consensus layer and data availability . Unlike Ethereum, Celestia is fully modular, providing flexibility for development teams to modify their dApps as needed.

Celestia uses rollup technology to make all this possible. You could say that Celestia is like a house whose job is to receive rollup transactions from various dApps. After that, Celestia's job is to process all transactions and ensure data availability for download by dApps.

Source: Celestia

With modular blockchain , Celestia also wants to create a collaborative ecosystem with many interconnected chains. By hosting dApps from various rollups , they no longer need to compete for each other's computing resources. Everything will share and connect through Celestia.

The Future of Modular Blockchain

Currently, the blockchain industry is still faced with scalability problems. The use of a monolithic blockchain which makes all transaction processing in one place is one of the reasons. Relying on a monolithic blockchain over the long term actually magnifies the problem.

The reason is, mass adoption of crypto and blockchain means more and more transactions have to be processed. On a monolithic blockchain, this will cause the amount of data that needs to be verified to be very large. A monolithic blockchain network architecture is not ideal for processing a large number of transactions in a short time.

Therefore, modular is considered to be one solution to overcome this problem. Rollup technology which will break down these tasks according to their respective structures makes the verification and execution process more optimal and practical.

Celestia Labs Chief Operating Officer Nick White said, like a collection of building blocks, modular blockchain will be connected to the data availability layer as part of one integrated ecosystem. So, nodes do not need to download all transactions like in a monolithic blockchain.

According to him, the use of rollups can make nodes verify transactions by downloading less than 1% of the size of a block . As a result, it is very possible to carry out the entire process using just a smartphone.

“ Modular blockchain is a technology that can be a solution to current blockchain infrastructure problems. "It is also the foundation for creating a decentralized network with a high level of scalability," explained Nick as quoted from Blockworks .