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The Potential of Modular Blockchains: Enhancing Scalability and Efficiency

Ethereum houses thousands of decentralized applications (dApps), millions of users, and significant financial assets. However, the blockchain’s monolithic architecture faces scalability limitations, often resulting in network congestion and high transaction fees. Currently, Ethereum handles transaction processing, consensus, and data availability, overwhelming its nodes and limiting overall network efficiency. This blog examines how modular blockchains address these challenges by dividing core functions into specialized layers, thus optimizing each component separately.

What is a Modular Blockchain?

A modular blockchain is an independent chain that performs specific operations such as execution, consensus, data availability, or settlement. This design aims to enhance efficiency and scalability by optimizing each layer for its specific purpose. Modular blockchains can be likened to Lego blocks, each representing a specific function, giving developers granular control over the blockchain’s architecture.

Modular architecture is particularly promising for addressing Ethereum’s data availability (DA) concerns by creating a separate DA layer. This layer enables:

  • Ethereum mainnet to focus on transaction verification, block production, and consensus maintenance.
  • Rollups to access verified data without incurring high costs.
  • Independent improvements and upgrades to the DA layer without disrupting the mainnet.

How Does a Modular Blockchain Work?

Modular blockchains represent an architectural evolution from the one-size-fits-all approach. They divide blockchain functionality into independent components: execution, settlement, consensus, and data availability.

1.      Execution Layer: The execution layer is where users submit transactions and interact with dApps via smart contracts. These interactions trigger state transitions, updating on-chain balances and accounts. Separating this layer from consensus allows for more efficient processing, as rollups can execute transactions off-chain.

2.      Settlement Layer: The settlement layer processes proofs from other chains to finalize transactions. It is critical in validating transaction states, managing fraud proofs, and facilitating dispute resolution, particularly for optimistic rollups.

3.      Consensus Layer: The consensus layer ensures all nodes agree on the blockchain state, validating transactions and determining their order. Developers can configure the consensus layer to meet specific needs, optimizing for decentralization.

4.      Data Availability (DA) Layer: The DA layer ensures that data necessary for validating transactions and executing smart contracts is readily available to all network participants, enabling easy verification of on-chain data. Several Ethereum dApps and protocols use DA solutions to reduce reliance on the mainnet for data availability.

Benefits of Modular Blockchains

·        Scalability: Modular blockchains offload tasks to dedicated chains, freeing up nodes on settlement layers like Ethereum. This reduces storage costs and transaction fees, as dApps use the expensive Layer 1 (L1) only for critical consensus and ordering functions.

·        Security: Developers can leverage existing validator nodes to deploy new chains, reducing the cost and complexity of maintaining and running nodes. This shared security model saves development time and enhances network robustness.

·        Flexibility: Modular blockchains offer plug-and-play functionality, allowing developers to experiment and build customized networks optimized for performance, security, and cost. This composability provides greater flexibility compared to monolithic chains.

Popular Examples of Modular Blockchains

Celestia

Celestia is a data availability store for modular blockchains, enabling Ethereum rollups and Layer 2 solutions to publish transaction data that is accessible for anyone to download. It uses data availability sampling (DAS) to verify data availability by light nodes. Celestia supports various Layer 2s, including Arbitrum Orbit, OP Stack, and Polygon CDK.

EigenLayer DA

EigenDA, built on Ethereum using EigenLayer restaking, is a data availability store for modular blockchains. Its actively validated service allows restakers to delegate stakes to node operators while rollup solutions post transaction data at affordable costs. A dedicated KZG data availability committee verifies data integrity and accessibility.

Modular Blockchains: Potential and Future

Monolithic blockchains are limited by their data availability design, making storing all data on every node impractical. Modular blockchains introduce a dedicated data availability layer, separating storage from core functionalities. This composability enhances dApp efficiency and provides greater flexibility for innovation, positioning modular blockchains as a solution to scalability and efficiency challenges in the blockchain ecosystem.

Seize the chance to lead in blockchain innovation! Join me, Michael Paulyn, as we transform the tokenization and trading of real-world assets. Embrace the future of blockchain technology with us at Real World Asset Tokenization.

So, here’s to embracing the future – one token at a time!  

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