Introduction

The blockchain space has witnessed significant growth since its inception, with developers continuously seeking ways to enhance scalability, security, and decentralization. The traditional monolithic approach, where a single chain handles all tasks, often faces challenges in scalability, upgradability, and hardware requirements for validator nodes. In response to these limitations, the concept of modular blockchains has emerged as a promising alternative.

What Are Modular Blockchains?

Modular blockchains mark a departure from the monolithic blockchain model, opting for a multi-layered architecture that divides primary tasks into specialized functions. By assigning specific functions to different layers, modular blockchains aim to create a more scalable and customizable system without compromising on decentralization or security.

How Modular Blockchains Work?

Modular blockchains often operate by specializing in four main functions: execution, settlement, consensus, and data availability. Execution involves processing transactions, settlement secures transaction destinations, consensus validates transaction authenticity, and data availability refers to the storage of transaction data. This modular design allows for greater flexibility and efficiency, offering a promising solution to the blockchain scalability trilemma.

Exploring Modular Networks

There are different methods of implementing modular blockchains, each with unique characteristics. Notable examples include rollups, validium, and sovereign rollups. 

• Rollups function as an execution layer, processing transactions and publishing data to a layer-1 network (L1). 

• Validium is a variation of rollups that processes transactions off-chain before submitting the data to the L1. It also relies on a network of Proof of Stake validators.

• Sovereign rollups distinguish themselves by acting as both an execution and settlement layer, with data blocks published directly onto the rollup. Sovereign rollups don’t require L1 smart contracts for validation.

Pros and Cons of Modular Blockchains

The modular blockchain architecture offers key benefits over monolithic designs, such as enhanced scalability, flexibility, and interoperability. But despite the advantages, building on modular blockchains can be more complex, posing a steep learning curve for users and developers.

Pros

1. Enhanced scalability: Modular blockchains excel in scalability by offloading resource-intensive tasks to separate layers, allowing for greater overall throughput without compromising decentralization.

2. Flexibility and interoperability: Modular base layers are designed to be highly flexible, promoting interoperability among multiple layer-1 and layer-2 chains. This flexibility allows developers to run the Ethereum Virtual Machine (EVM) or other virtual machines of their choice.

3. Versatile application development: The modularity of blockchains supports the development of universal applications, reducing friction for users in the blockchain ecosystem. This versatility encourages the creation of a broader range of secure and efficient decentralized applications (DApps).

4. Customizable tech stacks: Developers have the freedom to choose the virtual machine that best suits their needs, providing a customizable tech stack. This contributes to a more adaptable and developer-friendly environment.

Cons

1. Complexity in development: Building on modular blockchains can be more challenging compared to monolithic counterparts. The complexity poses a steep learning curve for both users and developers, potentially slowing down adoption and development.

2. Limited testing: Modular networks are not as battle-tested as their monolithic counterparts like Ethereum or Bitcoin. The extensive testing and validation that established chains have undergone are yet to be replicated in the modular landscape, raising concerns about their resilience under real-world, high-traffic conditions.

3. Early stage development: Modular blockchain development is still in its infancy. While the market has shown enthusiasm, these networks lack the extensive real-world testing and validation that comes with maturity. This early stage may introduce uncertainties about the long-term stability and effectiveness of modular blockchains.

Examples of Modular Blockchains

• Celestia

In the context of modular blockchains, Celestia is a modular network that allows for blockchains to securely scale without compromising performance. Rollups and layer-2 networks can use Celestia when making transaction data available for anyone while also enjoying the benefits of quick and efficient data availability. To achieve this, Celestia implements a variety of features, such as data availability sampling and sovereign rollups. Data availability sampling allows Celestia to increase its block size as more nodes join its network.

• Dymension

Dymension is a network of easily deployable and fast modular blockchains called RollApps. Dymension works in a similar way as a traditional full-stack web application. The RollApps network functions as the front-end (user interaction), while Dymension works as the back-end, coordinating the ecosystem. In addition to that, there are data availability networks that function as databases, providing data whenever necessary.