What are Modular Blockchains?
A modular blockchain outsources at least one of three components (execution, consensus, and data availability) to an external and independent chain. This separation of resources makes a modular blockchain more flexible and scalable than traditional blockchains, which are monolithic. An example of a modular blockchain is Celestia.
Modularity: Division of Labor
Modularity is a fancy word for something that is as old as humankind, or even multicellular life itself: it’s the division of labor. In any chain of manufacturing, different parts of the production process are divvied up across different components. The car that you buy hasn’t been created in one factory: the different parts come from across different specialized factories. Only the assembly takes place in that one factory hall.
Or take as an example the CPU revolution of different cores in a CPU instead of one, monolithic CPU. The multiple cores take up different tasks. Blockchains are undergoing the same revolution. Modular chains are splitting up the tasks of execution, security, and data availability layers. Simply put, modular blockchains focus only on one specific task and offload the other tasks to other layers.
The Problems with Monolithic Blockchains
Monolithic blockchains – really all the blockchain projects launched up until recently – handle the three basic features of a blockchain stack:
- Consensus: the ordering of transactions into blocks, based on for example a proof-of-stake consensus principle
- Execution: the computation of a new state, for example, your new balance
- Data availability: publishing the ordered transactions, so (app) users know the current state of the chain
As you’ll understand, a single chain can get quite crowded having to perform all this. Monolithic blockchains will easily get overwhelmed by too much data. Bitcoin and Ethereum, for example, have at times already witnessed periods of congestion and high transaction fees – especially Ethereum. In other words, the monolithic approach has led to inefficiencies, reflected in the blockchain trilemma: you can’t have a chain that is super decentralized, super secure, and super scalable at the same time.
Ethereum is Also Becoming More Modular
Monolithic versus modular is not an eternal label: traditionally monolithic chains can set steps towards modularity. Ethereum is an example. The originally monolithic chain realized its scalability issues early on. It has been drifting towards a modular design. How? By working on:
- Rollups: the module for the execution: Nodes used to verify each other’s computation so every single node would do all the computation. With rollups, Ethereum created a new execution layer (a so-called layer 2) that is separate from the actual Ethereum chain. Already, the majority of transactions happen on layer 2’s.
- Sharding: the data module. Ethereum will shard its data layer and divide it into 64 separate chains, or shards. (see the Ethereum roadmap)
What about Bitcoin’s path toward modularity? Well, Bitcoin’s Lightning network is how it created a separate ‘module’ for the execution environment. Lightning can handle much greater transaction volumes than the base chain.
Advantages of Modular Blockchains
By transforming the limitations of a monolithic blockchain into modules, modular design increases efficiency by orders of magnitude. A monolithic blockchain could scale to a few thousand or tens of thousands of transactions per second at most. Impressive, but not enough to function in a future world where ‘everything is on the blockchain’. Modular chains could reach millions of transactions per second.
Another advantage besides scaling is the option to launch new blockchains: new blockchains can be launched more quickly without having to worry whether all parts of the architecture are correct. Celestia (see below) is an example. A dedicated modular chain offers greater flexibility regarding trade-offs and design implementation. For example, one chain could focus on security and data availability, while another focuses on execution.
Example of a Modular Blockchain: Celestia
Celestia (its test net was deployed in May 2022, main net is expected in 2023) has a modular architecture where the blockchain’s consensus and data availability layers are separated from its execution layer. It’s the first blockchain to do so. Celestia is minimal in the sense that it only orders and publishes transactions and does not execute them.
Another way to explain this comes from founder Mustafa Al-Bassam: “Celestia is what we call a pluggable consensus layer. At the moment, it’s very difficult to create your own blockchain because you effectively have to bootstrap your own consensus network. You can’t just do it easily as let’s say deploying a smart contract on Ethereum. The goal of Celestia is to make deploying a new blockchain securely in a decentralized way as easy as it is to deploy a smart contract on Ethereum.”
So Celestia is modular in the sense that it offers developers a kind of pluggable consensus and data availability layer.
Celestia, the Lazy Blockchain
If you read carefully, you know which element has been missing from Celestia’s design description: execution. That’s why Celestia is called the lazy blockchain (it was even branded LazyLedger in its early days): it doesn’t do any execution and instead leaves it to the end user. There are no smart contracts, there isn’t a virtual machine for developers to deploy smart contracts. Instead, developers must define their own execution environments on top, in the form of a blockchain that they develop themselves.
Celestia launched its test net in May 2022 but has yet to launch a token.
Example Two of a Modular Blockchain: Cosmos
Like Celestia, in the Cosmos ecosystem, it is easy for developers to create blockchains and link them to Cosmos. These new blockchains keep their independence. In fact, both Cosmos and Celestia want to lower the barrier for people to deploy their own blockchains and envision a future of countless interconnected blockchains.
Cosmos helps developers build quickly by keeping the three tools in their toolbox nicely modular. In doing so, one tool helps the other.
- Tendermint BFT: The engine of the networking and consensus mechanisms needed for a working blockchain. Tendermint is thus a platform on which developers can build new blockchains. It can reduce the development time of a blockchain from years to weeks.
- The Software Development Kit (SDK): Multiple common programming languages are translated into a language understood by Cosmos. Makes it easy for developers to quickly build application-specific blockchains on Tendermint.
- The Inter Blockchain Communication Protocol (IBC): A protocol that is to blockchains what TCP/IP is to the internet.