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…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
