What is Modular Blockchain, and How Does It Work?

What is Modular Blockchain, and How Does It Work

Every blockchain in cryptocurrency provides some basic function such as guaranteeing the data availability, security, providing consensus and transactions execution. Generally, blockchains handle all these responsibilities on the same layer like bitcoin working on a monolithic blockchain. While monolithic blockchain design has dominated the cryptocurrency industry for more than a decade, the technology is changing rapidly and requires a more flexible approach. Modular blockchain design has emerged as a solution for this as it emphasizes on particular tasks that offloads other works to the rest of the layers. Read below to find out how the new modular blockchain work and how they are different from the monolithic blockchain. 

What is a modular blockchain?

A modular blockchain is one that focuses more on handling specific tasks and outsources the other work to the rest of the layers. The primary duties of modular blockchain include the following:

Consensus

Consensus can be defined as a mechanism through which the nodes come to one agreement about which data a blockchain can verify as accurate and secure. This protocol determines blockchain transactions and how new blocks can be added. 

Execution

Once a consensus is agreed upon, the blockchain executes the blockchain transaction process. The nodes that have participated in the consensus process must execute the transaction by utilizing blockchains copied to attest before new block validations. 

Data availability

The third function is about enforcing the rules that can verify transaction data availability. This will ensure that block producers publish data for every block so that peers can download or store the data on request. 

Settlement

The last function of modular blockchain is to guarantee that the transaction has been made in the chain history and that it remains irreversible. The blockchain must convince transactions validity, verify proofs and arbitrate disputes. 

How does modular blockchain work?

Unlike monolithic blockchain design, a modular blockchain works on the modularity principle that separates the system into specific components that can be further combined variously to attain the block’s objectives. Modular blockchain relies on specialization where every component can do a few things but in a proper manner. A modular chain is a part of a larger “modular stack” comprising blockchains that may be merged to serve a variety of purposes. Depending on the use case, modular blockchains function as “pluggable modules” and may be exchanged for or combined with one another.

Benefits of a modular blockchain design?

Scalability 

The architectural feature of a monolithic blockchain states that the user can have all four features in a blockchain layer. Therefore, optimizing these qualities may lead to trade-offs in other areas and make blockchain creation difficult. This mostly occurs as the blockchain tries to handle every activity at once under a single layer. However, in modular blockchain design, the tasks are separated between different layers which ultimately improves scalability without creating disruptive trust assumptions. 

New blockchain creation

To launch a new blockchain, miners have to face several issues owing to security reasons and the decentralization process which may prevent some from optimizing the out-of-network hash rate. Nevertheless, when miners focus less on specific areas such as execution and instead look at another blockchain component such as consensus, they are able to leverage their design and launch new blockchains quickly without worrying about other architectural aspects. 

Flexibility 

As compared to the monolithic blockchain, modular blockchain design is more flexible. In fact, this blockchain design has been made to offer miners greater flexibility which they lacked in monolithic ones. 

Drawbacks of modular blockchain

Safety or security

As compared to monolithic blockchain which performs every function in a single layer, modular chains may lack safety-related qualities. For example, if the blockchain lacks a security layer that handles consensus and data availability, it might become inefficiencies and induce failure risks. 

Complexity

To design and implement modular blockchain, miners need to have skilled operators due to modular blockchain design complexity. For instance, the data sharding in Ethereum relies on data availability sampling which ensures nodes on the single shard without holding other data. The execution layers require complex mechanisms like fraud proofs and validity proofs which may enable security layers to implement the validity on the off-chain state transitions. 

Effects on the token value

Certain modular chains might not be able to draw interest to their native tokens due to their constrained use cases. For instance, compared to an execution layer, a layer only concerned with consensus and data availability will probably see less use for its utility token. It could also be more challenging to draw users to these networks.

Modular Blockchain Cryptocurrencies

Celestia and Polygon Avail 

Two new modular blockchains, Celestia and Polygon Avail, are largely focused on consensus and data accessibility. Neither the Celestia nor the Polygon Avail nodes evaluate transaction data for execution; they are merely in charge of storing and organizing transactions. It is anticipated that these chains would act as data availability layers for other execution levels like rollups.

Validiums 

A validium is comparable to the rollups with no prior information. It conducts transactions off-chain and sends them in batches together with validity proof to a parent chain. A validium chain, as opposed to its parent chain, stores off-chain data elsewhere. This can be done via a data availability committee or a network of proof-of-stake validators for data availability.

Modular Blockchains as the Industry’s Future

It’s more than evident that the crypto market has a long way ahead to develop and become sustainable. The top digital assets, such as Bitcoin and Ethereum, face significant challenges due to their monolithic system structure. It forces to sacrifice one of three main components: decentralization, security, or scalability. As a result, BTC is slow, while ETH gas fees can be sky-high. 

The solution lies in the layered structure. Creating a modular network where each layer is responsible for specific actions solves the blockchain trilemma and provides a much more efficient system. Although similar technologies have already been implemented via cryptocurrency rollups and protocols, the main net of the first modular blockchain network Celestia will launch in 2023. The project’s developers have recently released a test net, aiming to create a secure decentralized Web 3.0 ecosystem.

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