With everything that is happening in the cryptocurrency world, it might be very easy to forget to pay close attention to what was at its very core. And that is blockchain. Blockchains are currently getting mostly attention only from developers, while others are not as keen on learning about them as it can be very complicated and technical.

That however does not mean that the development in this space can be overlooked. Blockchains are the cornerstone of the cryptocurrency world and they are slowly and surely developing and improving. Modular blockchains are one of the best examples of this.

What are monolithic blockchains?

Before this article dives into modular blockchains, it is important to know what monolithic blockchains are as these could be regarded as the “ancestors” of the modular blockchains. There might be several reasons why to create or use a blockchain, but the core tasks of every blockchain can be distilled into three things: providing consensus and security, guaranteeing data availability and execution of transactions.

Blockchain trilemma, source: blog.pantherprotocol.io

Usually, all of these tasks were done on a single layer. These blockchains, where everything happens on the same layer, are called monolithic blockchains and Bitcoin is the prime example of them.  As its name stands, monolithic, meaning “formed from a single piece,” refers to all the blockchains where nodes are responsible for all the core tasks of blockchain: consensus, data availability and execution. In most cases these blockchains are also used as a settlement layer, which means that the transactions are validated on-chain and not off-chain using other layers.

However, it is now clear that while monolithic blockchains have been important for the inception of the industry, they are not optimal. This can be for several reasons which always lead to the blockchain trilemma, which has not been solved yet. And since there is no clear solution to it, developers and the brightest minds of the industry have been trying to overcome it differently. And that solution might be offered thanks to the new design of blockchain.

What are modular blockchains?

Since the design of the monolithic blockchains is slowly becoming suboptimal, new solutions are getting more attention. One of these is modular blockchains and projects built around it. Modular blockchains allow for different technologies, projects, services or platforms to help the underlying blockchain via outsourcing one of the key responsibilities of the chain (consensus, data availability or execution).

Monolithic vs modular blockchains, source: blog.pantherprotocol.io

These types of blockchains are thus not only newer, but also built differently as they are able to split key tasks into different units and outsource them on external chains. Whether that is the consensus, data availability or execution (or in some cases the settlement) solely depends on the projects that are helping the main chain and what they were designed to do. This means that each component only does one or few specific tasks, however, it has to do them really well.

There are several good examples of these solutions, most of them connected to Ethereum. These are for instance rollups or sharding solutions which are trying to take the pressure off the main chain thanks to the services they offer. Rollups for instance are in charge of execution (processing transactions). Yet, this chain is not responsible for consensus, data availability or settlement, which is all outsourced to the main chain of Ethereum.

Monolithic vs modular blockchains examples, source: blog.pantherprotocol.io

Benefits of modular blockchains

Key benefit of modular blockchain design is the fact that it helps with the blockchain trilemma. While it does not solve the issue at heart, the outsourcing of special tasks to other chains or layers means that the other parts of blockchain can work uninterrupted and do not have to sacrifice one of the key three aspects of blockchains (security, scalability, decentralization). And there are clear benefits to it.

Scalability

Under modular blockchains, the resources are distributed into more specialized units, which leads to better efficiency. In the case of scalability, modular blockchains allow for technologies such as data availability fraud proofs or zk-proofs. In these instances, the nodes do not have to execute all transactions to check their validity.

Through this, the overall throughput of the blockchain is increased leading to better scalability, yet the other two aspects, namely decentralization and security, are not compromised. This is thanks to the fact that they are still done over at the main chain, thus ensuring correctness and reliability.

Launching new blockchains and security

Security is still one of the biggest drawbacks of the cryptocurrency world. Constant hacks, exploits and bugs are costing the investors and users billions of dollars. Modular blockchains have the power to help with that as well.

If the developers had the power to focus and be specialized at one of the three main characteristics of blockchains, such as scalability, and could plug in another modular blockchain component that would be in charge of different tasks, such as security, the overall outcome would be astonishing. 

The specification on different tasks would not only yield to better designs, but could also help with launch of new blockchains and their security. These would be able to launch faster and would not have to worry about getting everything done correctly at the same time.

Flexibility

Another benefit that modularity brings to the table is flexibility. Thanks to this solution, it is possible to have rapid experiments across the stack for developers. This could lead to several improvements and a more specialized approach to decentralized applications for example.

Here is a simple example of how that could work. A modular blockchain can include modular chains that focus on data availability and security, while others focus on execution. Thanks to the flexibility of the whole system, this would lead to the modular system benefiting from improved scalability for security and data availability layers. This solution is represented for example by rollups.

It could also lead to the execution layer that is optimized for scalability to be benefitting from extra security by the properties of the parent chain. This is a rather common example of how layer-2 protocols benefit from the decentralization of Ethereum.

Three modular blockchain projects worth following

While we have already mentioned some solutions or projects connected to modular blockchains such as rollups or sharding, these are not the only ones worth following. Ethereum PoS is probably the best example of the modular blockchain system.

Different modular blockchains based on their focus, source: volt.capital

However, we decided to capture projects that are not as popular or famous as Ethereum PoS, but are just as ambitions. Here is a list of few interesting projects in this sub sector that you might want to have on your radar.

1. Cosmos (ATOM)

Probably one of the best known modular blockchains (excluding Ethereum’s PoS) is Cosmos. Cosmos is a decentralized network of independent and parallel blockchains. Each of them is powered by BFT consensus algorithms like Tendermint consensus. Cosmos thus creates a whole new ecosystem of blockchains that are able to scale and interoperate with each other.

Just as it is popular for modular blockchains, their main goal is to help developers to build blockchains and break barriers between them. This would be done simply through allowing for transactions to happen between them. In the end, this would allow them to communicate with each other.

Obviously, one of the main goals of Cosmos is to build an ecosystem of modules. This would allow developers to easily plug in application-specific blockchains without any need to create them on their own. These modules can be created for Cosmos SDK by anyone. Moreover, they can then be implemented by anyone in an easy fashion right into their blockchains.

2. Celestia

Celestia is probably one of the most ambitious projects in the modular blockchains segment. This blockchain scaling startup has raised around $55 millions for its plans to build a unique modular blockchain architecture with the goal of solving scaling and deployment issues.

The plan of this project is to focus mostly on improving scalability, shared security and sovereignty issues, through its modular blockchain. They also want to make sure that this solution is not a burden to any system or set of systems via increased costs.

What is however interesting about the solution that Celestia works on is the fact that a wide range of execution layer implementations should be able to utilize it as a data availability layer. This could include non-EVM virtual machines like StarkNet, WASM or FuelVM, thus creating trust minimized bridges, roughly similar to what Ethereum and its rollups are offering.

3. Fuel Labs

Fuel Labs is a project that is at the forefront of the change from monolithic to modular blockchains. Its aim is to make the execution as fast as possible and become the leading layer-2 technology. All this would be achieved thanks to its three main pillars. These are parallel transaction execution, Fuel Virtual Machine (FuelVM) and superior developer experience with Sway (domain-specific language for developers) and Forc (unique supportive toolchain).

As these main pillars suggest, Fuel is mostly concerned with helping developers. They should be the ones who would ideally receive as many benefits from this solution, as possible. If modular technology catches on, the developers would be able to work without any middlemen.

Moreover, Fuel Labs is also working on modularity with adaptable architecture. This could potentially end up as an alternative to Ethereum’s future, as the team wants the execution layer even higher than standard rollups. If the team succeeds with fulfilling this with small costs and without compromising the security, Fuel Labs might actually become a very important modular blockchain project in the future.

Conclusion

There are a plethora of interesting projects that are connected to modular blockchains. And that is not a surprise at all as many believe that modular blockchains are becoming superior to monolithic blockchains and that the future of the cryptocurrency world will include mostly projects built with modularity in mind. Whether that will be the case only time will tell, but the promise of very interesting projects and developers is surely there.

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