Modular Ethereum
The Concept of Modular Blockchains
Modular blockchains are blockchains that focus on handling a few responsibilities and outsource the rest to one or more independent layers. Modular blockchains can be used to process the following single or combined tasks:
- Execution: Supports the execution of transactions and facilitates the deployment and interaction with smart contracts.
- Data Availability: Ensures the availability of transaction data.
- Consensus: Permits the content and order of transactions.
- Settlement: Used to complete transactions, resolve disputes, verify proofs, and bridge between different execution layers.
Modular chains typically perform two or more interdependent functions. For example, the data availability layer must reach a consensus on data sorting, otherwise it would be impossible to know which data represents the correct version of the history.
Advantages of Modular Blockchain Design:
- Scalability: Using modularization in blockchains can increase scale without introducing harmful trust assumptions.
- Easier Launch of New Blockchains: By leveraging modular design, new blockchains can be launched more quickly, and there is less concern about maintaining correctness in every aspect of the architecture.
- Flexibility: Specially built modular chains offer more choices for trade-offs and design implementations. For example, a modular blockchain system might include modular chains focused on security and data availability, while others focus on execution.
Disadvantages of Modular Blockchain Design:
- Security: Unlike monolithic chains, modular blockchains cannot guarantee their own security quality. If the security layers used for consensus and data availability are ineffective, the modular blockchain faces a risk of failure.
- Complexity: Implementing a modular blockchain design introduces new complexities. For instance, Ethereum’s data sharding plan relies on data availability sampling to ensure that nodes on a shard do not conceal data. Similarly, the execution layer must create certain complex mechanisms, like fraud proofs and validity proofs, to enable the security layer to guarantee the validity of off-chain state transitions.
- Token Value: Due to limited applications, the native tokens of some modular blockchains may struggle to accrue value. For example, utility tokens focused solely on consensus and data availability layers have fewer uses compared to those on execution layers, making it potentially more challenging to attract participants into such networks.
Modular Ethereum: Sharding and Rollups
Originally designed as a monolithic blockchain, similar to first-generation blockchains like Bitcoin, Ethereum is currently transitioning to a modular framework to enhance network performance, scalability, and sustainability.
Sharding is the process of dividing a system (like a database) into multiple parts to operate. By distributing functions across several components, the system achieves greater output and efficiency. In blockchain networks, sharding splits the blockchain into multiple sub-chains, with each sub-chain handling different parts of network activity.
In Ethereum’s sharding design, 64 shard chains will run in parallel. Sharding can process transactions in parallel (execution shards) and also be used for storing different parts of blockchain data (data sharding). With data sharding, Ethereum nodes will only store data published on their shard chain — this is in contrast to the current structure where all nodes store the same data.
Sharding represents a modular form where different components (shard chains) handle different responsibilities. In data sharding, shard chains store different parts of Ethereum data, while execution sharding allows each shard chain to process its own set of transactions. This increases data throughput and reduces processing time.
Some developers have adopted a rollup-centric approach to scale Ethereum. Unlike pure off-chain scaling solutions (like sidechains), rollups are tightly integrated with the primary chain. Ethereum’s blockchain outsources computation to rollups while retaining settlement, consensus, and data availability. With Ethereum acting as the base layer for L2 rollups, these rollups can actively optimize execution through faster block times and larger blocks without compromising decentralization or security.
Ethereum’s Path to a Modular Blockchain
The development process of Ethereum’s modular technology stack unfolds as follows:
- Monolithic Blockchain: Represents Ethereum L1 or the primary chain, functioning as a monolithic blockchain itself.
- Rollup: Acts as an L2 solution for execution, such as Arbitrum and Optimism, separating the execution layer from Ethereum L1. It publishes state roots and rollup data back to Ethereum L1.
- Modular Rollup: A rollup with modular data availability.
Ethereum’s modular L2 technology stack offers scalability while retaining a high level of security and decentralization. This robust combination lays the foundation for a more efficient and sustainable blockchain ecosystem for Ethereum.
Monolithic Blockchain
The monolithic blockchain is Ethereum’s original operating form, processing everything without the need for rollups or data sharding. This single-chain architecture offers the highest security but comes at the cost of high expenses and limited scalability. As a result, the transaction speed on the Ethereum mainnet is relatively slow, averaging only about 15–20 transactions per second (TPS). Currently, Ethereum is gradually transitioning to a modular blockchain, mainly by adopting a rollup-centric approach for computation and strategies for data sharding. This transition aims to enhance the network’s scalability and efficiency while maintaining its foundational security principles.
Rollup
Rollups represent one of the earliest technological breakthroughs in modular blockchain technology. They offer a separate layer for execution, expanding Ethereum’s monolithic architecture. Rollups can securely abstract the blockchain’s execution layer to sequencers, which use powerful computers to package and execute multiple transactions before regularly sending compressed data back to the Ethereum mainnet for validation. By shifting this computational process off the Ethereum chain, rollups can increase the transactions per second (TPS) by 20–50 times.
In the current context, rollups act as the execution layer, processing transactions while outsourcing settlement, consensus, and data availability. Examples include optimistic rollups utilizing the Optimistic Virtual Machine and ZK rollups running ZK EVM. These rollups execute smart contracts and process transactions, but still rely on Ethereum for the following operations:
- Settlement: All rollup transactions are finalized on the Ethereum mainnet. Users of Optimistic rollups must wait for a challenge period to pass or for a transaction to be deemed valid after anti-fraud computation. Meanwhile, users of ZK rollups must wait until the validity is proven.
- Consensus and Data Availability: Rollups publish transaction data to the Ethereum mainnet in the form of CallData, enabling anyone to execute rollup transactions and rebuild their state when necessary. Before achieving finality, Optimistic rollups require a significant amount of block space and a 7–14 day challenge period. ZK rollups store data available for verification for 30 days, offering instant finality but requiring substantial computational power to create proofs.
The use of Ethereum as the base layer for rollups allows for faster block times and larger blocks without compromising decentralization or security. Rollups can be seen as heralding a new era for Ethereum. The recent surpassing of Ethereum’s transaction count by Arbitrum and Optimism highlights Ethereum’s modularization trend, reflecting a shift towards more efficient and scalable solutions within its ecosystem.
Modular Rollups
Newer modular rollups move the data availability layer out of Ethereum. For instance, Mantle still relies on Ethereum for settlement and consensus but utilizes Mantle DA (Data Availability) as its data availability layer. Mantle DA handles data ordering and provides data proofs, without needing to execute transactions; the execution of transactions is efficiently outsourced to Mantle’s execution layer.
Previously, Ethereum was the only data availability solution for rollups, posing cost challenges. Data availability is the largest cost source for most rollups, particularly storing transaction data on Ethereum, which can account for up to 70% of expenses. Moreover, this cost is variable and increases proportionally with usage, gradually becoming a significant barrier as more users join. Until recently, only large rollups with substantial resources could accommodate a larger user base.
Fortunately, Ethereum is evolving, and new modular solutions in the form of data availability layers are emerging to reduce the cost of submitting transaction data. The main paradigms of data availability layers include EigenDA, Celestia, and Avail. They are dedicated to solving data availability issues, offering potential solutions to the limitations of rollups. These developments mark a significant stride in Ethereum’s journey towards a more efficient, scalable, and cost-effective modular blockchain ecosystem.
The Future of Modularization
Over the past decade, the blockchain field has often found itself in a cycle when addressing scalability challenges — continuously creating new Layer 1 (L1) blockchains due to Ethereum’s high costs and limitations. However, the high fees associated with Ethereum are not an insurmountable bug but rather a challenge to be addressed.
In a world where Layer 2 (L2) solutions are becoming the norm, modular blockchains revolutionize the architecture by segregating execution, settlement, consensus, and data availability layers. As monolithic blockchains struggle with scalability, the potential of modular architectures is unleashed.
With the development and competition in data availability layers, the barriers to entry for new rollups will significantly reduce. In the near future, with the reduction of data availability costs and further refinement of modular functionalities, we can anticipate a flourishing of applications on Optimistic (OP) or Zero-Knowledge (ZK) stacks. This trend points towards a more accessible, scalable, and efficient blockchain ecosystem, driven by the advancements in modular technology.
