Modular Blockchain: The Evolution of Next-Generation Web3 Infrastructure

Modular blockchain, as a new generation of blockchain infrastructure, is driving the evolution of the Web3 ecosystem. It redefines the layered architecture of blockchain by dividing different functions into independent modules, achieving higher performance and flexibility. Although modular blockchain has become a new narrative hotspot, this does not mean that traditional monolithic blockchains will be replaced. On the contrary, both will complement each other and jointly support the next billion-user level Web3 ecosystem.

To understand modular blockchain, we can approach it from the perspective of transactions and block data, dividing it into several key modules: execution layer, data availability layer, consensus layer, and settlement layer.

• The execution layer is responsible for batch processing and computation of transactions, serving as a pioneer for scaling and computation outsourcing of a monolithic Blockchain.
• The data availability layer not only reduces data storage costs but also achieves data availability verification under the protection of the consensus layer.
• The consensus layer is dedicated to reusing decentralized consensus mechanisms to build a brand new decentralized framework.
• The settlement layer optimizes the matching and association of account assets and transaction flows.

The Development and Challenges of Monolithic Blockchain

The birth of Bitcoin marked the emergence of a decentralized electronic cash system, making people aware of blockchain technology and the proof-of-work consensus mechanism. Subsequently, Ethereum, as a smart contract platform, demonstrated the vast potential of blockchain in finance, social networking, gaming, and other fields. Although blockchain technology is still in its infancy, its potential is enormous.

Currently, the mainstream public chains can be referred to as monolithic blockchains. They use transactions as carriers, store valid transactions through blocks, and rely on specific consensus mechanisms to achieve a decentralized, trustless distributed ledger network. Monolithic blockchains can independently build a complete ecosystem, but as they develop, they also face issues such as transaction congestion, rising costs, and high participation barriers.

To address the limitations of monolithic blockchains, extensive exploration has been conducted in the industry, including technical solutions such as state channels, sidechains, Rollups, light nodes, sharding, and modular blockchain. These studies continuously optimize the blockchain technology stack and improve the adoption of blockchain.

Definition and Architecture of Modular Blockchain

A modular blockchain redefines the layered architecture of blockchain through the ideas of aggregation and combination, dividing it into independent and composable modules. This architecture not only enhances performance in various aspects but also accommodates diverse application scenarios.

From the user's perspective, the Ethereum Layer 2 network Arbitrum can help us intuitively understand the architecture of modular blockchain.

• User transactions are collected and processed by sequencers on the second layer network, rather than interacting directly with the first layer network.
• The sequencer compresses and sends batch transaction data to a layer network.
• Sort transactions simultaneously, calculate state changes, and send the results to a layer network settlement.

This way, we can clearly understand the functions of the execution layer, data availability layer, consensus layer, and settlement layer:

• Execution Layer: The sequencer processes transactions, including data compression and state computation.
• Data availability layer: A layer of network storage that maintains the compressed transaction data of the execution layer.
• Consensus Layer: Ensures the security of the Execution Layer on the Data Availability Layer and Settlement Layer.
• Settlement Layer: Confirmation of the Finality of State Transition

Execution Layer Products and Development

Before the emergence of execution layer products, the industry had been exploring ways to improve the transaction performance of Blockchain. In addition to optimizing the monolithic chain itself, the Ethereum ecosystem has developed Layer 2 solutions primarily based on Rollup, such as Optimism and Arbitrum for optimistic Rollup, as well as Starknet and zkSync for ZK Rollup.

With the development of Layer2, the concept of execution layers has been formally proposed. Not only Ethereum, but other public chains are also developing their own Rollup solutions. This has brought about a new situation where multiple chains and multiple execution layers coexist, while also leading to new issues such as ecological fragmentation and high user operation costs.

To this end, products such as Rollup as a Service have emerged, including Sovereign Labs, Stackr Labs, and others. These products construct a tree-like execution layer architecture with a single Hub and multiple Rollups.

Despite significant progress in the execution layer products, there are still many challenges to address, such as decentralized sequencers, zkEVM, and parallel transactions.

Development of the Data Availability Layer

With the prosperity of blockchain users and smart contracts, on-chain data is growing exponentially. Ethereum full nodes now require 800G+ of storage space, while Archive nodes need even more at 13TB+. How to efficiently and cheaply store and process massive blockchain data has become a key issue.

Early Bitcoin addressed data inflation through solutions like Reclaiming Disk Space and SPV. Ethereum, on the other hand, explored solutions like Stateless Ethereum. As execution layer products evolved, the concept of data availability expanded, emphasizing the validation of transaction validity without complete data synchronization.

As a mainstream execution layer, Ethereum's data availability layer faces issues such as high operational costs and limited capacity. To address this, improvement proposals such as EIP-4844 have been proposed. Other specialized DA products like Celestia and Polygon Avail have made breakthroughs in areas such as sampling and encoding. Additionally, there are storage layer products like Greenfield and Arweave.

Development of the Consensus Layer

Blockchain networks require robust consensus mechanisms to ensure asset ownership. Currently, the mainstream PoW and PoS mechanisms each have their advantages and disadvantages, and it is difficult to achieve cross-chain interoperability.

PoW faces the risk of hash rate attacks, and new chains need to accumulate hash power over time or rely on joint mining. However, joint mining may lead to conflicts of interest, as seen in the case of Namecoin. Quai Network and others are attempting native multi-chain joint PoW, but it remains difficult to achieve consensus reuse.

The PoS mechanism relies on the value of stakes, but the cost of establishing a validator set is high. Cosmos and Polkadot have explored solutions such as shared security and parachains. The PoS mechanism after Ethereum's merge has created conditions for the reuse of consensus resources.

Projects like EigenLayer are exploring ways to reuse Ethereum staking assets to protect other networks through Restaking and other methods. Liquid staking derivatives also provide potential resources for consensus layer products.

Conclusion

Modular blockchain draws on the ideas of microservices architecture, decoupling blockchain functionality into independent modules. Currently, all layers are developing rapidly and are expected to release more potential through flexible combinations in the future. Although challenges remain, modular blockchain is becoming an important direction to promote the advancement of blockchain technology, expected to bring more innovations and opportunities to the Web3 ecosystem.