Modularity is transforming the crypto landscape

The primary good contract blockchain, Ethereum, was monolithic by design, that means it manages its personal execution, settlement, consensus, and information availability. Through the years, new decentralized purposes developed, resulting in elevated demand for blockspace. When the demand for blockspace is greater than its provide, the constrained availability restricts the vary of potential purposes, inflicting a major obstacle to utility and widespread adoption.

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This limitation is named the scalability trilemma or, in a nutshell, the concept that no public blockchain can concurrently obtain most decentralization or safety to realize optimum scalability. To beat the restrictions of the scalability trilemma, modularity has emerged as a approach of outsourcing core elements optimized to resolve crucial features.

The courtesy of the Inco’s staff

The modular blockchain thesis facilities on position specialization. It proposes decentralizing conventional blockchain features—like execution or information availability—throughout specialised networks. By segmenting these features from a singular L1 into distinct layers, blockchains could be tailor-made for optimum efficiency in particular areas, considerably boosting customization, effectivity, and, the place needed, decentralization, safety, and scalability.

Given the varied vary of use instances, these features could be totally different. A modular community may very well be specialised to push oracle value feeds, present zero-knowledge proving providers, make accessible information, or allow a extra scalable execution layer on prime of one other underlying blockchain.

The necessity for modularity within the crypto trade

Ethereum exemplifies the gradual transformation right into a modular world. The chain was first launched with a monolithic design, following within the footsteps of Bitcoin. Arbitrum, a layer-2, represents the success story of rollups in separating the intensive computation wanted for scalability off-chain whereas settling again on-chain. Many extra tasks have adopted this design due to the useful resource effectiveness and more cost effective design of processing transactions utilizing rollups.

It doesn’t cease there. Networks that assist builders see and unlock the worth of modularity have been on the rise. Celestia is a good instance of fixing an apparent downside: the numerous value of storing information availability (DA) again to Ethereum. Whereas rollups enable for increased throughput, the price of transacting continues to be comparatively excessive as a result of it finally is dependent upon the storage value of the settlement layer. An answer to this downside is to supply another DA layer.

The belief {that a} single monolithic design can not meet right this moment’s blockchain calls for with no trade-off is why the area is shifting in the direction of modularity. Ethereum is probably the most safe blockchain with good contracts however has continued to face numerous shortcomings with processing transactions and gasoline charges.

The courtesy of the Inco’s staff

Along with fixing blockchain’s architectural challenges, it’s changing into clear that extra providers are needed for enabling new use instances and pushing for web3 adoption. Examples of such add-on providers embrace oracle providers, decentralized RPC, ZK prover networks, AI, to call just a few. Nonetheless, blockchains can not help these providers natively because of the extra overhead, {hardware} necessities, or technical incompatibilities. Given the composable nature of the modular structure, blockchains don’t must help every part themselves anymore—every part could be plug-and-play like legos.

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The courtesy of the Inco’s staff

For example, one unsolved downside that this area will carry on tackling is round confidentiality. Many of the broadly adopted blockchains right this moment are clear and can’t add on-chain confidentiality with out requiring resource-intensive {hardware} for his or her validators when using cryptography methodologies reminiscent of zero-knowledge proofs (ZKP) or absolutely homomorphic encryption (FHE).

Past the prevailing 4 blockchain layers (execution, settlement, information availability, and consensus), a confidentiality layer on prime of present dApps is a crucial lacking piece that can allow web new use instances that aren’t possible on prime of clear blockchains. Inco is an instance of a modular protocol that acts because the fifth layer—confidential computing—by introducing absolutely homomorphic encryption (FHE) to Ethereum and different blockchains with out altering the bottom protocol.

Right now, modular protocols are gaining traction, and with the widespread adoption of decentralization, they’ll probably turn out to be the usual for constructing in web3. This normal will undoubtedly disrupt the vertically built-in method of monolithic chains and faucet into particular Lego blocks that may be matched to create distinct modular stacks. This implies tasks will use the modules they want for his or her particular wants as a substitute of attempting to do every part.

This can unlock infinite scalability as a result of a community may depend upon Ethereum for safety, Transfer because the execution surroundings, Celestia for information availability, and Inco for confidential computing. The last word purpose is for disparate ecosystem modules to coexist and develop collectively.

The panorama of blockchain know-how is poised for vital growth with the arrival of modular architectures in 2024 and past. These novel blockchains delegate a minimum of one of many quintessential features—settlement, consensus, confidentiality, information availability (DA), or execution—to a different distinct blockchain framework.

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