Blockchain 101: What Is A Modular Blockchain?

Beginner Mode: Modular Blockchains In Essence

The initial approach to building blockchains was monolithic, where a single blockchain performed all necessary functions (example: Bitcoin, Ethereum, and many other L1s). However, this design faces significant scalability challenges. Modular blockchains offer a solution by separating various functions, allowing specialised layers to handle specific tasks. This modular approach offers several key values:

● Scalability: By enabling parallel processing, modular blockchains can handle a higher volume of transactions, reducing fees and improving efficiency.

● Flexibility: Independent upgrades and customisable layers allow developers to optimise for speed, security, and other factors.

● Security: Specialised security measures tailored to each layer enhance overall system security.

● Interoperability: Designed to support cross-chain communication, modular blockchains facilitate seamless data and asset transfer across networks.

Intermediate Mode: Monolithic Blockchains And The Rise Of Modular Solutions

Blockchain researchers have long aimed to create an optimal system capable of accommodating all users on a single chain or a tightly coupled network of chains. This monolithic approach, where a single blockchain handles all functions - processing transactions, verifying their correctness, and achieving consensus - faces inherent scalability challenges. High hardware requirements mean that increasing transaction processing necessitates more powerful hardware for nodes and establishing a secure validator set and maintaining a consensus network requires significant overhead. In addition, applications must conform to the blockchain’s predetermined rules, thereby limiting flexibility and adaptability.

These challenges have driven the development of modular blockchains. By splitting blockchains into specialised layers, each optimised for specific tasks, modular blockchains offer a more scalable and efficient solution. This approach allows the distribution of functions across multiple chains, addresses the limitations of monolithic designs and enables the creation of a more optimal, sovereign, scalable, and secure blockchain system.

Advanced Mode: A Deeper Dive Into Modular Blockchains

As the blockchain ecosystem evolves, modular blockchains emerge as a cutting-edge solution, addressing the limitations of monolithic designs. They offer significant improvements in scalability, flexibility, security, and interoperability. Nevertheless, they also introduce new challenges that must be managed effectively to realise their full potential. Here, we explore the key advantages of modular blockchains and the remaining issues that need to be addressed.

Advantages of Modular Blockchains

In this part, we will explore how modular blockchains are of a higher caliber than the original monolithic design. Below is a summary of modular blockchains' key advantages:

Scalability and Performance

In monolithic blockchains, all tasks are handled within a single layer, limiting transaction throughput and making ledger management increasingly difficult. Modular blockchains, on the other hand, separate tasks into distinct layers, enabling parallel processing and significantly increasing transaction-per-second (TPS) throughput. Data availability layers handle storage and accessibility, reducing the burden on individual nodes and allowing for efficient scalability.

Flexibility and Adaptability

Upgrading a monolithic blockchain is complex and time-consuming, requiring extensive testing and introducing significant risks. Applications must conform to the blockchain’s predetermined rules, limiting flexibility. In contrast, modular blockchains allow individual layers to be upgraded independently without disrupting the entire system, making improvements easier to implement. Developers can choose and combine layers that best suit their needs, optimising for specific use cases.

Security

Monolithic blockchains must implement security measures encompassing all functions, challenging optimisation. A single layer handling all functions can become a single point of failure. Modular blockchains, however, allow each layer to employ tailored security measures, improving overall security. Distributing functions across multiple layers reduces the attack surface, with compromised layers not necessarily affecting the entire system.

Interoperability and Composability

Monolithic blockchains offer limited and complex interoperability, making building cross-blockchain applications challenging. Modular blockchains support interoperability by design, enabling seamless data and asset transfer across networks. This facilitates the creation of composable ecosystems where different layers and applications interact fluidly.

Cost Efficiency

Higher hardware requirements in monolithic blockchains lead to higher operational costs. Limited processing capacity and block space competition can spike transaction fees. Modular blockchains optimise resource usage by distributing tasks, reducing overall costs, and increasing throughput, which helps keep transaction fees lower.

Arising Challenges

Despite their numerous advantages, modular blockchains also face several challenges that need addressing for their widespread adoption and success, including security and complexity problems.

1. Security:

● Vulnerability Points: While modular blockchains distribute functions across multiple layers, they introduce new points of vulnerability, particularly at the interfaces and bridges connecting different layers. Each point where data or assets transfer between layers or systems can potentially be exploited by attackers.

● Bridge Attacks: Bridges, which enable interoperability between different blockchain networks, have been frequent targets for hackers. High-profile incidents, such as the Solana-Ethereum Wormhole and Axie Infinity Ronin bridge attacks, resulted in significant losses. These attacks exploited vulnerabilities in the bridge protocols, highlighting the need for more robust security measures.

● Cross-Layer Security Coordination: Ensuring that security protocols are consistently and effectively implemented across all layers of a modular blockchain is challenging. Each layer might have its own security mechanisms, and coordinating these to provide a unified defence against attacks requires careful design and ongoing maintenance.

2. Complexity:

● Backend Complexity: Establishing trust and ensuring data availability in modular systems involves complex mechanisms not required in monolithic structures. For instance, ensuring that data is consistently available across multiple shards or layers demands sophisticated coordination and validation processes, such as random sampling and cryptographic proofs. This complexity can increase the risk of bugs and vulnerabilities.

● Frontend Complexity: For end-users, interacting with modular blockchain systems can be more complicated compared to monolithic ones. Users may need to navigate multiple interfaces and sign multiple transactions, each corresponding to different layers or functions of the modular system. This additional complexity can create usability challenges and increase the risk of user errors.

● Integration and Interoperability: While modular blockchains are designed for interoperability, achieving seamless integration between different layers and external systems remains a technical challenge. Ensuring that different modules work together efficiently without introducing latency or security vulnerabilities requires advanced engineering and rigorous testing.

Summary

Modular blockchains represent a significant advancement over monolithic designs by offering improved scalability, flexibility, security, interoperability, and cost efficiency; yet addressing the challenges of security and complexity remains crucial for the widespread adoption and success of modular blockchain architectures. Ensuring robust security at all interfaces and bridges, simplifying user interactions, and achieving seamless integration between different layers are essential steps for the future development of modular blockchains. As the blockchain ecosystem continues to evolve, modular blockchains promise a more scalable, secure, and adaptable future for decentralised applications and systems.