Modular blockchain Celestia has been steadily growing since its launch less than six months ago, with a 717% increase. It has even been dubbed the “Ethereum killer” and has sparked strong interest in the market. In addition to Celestia, there are several other modular blockchains worth paying attention to. These include Mantle Network and SKALE Network.
Modular blockchains aim to achieve decentralized scalability of blockchain networks by outsourcing at least one of the four components – execution layer, settlement layer, consensus layer, and data availability layer – to external chains without compromising network security. Celestia, the first modular blockchain network, has seen its native gas token TIA increase from around $2 to around $16 in less than six months. Its market value of $2.5 billion has propelled Celestia to the 37th position on the cryptocurrency market cap rankings, making it the only modular blockchain to enter the top 50 and attracting capital to the sector.
In 2023, several modular blockchain projects received new investments, including Eclipse, AltLayer, Sovereign, and Dymension. Today, we will introduce the concept and application scenarios of modular blockchains and highlight some high-profile projects in the field.
Modular blockchains solve the “impossible triangle” problem. Traditional blockchain networks, such as Bitcoin and Ethereum, are considered monolithic blockchains, where each transaction is stored in blocks and the network performs all tasks. However, monolithic blockchains face the challenge of scalability, decentralization, and security. Layer 1 networks often sacrifice decentralization for security and scalability, while Ethereum maintains decentralization and security and relies on compatible Layer 2 networks for scalability. Modular blockchains offer a solution by re-architecting the blockchain structure in a modular way, allowing for scalability, decentralization, and security without compromising any of these characteristics.
The concept of modular blockchains dates back to the 2018 whitepaper “Data Availability Sampling and Fraud Proofs” by Mustafa Albasan and Vitalik Buterin. This paper presents a solution to the scalability issue of blockchains without sacrificing security and decentralization. It allows lightweight clients to receive and verify fraud proofs from full nodes and introduces data availability proofs to reduce the trade-off between chain capacity and security.
Rollups and sharding are examples of Ethereum’s transition to modular blockchains. Rollups provide a separate layer for execution, extending Ethereum’s monolithic structure. They use powerful computers to package and execute multiple transactions before periodically sending compressed data back to the Ethereum mainnet for verification. Sharding, on the other hand, implements scalability at the Layer 1 level by breaking down the Ethereum main chain into different shards and rotating validators among them. Each shard acts as a mini-blockchain and runs in parallel with the beacon chain. Sharding greatly increases transaction throughput and scalability to meet the growing demand of users.
There are several promising modular blockchain projects. Celestia focuses on data availability and proposes a solution similar to Layer 2 scaling solutions for Ethereum. It releases newly generated data onto the Celestia chain instead of directly onto Ethereum, reducing transaction fees by over 90%. Celestia also introduces Data Availability Sampling (DAS), allowing users to confirm the existence of large chunks of data without downloading the entire blockchain. Blobstream integrates Celestia’s modular data availability layer with Ethereum, enabling Ethereum developers to build efficient and high-throughput Layer 2 solutions.
Mantle Network is an L2 scaling solution based on Optimistic Rollup technology. It offers EVM compatibility and modular design. It provides high throughput, low-cost, and fast settlement services using roll-up technology and a decentralized data availability layer (Mantle DA) while ensuring Ethereum-level security.
SKALE Network is a Layer 2 scaling solution that uses sidechains to improve the performance of decentralized applications (dApps) on the Ethereum network. It enables developers to execute smart contracts with high speed, throughput, and low cost. SKALE Network is deeply compatible with Ethereum and is not limited by Ethereum’s storage and computation constraints. It supports thousands of independent chains with linear growth and various types of elastic sidechains, storage chains, and other types of subchains.
There are more economic models and tokens in the testing phase for modular blockchains, with some projects preparing for mainnet launch or attracting ecosystem applications. AltLayer, recently launched on Binance Lauchpool, is a highly scalable application-specific execution layer system with multiple flash memory layers similar to optimistic rollups. It enhances the scalability of the network by providing a modular and pluggable framework for the multi-chain and multi-VM world. Fuel, deployed on the Ethereum mainnet, is the earliest Optimistic Rollup and has a UTXO-based blockchain. It offers highly parallelized minimal execution systems, supports ETH and all ERC-20 tokens, and has attracted 36 top applications in various fields.
It is worth noting that many high-profile modular blockchains have attracted investment from centralized exchanges (CEXs) and mainstream blockchain ecosystems. Some networks have already launched and generated a significant number of applications.
(End of translation)