Modular Ethereum

Nick Bolduc

on Oct 20, 2021

The cryptocurrency landscape has, in recent history, been dominated by monolithic blockchains. That is, blockchains that attempt to handle all of the responsibilities of execution, security, and data availability. This has—until recently—been a matter of some difficulty, due to the scalability trilemma.

The scalability trilemma will be familiar to many. It is desirable for a blockchain to be scalable—i.e. to be fast, and to support many users. It is desirable for a blockchain to be decentralized—i.e. to avoid depending on centralized architecture or organizations. And, it is desirable for a blockchain to be secure—i.e. to resist or defeat common forms of attack.

The scalability trilemma says that there are three properties that a blockchain try to have, and that, if you stick to "simple" techniques, you can only get two of those three.
– Vitalik, Why sharding is great: demystifying the technical properties

The importance of scalability and security is fairly obvious: blockchains should be able to support massive userbases, and blockchain applications demand security. Decentralization is also of utmost importance, especially as the politics around blockchain are still rapidly developing. For more details on decentralization, check out:

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Optimistic Rollups, zkRollups, Valdiums, and Volitions means a shift from a monolithic blockchain model to segregating security, data availability, and execution into different layers

This is key to not just the mitigating the blockchain scalability trilemma, but inverting it
— ChainLinkGod.eth 2.0 (@ChainLinkGod) October 6, 2021

Modular blockchains allow for an inversion of this trilemma. The decentralization is no longer a cost, rather it is now a source of benefit. Blockchains can specialize in one (or more) of the desirable properties, and crypto systems will use multiple chains to deliver more speed, scale, security, and decentralization, than the monolithic approaches of the past half-decade are capable of.

Ethereum L2s are an example of this approach in action. (Many) L2s handle execution, and use Ethereum for security and data availability, or use Ethereum for security and use a different chain for data availability. The benefits are tangible, and practically available today. But they are nowhere near finished.

Exponential scaling roadmap through modular architectures.

As an example: rollups on Ethereum alone. Not validiums, not volitions, not state channels on rollups - just rollups fully secured by Ethereum. In TPS, inner bound DeFi trades, outer ERC20 transfers. Sky's the limit. pic.twitter.com/o9WWQ2zi51
— polynya (@epolynya) October 8, 2021

This has massive implications, not just for Ethereum and other modular blockchains, but for the direction of Web3, of the internet as a whole.

Part of the reason Web2 tech is so deeply entrenched is that the infrastructure has had a lot of time to mature. "Don't reinvent the wheel" is a common (and sensible) refrain among developers. Building a Web2 service is, in many ways, made easier by solutions and frameworks that have already solved many of the associated problems.

We're extremely optimistic about the direction of Web3, but it's not difficult to see that the "building blocks" of Web3 are not as plentiful or mature as those from the centralized Web2 era. Often, decentralized solutions pose additional challenges when compared to centralized solutions (but also additional benefits!), and no shortage of resources have gone into Web2 (and thus Web2 infrastructure) development.

However, Web3 infrastructure is rapidly evolving, and each step pushes the theoretical limits of scalability even further.

The future of social networks, of finance, of art, and of community governance will be decentralized, modular, and almost infinitely scalable. As money-Legos become culture-Legos,¹ as blockchains are utilized to help decentralize, to help fight against censorship and for freedom, as community and crypto continue to evolve, expect to see quickly accelerating Web3 development, in addition to accelerating modular blockchain (read: Ethereum) scalability.