Year of module expansion in cryptocurrencies

Today's guest post was written by @ayyyeandyco-founder of The Rollup Company.

Modular blockchain is already shaping up as the biggest zero-to-one innovation in cryptocurrency since Ethereum.

Following the highly anticipated releases of Celestia and Dymension, expectations for future modular ecosystem project releases are extremely high. As dozens of tokenless protocols prepare to launch on mainnet this year and the modular narrative permeates every crack in the crypto media, We believe we are on the cusp of an expansion similar to what happened after the launch of smart contracts.

We recently launched the Modular Ecosystem Map, showcasing over 100 teams leading modular expansion. In today's article, you will learn what a modular blockchain is, details about the modular stack, and my vision for the modular endgame.

First, let's answer a seemingly simple question. What is modular blockchain?

Modular blockchains specialize in specific operations rather than performing all core functions at once. Their basic principle is to separate blockchain functionality into separate specialized modules and do one of those jobs very well while outsourcing the rest.

Modular blockchain design separates key functions (Data availability and consensus, settlement, and execution) into specialized parts to create the most scalable and efficient blockchain design possible.

Modular blockchains can be thought of as having specific codebases/chains for specific functions that, when combined, produce a greater output than one unified blockchain that attempts to do everything. . Much of what modular blockchain designs seek to achieve is reaching maximum scalability without sacrificing the core principles of why we build cryptocurrencies in the first place.

The rest of this article explains how each layer of the stack modular endgame.

🎁 Deploy the data availability layer

The goal of the data availability (DA) layer is to cheaply and securely verify that a particular block of data has been successfully published to the network and is accessible to all network participants. Verifiability is a core benefit of using blockchain for any transaction. Data availability is central to validating whether the data is publicly available and accessible to all nodes in the network.

The DA layer validation process begins when a user executes a transaction and the rollup sequencer batches these transactions into separate blocks. If validation is successful, the block is added to the chain.

The launch of Celestia in November 2023 marked the beginning of the emergence of the Alternative Data Availability (altDA) layer. Recently, the Dencun upgrade increased the scale of Ethereum L2 using Ethereum for DA with Blobspace (a data storage solution), but the limitations of Blobspace are more limited than when using an altDA solution. I am.

However, please note that posting data directly to Ethereum L1 achieves the highest level of security and decentralization, as shown below.

Celestia focuses solely on transaction ordering and making transaction data available. Rather than focusing on smart contract execution, Celestia outsources this to rollups as part of its focus on offering extremely low costs. This minimalism allows maximum performance in a special way.

Celestia excels in data availability. Data availability sampling (DAS) is enabled by light nodes that validate data without downloading the entire block.

Avails is an upcoming data availability layer that leverages KZG commitments, erasure coding, and mathematical DA guarantee validity proofs, as well as lightweight client data availability sampling. Avail is also developing two of his other products, Nexus and Fusion, which address cross-chain communication and liquidity, and shared multi-token security.

Other data availability layers on my radar are: Eigenda, nearand Zero gravity.

💪 Execution layer

The execution layer (also known as the virtual machine layer) is the part of the modular blockchain stack that is dedicated to processing and executing smart contracts and transactions.

The most notable of the VMs is EVM, the virtual machine that powers the execution of Ethereum. EVM allows you to create all kinds of smart contracts and programs. EVM was a major step forward in innovation introduced by Ethereum in 2016.

As an Ethereum evangelist, I have to say that it's hard to have a negative opinion about EVM. It dominates VM environments and serves as the backbone of countless distributed applications, and for good reason. It has the best developer tools and infrastructure ever in the cryptocurrency space.

EVM allows you to create all types of smart contracts and programs. EVM inspired the story of “programmable money.”

But I think 2024-2025 will be the era of a new execution layer in the modular space called “altVM” or “next-generation VM.” High-performance, safe parallel execution environments will eventually become the norm as rollups and applications aim to reduce congestion and operate in high-throughput environments.

This idea is not about abandoning Ethereum It's about embracing diversity and exploring new possibilities for user experience and continuous experimentation. One of altVM's biggest innovations is the idea of ​​parallel execution, also known as local fee markets.

Ethereum always has many different types of transactions happening at the same time. People are exchanging, buying and selling NFTs, yield farming, and doing a ton of other on-chain actions while paying for block space.

Within EVM, there is a global fee market and sequential execution. This means that there is a single gas fee for all transactions, regardless of the type of transaction or what blockchain “state” this transaction affects.

Remember BAYC Otherside Mint? i will do it. One gas change cost him more than $2,000.

This is where parallelization comes into play. By isolating the “state” that certain types of transactions affect, many users can work with different applications without large gas spikes on-chain.

The current notable execution environments are:

These teams are building rollups using altVM to improve throughput and security at the execution layer. Data availability emerged in the first quarter of 2024, but I believe that next-generation VM rollups and parallelized EVM will become mainstream in the second half of 2024.

📚 Residential group

In this article, we argue that Ethereum is the primary payment layer in the modular stack. Ethereum is home to dozens of rollups that rely on the native security properties of the Ethereum validator set for economic security.

Many of the rollups mentioned earlier in the execution section use Ethereum. butWhat's particularly interesting is that we're now seeing many traditional “monolithic” chains move towards a more modular approach to scaling. Avalanche has subnets. There is talk that Solana should be extended with rollups. dimension and Initia is its own L1 with rollups built on top of it.

The payment layer is one of the least talked about parts of the modular stack, and for now it looks like Ethereum will continue to reign as the payment layer of choice for rollups.

But in the near future, sovereign rollups will also take root directly in Celestia, and other Alt-L1s will launch their own rollup frameworks to combat the gravity of scaling single state machines in a distributed manner. I think it will be. .

👑 Interoperability is a must

Launching and customizing your blockchain is now easier than ever with our modular blockchain stack toolkit. In particular, Rollup as a Service (RaaS) providers include: gelato, caldera, conduitand ortho layer When used with rollup frameworks like Initia and Dymension, it facilitates five-minute deployment of rollups through a no-code interface.

this is, explosion A new modular chain is on sale. However, all these new chains come with the ultimate tradeoff: fragmentation. Fragmented liquidity exacerbates slippage in bridging and trading. A fragmented user experience across multiple chains with different wallets, DEXs, and bridges can be overwhelming.

So how do we integrate liquidity and UX? If it's this easy to launch a blockchain, shouldn't it be just as easy to connect?

Traditional interop providers had to manually deploy to the chain one by one and had to lobby the chain for deployment. This creates a major bottleneck for new chains and hinders their growth.

There are several interoperability protocols that lead the chain's continued expansion. hyperlane Building a permissionless interoperability framework. union build Focuses on zk-light client interoperability, omni network Using Open Liquidity Network standards, mitosis liquidity protocol and catalyst Using AMM.

Another interesting area for interoperability is shared sequences. This has recently been promoted by Ethereum Foundation researcher Justin Drake.

This is a mechanism to connect rollups to atomic execution via a shared sequencer. These solutions are currently being tested in production, and we expect leaders in the field to launch them this year. Modular interoperability completes the modular stack and enables the integration of a modular ecosystem in a world of over 10,000 rollups.

🤝 Modular final stage

In conclusion, modularity is about building systems that are greater than the sum of their parts.

Those who believe in a modular future believe in a future of options. We believe that by providing a more adaptable and less restrictive developer experience, we will embrace more non-crypto native developers and bring innovation. We also believe in sovereignty. We don't think apps need to compete with each other for block space. Moving apps to their own chain provides a much better user experience and increased flexibility for builders.

The days of running out of block space are coming to an abrupt end. We are in the early stages of a massive, multi-year shift in how builders operate and build applications on-chain. As we begin to expand our modules, unparalleled innovation and experimentation will continue that will ultimately benefit participants in these networks in ways we cannot imagine.

We will soon see a world of 100,000+ chains, a world of thousands of applications on their own sovereign chains, a world of accelerated developer onboarding, and a better on-chain user experience. You'll probably end up doing it.

We believe this will move the industry closer to true adoption. I envision a future where users can interact with applications in the same streamlined way they interact with the Internet on a daily basis. These applications will be their own modular chains, each using a specific part of the modular stack we've discussed today.

You cannot expand block space by adding more single state machines. We must modularize and collaborate.