Modular Blockchain: A New Perspective on Functional Layer Controversies and DA Economics

Foreword

The triangle dilemma of blockchain has been an insurmountable gap in the industry in the past, and the successive public chain projects always try to cross this gap through the design of different architectures, and become the so-called “Ethereum killer”. However, the fact is cruel, for so many years, the status of Ethereum under one person has never been surpassed, and the impossible triangle of blockchain is still unbreakable. So is there a way for public chains to fill in the gaps that fill the impossible triangle? This is where Mustafa Albasan’s idea for modular blockchains was born.

The Origins of Modularity

The birth of modular blockchains came from two white papers, a 2018 paper co-authored by Mustafa Albasan and Vitalik called “Data Availability Sampling and Fraud Proofs.” This paper describes how blockchain scalability is addressed without sacrificing security and decentralization by allowing light clients to receive and verify proof of fraud from full nodes, and designing proof of data availability systems that reduce the on-chain capacity versus security tradeoff.

Then in 2019, when Mustafa Albasan wrote the white paper for Lazy Ledger. Details a new architecture in which blockchain is only used to sort and guarantee the availability of transaction data, and is not responsible for the execution and verification of transactions. The purpose of the architecture is to solve the scalability problem of the existing blockchain system. At the time, he called it a “smart contract client.”

Smart contracts are executed on this client through another execution layer, Celestia (the first modular blockchain). Then Rollup came along, making this concept more definitive. Because the logic of Rollup is to execute smart contracts off-chain, and then aggregate the results into proofs to upload to the execution layer of the “client”.

By reflecting on the architecture of blockchains and new scaling technologies, he has defined a new paradigm that he calls “modular blockchain.”

What is a modular blockchain?

The architecture of a traditional monolithic blockchain typically consists of four functional layers:

· Execution layer — — The execution layer is primarily responsible for processing transactions and executing smart contracts. It includes the verification, execution, and status update of transactions.

· Data-availability layer — — The Data availability layer in a modular blockchain is responsible for ensuring that data in the network can be accessed and verified. It typically includes functions such as the storage, transmission, and verification of data to guarantee transparency and trust in the blockchain network.

· Consensus layer — — Responsible for agreements between nodes to achieve consistency of data and transactions in the network. It verifies transactions and creates new blocks through specific consensus algorithms, such as proof of work (PoW) or Proof of Stake (PoS).

· Settlement layer — — is responsible for completing the final settlement of transactions, ensuring that the transfer of assets and records are kept permanently on the blockchain, determining the final state of the blockchain.

Monolithic blockchain makes the work of these components integrated in the same system to complete, this highly integrated design will inevitably lead to some inherent problems, such as poor scalability, poor flexibility, maintenance and update difficulties.

However, Celestia believes that monolithic blockchains no longer need to do everything themselves. The future evolution of Web3 will be “modular blockchains,” which create a better system by making the blockchain modular and dividing its processes into multiple “proprietary layers”, each of which handles specific functional layers, and that the system should be independent, secure and scalable.

Modular design principles:

A design is modular if it breaks down the system into smaller parts that can be exchanged or replaced. The core idea is to focus on doing only a few things well (parts or individual functional layers working) rather than trying to do everything. Cosmos Zones, Polkadot Parachains, and Polkadot Parachains are all examples of modular projects that we are familiar with in the past.

A New Perspective

Based on the new perspective of modularity, the space for redesign of the monolithic blockchain and the modular stack it belongs to will be greatly improved. Modular blockchains with different specific uses and architectures can all be combined to work together. With a variety of design possibilities, the circuit has also spawned a number of interesting and innovative projects. What follows is a discussion of the current controversies over the different functional layers and how Celestia interprets “modularity” from a modularity perspective.

The execution layer is centered around Ethereum

If we think of Rollup as the executive layer for modularity, we will find that the projects of the modular executive layer are almost all built on top of Ethereum. The reason for this is obvious, Ethereum has a lot of resources as a moat and the degree of decentralization is the strongest choice, but its scalability is poor, so it has great potential in terms of functional layer redesign. From the recent online Move system language public chain (APT, SUI) bleak contrast with the unprecedented boom of Layer2 on Ethereum, it is not difficult to see that the infrastructure narrative of blockchain has also shifted from doing public chain to doing Ethereum Layer2. So is the existence of modularity good or bad? Is the execution layer centered around Ethereum stifling innovation in public chains?

The blockchain scaling picture

First, from the perspective of the executive layer, the existing chain is reclassified. Here is a reference to the Nosleepjon article “Tatooine’s Double Sun” to explain the current execution-level classification of blockchains.

Current blockchains can be divided into four categories:

1.Single-threaded monolithic blockchain:

A single blockchain that processes one transaction at a time. Most of these have moved to Rollup or horizontal scale-out roadmaps due to limitations.

Representative projects: Ethereum, Polygon, Binance Chain, Avalanche

2.Parallel processing monolithic blockchains: monolithic blockchains that process multiple transactions at once.

Representative projects: Solana, Monad, Aptos, Sui

3.Single-threaded modular blockchain: A modular blockchain that processes one transaction at a time.

Representative projects: Arbitrum, Optimism, zkSync, Starknet

4.Parallel processing modular blockchains: Modular blockchains that process multiple transactions at once.

Representative projects: Eclipse, Fuel

Monolithic parallel processing architecture vs. Modular architecture

There is a lot of talk about which approach to adopt, especially when it comes to the concept of modularity versus global parallel processing. There are also three camps:

Modularity camp: Modularity advocates (who are also mostly Ethereum advocates) argue that it is impossible for a single piece of blockchain to solve the blockchain’s impossible triangle. Stacking Legos on Ethereum is the only way to get scalability while being secure and decentralized. And modularity has more control and customizability.

Monolithic parallel processing camp: This camp (citing Kodi and espresso in Monolithic vs. Modular: Who is the future of Blockchain?) “View) that the new public chain architecture of single chip parallel processing (Move system, Solona, etc.) has a high degree of integration, the overall performance will be better than the modular fragmented design, and the modular architecture is not safe, especially the need for a large number of cross-chain communication, and the attack surface of hackers is wider.

Neutral camp: Of course, there are those who hold a neutral attitude and believe that the two can eventually coexist. For example, Nosleepjon believes that the end game is that both have their merits, the public chain competition will still exist, and the Rollup will compete with each other.

EndGame

The focus of this question can really be reduced to whether the frictional disadvantages of modularity (cross-chain insecurity, poor system flow, etc.) outweigh the centralization problems of the new public chain. In terms of the market debate, neither the Rollup centralization sequester’s shortcomings nor the cross-chain bridge’s insecurities have caused people to move to the new public chain. That’s because all of these issues seem to have room for improvement, and the new public chain can’t replicate the massive ecological moat and decentralization advantages of the Ethereum chain.

On the other hand, although the new public chain has the advantages of performance and integration in the architecture, it is ecologically a simple fork of the Ethereum ecology, with too high degree of homogenization and lack of liquidity. No exclusive application can reflect its own architectural advantages, and naturally, there is no reason why people have to give up the Ethereum ecology. The plasticity of Rollup is high enough, and there is still a lot of room for future Rollup improvement of new architectures. When Rollup also has most of the advantages of non-EVM chains, it is very difficult for “Solana summer” to happen in the future. So in this case, I think the friction disadvantage of modularity is less than the problem of public chain centralization. And the neutral situation does not seem to exist, Ethereum’s siphon effect will be like the “iPhone”, attracting a large number of developers who focus on scalability to the second layer, and the new public chain will become a ghost town.

Then about the future of infrastructure, I am undoubtedly more inclined to modularity, Ethereum’s classification expansion will also be the beginning of the public chain game EndGame, Layer2 competition between the general chain, Layer3 competition between the super application chain.

At present, the projects being financed in the primary market also confirm this. In addition to a large number of Ethereum two-layer projects, that is, the expansion project of Bitcoin, there is almost no new public chain.

But then again, the industry is always built on Ethereum development, and the current trend is a little over-concentrated taste, this status quo is really good? A lack of competition can stall an industry. The industry needs diversity and more choices. If the user experience gradually tends to be homogenized, how the new public chain will create the signs of breaking the game has not been seen so far. When Ethereum continues to improve its own shortcomings at the same time, how to find a larger gap to do accurate combat non-EVM system needs to focus on the issue.

The arena of DA scheme

Moving on from the execution layer controversy to the Data Availability Layer (DA layer) controversy, the debate over which data availability scheme Rollup should adopt has been a hot topic in the industry recently, caused by a tweet from Ethereum Foundation researcher Dankrad Feist discussing related aspects of the topic. And making it clear in his opinion that rollup without Ethereum DA is not Layer2, will the Layer1 war of the past evolve into a war between orthodox (with Ethereum DA) Layer2 and unorthodox Layer2? Then there are three main solutions for DA in the industry at present:

1.Public chain as the settlement layer

Taking Ethereum as an example, the fees submitted to Ethereum when a transaction is carried out in Rollup mainly include the following categories:

Execution Fee: compensation for the computing resources required to execute a transaction. It includes the gas fee required to execute the transaction and is usually proportional to the complexity of the transaction and the time it takes to execute. In Rollup, the execution fee will likely include the fee for executing the transaction off-chain, as well as the fee for generating and verifying proof of the transaction.

State Fee: The state fee is related to updating the state on the Ethereum mainchain. In Rollup, this includes the fee for submitting the new state root to the main chain. Each time the Rollup aggregator generates a new state root and commits it to the main chain, a state fee is incurred. This expense may be proportional to the frequency and complexity of state updates.

Data Availability Fee: A fee for publishing data to Layer1.

In these fees, the data availability fee accounts for the largest proportion, and the cost is high, such as Arbitrum in May 6th this year due to the explosion of Ethereum GAS fees, a single day paid to Ethereum 376.8ETH GAS fees.

This is because Rollup uploades data to Ethereum in the form of Calldata upload, and permanently store these data, so the cost is very expensive. But the benefit is that Rollup has the best security and legitimacy of the three schemes, and the cost reduction of the scheme currently awaits the update of the upgraded EIP-4844 in Cancun. By introducing a transaction format with Blob carrying Transactions. Make the transaction format one more Blob place to carry Layer2’s data than the normal transaction format. Moreover, Blob data is deleted by the node after one month, thus saving storage space significantly.

The transaction format of Blob provides cheaper data availability than Calldata. There are two main reasons: On the one hand, Callda exists in the Execution Payload, while Blob data is stored in Prysm node or Lighthouse node (instead of Geth), which consumes much more resources when Calldata needs to be read by contracts. On the other hand, the Blob data is short-term storage, and the node will delete the Blob data after one month. However, the GAS cost will still be higher than the latter two schemes.

2.Validiums DA Mode

For app chain type rollups (such as the former dYdX, Immutable, etc.), they are usually made using the layer 2 scalability engine introduced by the header Rollup project (currently the most common is StarkEx, but Zk series header projects all have similar schemes). In the DA mode, due to the larger application chain calculation, they prefer to use Validiums, which is a low-cost, high-throughput scheme. Validiums are designed to take advantage of off-chain data availability and computation, similar to ZK-rollup, by publishing zero-knowledge proofs to verify off-chain transactions on Ethereum. However, unlike ZK-rollup, which keeps data on-chain, Validiums keeps data off-chain and costs 90% less than using Ethereum, making it the most cost-effective solution in the alternative scenario.

But because the data remains off-chain, Validium’s physical operators can freeze users’ funds. To prevent extremes, a Data Availability Committees (DAC) scheme had to be introduced again, with the DAC having to confirm that it had received the data by signing each update of the status by its quorum. This is a controversial practice because you have to trust the security of the entity first, not the chain. Dankrad Feist (the creator of EIP-4844 above) directly called out this scheme in a tweet.

3.Modular DA

From the perspective of modularity, there are many ways to redesign the DA layer, which may lead to the concrete implementation of different projects. Therefore, the detailed description of the modular DA project needs a lot of space, and the description of the DA project is represented by Celestia.

Celestia

As the first proponent of the modular blockchain concept at the beginning of this article, Celestia is the most well-known and earliest project on the circuit. Its vision aims to solve the problems of blockchain scalability and modularity. Celestia is based on the COSMOS architecture and offers developers more flexibility, enabling them to deploy and maintain blockchain applications more easily. At the same time, it is reducing the cost and complexity of deploying blockchains by providing dApp creators and blockchain developers with a modular, scalable blockchain architecture to support the needs of a wide variety of applications and services.

How it works and the architecture

Decoupled execution: Celestia’s logic is to divide the protocol into different layers, each focused on a specific function, which can then be recombined to build blockchains and applications. Celestia, in turn, focuses on the consensus and data availability layers within the hierarchy. Similar to some Layer1s, Celestia uses Tendermint, a Byzantine fault-tolerant (BFT) consensus algorithm, to sort transactions, but differs from other Layer1s. Celestia does not reason about the validity of the transaction, nor does it execute the transaction, only the packaged ordering of the transaction, broadcast, and all the transaction validity rules are enforced by the Rollup node on the client side (i.e. decoupled consensus layer and execution layer). Then note a key point, “do not reason about transaction validity”. Malicious blocks that conceal transaction data can also be posted to Celestia. So how should the verification process be implemented? Celestia introduces two cores here, 2D Reed-Solomon coding and Data Availability Sampling (DAS).

The monolithic blockchain’s overall architecture contrasts Celestia’s modular architecture

DAS: This scheme is used for light nodes to verify the availability of block data in a way that does not require nodes to download the entire block. Only a portion of the block is needed to sample the data (the specific implementation requires 2D Reed-Solomon encoding, which will be explained in detail below). Unlike the Dacs mentioned above, DAS does not need to trust the security of the entity, only the chain needs to be decentralized enough for the data to be trusted.

Two-dimensional Reed-Solomon coding

(erasure-correcting code) : The basic idea of two-dimensional Reed-Solomon coding is to apply Reed-Solomon coding to both rows and columns separately. This way, even if errors occur in some rows and columns of 2D data, they can be corrected. Then by encoding the block data, the block data is split into kk blocks, arranged into a matrix of kk, and expanded into a 2k2k extended matrix by multiple Reed-Solomon encoding. Calculate 4k independent Merkle roots of rows and columns of the extended matrix; The merkel-roots of these roots are used as block data commitments in the bulks. Celestia light nodes sample 2k2k data blocks. Each light node randomly selects a set of unique coordinates in the extended matrix and queries the full node for data blocks about those coordinates and corresponding Merkle proofs. Each received block of data with the correct Merkle proof is broadcast to the network.

If abstracted, it can also be said that the block data is divided into a square matrix (for example, 8x8), and by encoding, additional “check” rows and columns are added to the original data to form a larger square matrix (16x16). By randomly sampling part of the data in this large square and verifying its accuracy, the integrity and availability of the overall data can be ensured. Even if part of the data is lost or damaged, the whole piece of data can still be recovered using the checksum data.

Block scaling: Celestia scales as the number of light nodes increases. As long as there are enough nodes on the network to sample the entire block, Celestia remains secure. This means that as more nodes join the network for sampling, the block size can increase accordingly, without sacrificing security or decentralization. And doing so on a traditional monolithic blockchain sacrifices decentralization, as larger block sizes add greater hardware requirements for nodes to download and verify data.

Sovereign Rollup: This is also a concept pioneered by Celestia, combining elements of various blockchain designs, including the Layer 1 blockchain, rollup, and early Bitcoin networks like Mastercoin. The key difference between Sovereign rollup and smart contract rollup (op, arb, zks, etc.) is how transactions are verified. In smart contract rollup, transactions are verified by a smart contract on Ethereum. In contrast, in sovereign rollup, the nodes of the rollup itself verify the transaction.

The sovereign rollups publishes its transactions to another blockchain (such as Celestia) for sequencing and data availability. The nodes of the sovereign Rollups then determine the correct chain. This design allows sovereign rollups to inherit multiple security aspects from the data availability (DA) layer, including activity, security, recombination resistance, and review resistance.

For smart contract rollup, upgrades depend on the smart contract on the settlement layer. Upgrading rollup requires changes to the smart contract. Multiple signatures may be required to control who can initiate updates to the smart contract. Although it is common for team control to escalate multi-signatures, it is possible to make multi-signatures controlled through governance. Since smart contracts exist on the settlement layer, they are also subject to the social consensus of the settlement layer.

Sovereign rollup is upgraded through a fork like Layer 1 blockchain. New software versions are released and nodes have the option to update their software to the latest version. If the nodes do not agree to the upgrade, they can continue to use the old software. Providing options lets the community, the people running the nodes, decide if they agree to the new changes. Even if most nodes upgrade, they cannot be forced to accept the upgrade. This feature makes sovereign rollup a “sovereign” rollup compared to smart contract rollup.

Quantum Gravity Bridge (QGB) : A key component of the Celestia ecosystem that acts as a bridge between Celestia and Ethereum (or other EVM L1 chains), enabling the transfer of data and assets between the two networks. By introducing the concept of Celestium (EVM L2 rollup), use Celestia for data availability, but settle on Ethereum. This achieves the advantages of taking advantage of both networks: the scalability and data availability of Celestia, and the security and decentralization of Ethereum. Validators on Celestia can run QGB, enabling Celestium to provide strong data availability guarantees for block data ata fraction of the cost of Ethereum’s calldata.

QGB is a key part of Celestia’s vision for a scalable, secure and decentralized blockchain ecosystem. It enables the interoperability needed for the future of blockchain technology. The project is currently working on a Zk QGB to further reduce the Gas cost of verification.

DA Economics

Let’s talk about how much economic value DA will have in the future.

This assumption is made by Jon Charbonneau, a research associate at delphi, and based on Polygon Hermez’s prediction that they will eventually need only 14 bytes per transaction in Danksharding. Also the above EIP-4844) specification at 1.3 MB/s, Laeyr2 can reach around 100,000 TPS, then the projected revenue will reach the staggering figure of $30 billion.

Under such a huge cake, the future disputes in the DA market will be very fierce. In addition to the three major solutions, Stark’s Layer3, zkPorter, and several modular DA projects will join the fray. So from the existing Layer2 project, the universal chain is fully inclined to use Ethereum DA. And application chains and long-tail chains will be the main customers of “unorthodox DA”. My personal opinion is that modular DA and soon Layer3 will be the mainstream choice in the future.

Epilogue

Moving forward on decentralization is still the mainstream concept in the industry, and the modular blockchain is essentially an extension of the value of Ethereum and an attempt to break the impossible triangle of the blockchain, although the design is full of diversity, but also makes the construction more complicated. And modular construction because the module has a variety of choices, the risk of different modules are a blind box, how to build a more stable modular system is the place that needs attention. Driven by the modular trend, on the other hand, dozens of Layer2 will also cut liquidity again, and cross-chain communication and security will also be the focus of the future. The modularity of Bitcoin is also the recent hot direction, and with some slightly feasible schemes, it can also be appropriate to pay attention.

About YBB

YBB is a web3 fund dedicating itself to identify Web3-defining projects with a vision to create a better online habitat for all internet residents. Founded by a group of blockchain believers who have been actively participated in this industry since 2013, YBB is always willing to help early-stage projects to evolve from 0 to 1.We value innovation, self-driven passion, and user-oriented products while recognizing the potential of cryptos and blockchain applications.

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