Over the last 13 years, digital assets have developed from a “geek industry” into a trillion-dollar-market. Regardless of the current bearish trend, today, Bitcoin is worth 900% more than five years ago. The future of crypto involves mass adoption and awareness, more crypto-fiat gateways, and the market’s efficiency.
Nevertheless, there is a long way to go for that future to become a reality. Even though digital assets operate much more effectively and offer transparency and decentralization, the industry still has many challenges. One of them is the considerable shortcomings of traditional monolith blockchains, such as Bitcoin and Solana. This article explores how the drawbacks of monolithic blockchains, including scalability problems and blockchain trilemma, can be resolved with a new approach of a modular approach.
Difference Between Monolith and Modular Blockchains
If you are familiar with crypto and its exchange process, you are already familiar with common difficulties users face. Despite being the market leader and driver, Bitcoin is slow. There are hundreds of memes surrounding the matter. It takes 10 minutes for the Bitcoin system to add a new block to the chain, which translates into transaction delays.
Ethereum, the second-largest cryptocurrency by capitalization, also has its issues. High fees, for instance. To deal with the network load, the system raises transaction fees. As a result, a commission can reach hundreds of dollars during high demand. Most exchanges even recommend their clients refrain from Ethereum transactions if the network is overloaded.
Shortcomings of Monolith Blockchains
The reason for this lies in the structure of the projects mentioned above. Both Bitcoin and Ethereum are built using the monolith approach in their current form. It means that a single network is responsible for handling each aspect of the system’s functioning, including transaction processing, network consensus, and data storage. The system can be viewed as layers of the blockchain:
- Application & presentation layer → scripts, API, user interfaces
- Consensus layer → transactions verification
- Network layer → inter-node communication
- Data layer → transaction history storage
- Infrastructure layer → decentralized ledger
The realities are such that these three components cannot be achieved simultaneously within the monolith approach. As a result, compromises have to be made. The crypto industry calls it “a blockchain trilemma,” stating that a network can only achieve two of three main characteristics: decentralization, security, and scalability.
Modern Solutions for Blockchain Technologies
Luckily, progress does not stand still. Today, there are modern tools that allow blockchains to operate more efficiently. For example, additional system protocols and on-chain solutions such as Bitcoin Lightning Network and SegWit. Another way would be sharding, which involves splitting a blockchain into multiple pieces (shards), allowing the network to process a larger volume of transactions. There are also Layer-2 solutions that require adding a second layer to the main blockchain: sidechains and payment channels.
We can combine all methods above into one group called a modular approach. Such a system is built of separate parts that can be independently created or exchanged between different systems. Rather than hopelessly trying to achieve everything with a single chain, a modular blockchain segregates its essential functions into separate layers.
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Monolithic |
Modular |
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Execution, Settlement, Consensus, and Data Availability |
Execution |
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Settlement |
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Consensus and Data Availability |
Benefits of the Modular Blockchains
As we have already established, modular blockchains consist of layers responsible for a specific action. It is very similar to an efficient-manager approach: dividing labor for better results is better than doing everything yourself. Consequently, the main advantage of a modular blockchain is solving the blockchain trilemma:
- Scalability
A modular approach allows crypto projects to provide decentralization, security, and scalability. In the real world, it translated into users being able to escape Bitcoin’s long confirmation time or high Ethereum gas fees. Assigning each layer an individual task helps the system stay secure, fast, and efficient.
- Decentralization
Despite the modular blockchain being split into different layers, it still maintains its sovereignty and, as a result, security. No single server can gain sole control over the network even if it’s overloaded. Social consensus is used to make even critical decisions regarding the project, creating a genuinely decentralized platform.
- Efficiency
Since the structure of a monolithic blockchain is layered, other projects can use them to improve their networks’ efficiency. A developer can introduce Layer-2 solutions to solve the blockchain’s problem. For instance, Optimism Rollup for Ethereum utilizes strong security guarantees while reducing its cost and latency.
Celestia: The First Modular Blockchain Network
In 2021, the Celestia team introduced the concept of the first blockchain built on a modular basis. Recently, the developers have launched the testnet “Mamaki,” while the mainnet release is scheduled for 2023 according to the project’s roadmap. Since the underlying technology can potentially be revolutionary and end the era of Layer-1 blockchains, Celestia has already managed to gain some serious buzz in the media. The articles about the network were published by CoinDesk, Finance.Yahoo, Blockchain Council, etc. Let’s cover the prospects of Celestia that make it attractive.
dApps Ecosystem
Celestia allows the developers to create decentralized applications. Instead of launching a new blockchain that can be time-consuming and costly, you can use the Celestia consensus network via smart contracts.
Data Availability Sampling
Since Celestia is not involved in transaction validation, the system’s throughput is not burdened with the state execution typical for monolith blockchains. As a result, the network maintains its efficiency with the user base growth due to data availability sampling.
Chain Interoperability
Considering Celestia does not require an honest majority to validate transactions as in PoW blockchains, the dApps developers will be able to securely interoperate with all Celestia chains.
Modular Blockchains as the Industry’s Future
It’s more than evident that the crypto market has a long way ahead to develop and become sustainable. The top digital assets, such as Bitcoin and Ethereum, face significant challenges due to their monolithic system structure. It forces to sacrifice one of three main components: decentralization, security, or scalability. As a result, BTC is slow, while ETH gas fees can be sky-high.
The solution lies in the layered structure. Creating a modular network where each layer is responsible for specific actions solves the blockchain trilemma and provides a much more efficient system. Although similar technologies have already been implemented via cryptocurrency rollups and protocols, the mainnet of the first modular blockchain network Celestia will launch in 2023. The project’s developers have recently released a testnet, aiming to create a secure decentralized Web 3.0 ecosystem.
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