Hello everyone...
Welcome to another day of exploring Web3 Engineering. Today, let us dive into the world of Modular blockchains. Let us understand what are they? How do they work ? And where are they useful ? So, without any further ado, let's get started..
What are Modular Blockchains ?
Traditionally, the old blockchain systems (Ethereum and Bitcoin) are monolithic. Which means all the tasks like block producing, consensus, validation etc are all taken care of as a single service. This approach creates problems whenever there is a need of updating the node for even a smaller change. e.g. Ethereum PoS update.
So, all these services are separated into separate for easy updates. And this module based architecture is called Modular Blockchains. By this, we can easily upgrade one layer without effecting the other layers. For instance, we can change the consensus algorithm without effecting block producing layer etc.
How do they work ?
These modular blockchains is made up of four layers. They are:
Blockchain / Execution layer
Settlement layer
Consensus layer
Data Availability Layer
Execution / Blockchain Layer
The execution layer is responsible for processing transactions and executing smart contracts. It is where users interact with the blockchain by signing transactions and transferring assets. This layer handles state changes, enabling the blockchain to update its ledger based on the transactions processed. By offloading execution to this layer, modular blockchains can achieve higher throughput and faster transaction times compared to monolithic structures.
Settlement Layer
The settlement layer verifies the execution of transactions and resolves disputes. It acts as a final arbiter, ensuring that once a transaction is executed, it is immutable and cannot be altered. This layer is not always present in monolithic blockchains but is an optional component in modular designs. It provides a crucial function analogous to a judicial system, confirming the legitimacy of transactions and maintaining the integrity of the blockchain.
Consensus Layer
The consensus layer establishes agreement among network participants on the validity of transactions and the state of the blockchain. It employs various consensus mechanisms, such as Proof of Stake (PoS) or Byzantine Fault Tolerance (BFT), to ensure that all nodes in the network reach a consensus on the order and validity of transactions.
Data Availability Layer
The data availability layer ensures that the data required to verify transactions is accessible and can be validated by network participants. This layer addresses the challenge of ensuring that transaction data is publicly available and not withheld by malicious actors.
Where are they useful ?
Modular blockchains are mainly used as Layer 2 solutions where scalability of a blockchain is the major issue. Modular blockchains address the scalability problem with the help of the technique called Sharding.
In monolithic blockchains, every transaction passed is required to be validated by every validator node in the cluster which is time consuming since there are a good number of validators running for a strong blockchain network like Ethereum.
But in modular blockchains, the transaction set is split into smaller chunks called SHARDS. Each shard is responsible for storing and managing a subset of the network's data, ensuring that the required data is available for processing transactions within that shard. With this process, the transactions undergo parallel execution that increases the scalability exponentially.
