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The primary sensible contract blockchain, Ethereum, was monolithic by design, that means it manages its personal execution, settlement, consensus, and information availability. Through the years, new decentralized functions developed, resulting in elevated demand for blockspace. When the demand for blockspace is greater than its provide, the constrained availability restricts the vary of potential functions, inflicting a major obstacle to utility and widespread adoption.
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This limitation is known as the scalability trilemma or, in a nutshell, the concept that no public blockchain can concurrently obtain most decentralization or safety to realize optimum scalability. To beat the restrictions of the scalability trilemma, modularity has emerged as a method of outsourcing core parts optimized to unravel crucial features.
The courtesy of the Inco’s workforce
The modular blockchain thesis facilities on position specialization. It proposes decentralizing conventional blockchain features—like execution or information availability—throughout specialised networks. By segmenting these features from a singular L1 into distinct layers, blockchains may be tailor-made for optimum efficiency in particular areas, considerably boosting customization, effectivity, and, the place needed, decentralization, safety, and scalability.
Given the various vary of use circumstances, these features may be totally different. A modular community may very well be specialised to push oracle value feeds, present zero-knowledge proving companies, make obtainable information, or allow a extra scalable execution layer on prime of one other underlying blockchain.
The necessity for modularity within the crypto trade
Ethereum exemplifies the gradual transformation right into a modular world. The chain was first launched with a monolithic design, following within the footsteps of Bitcoin. Arbitrum, a layer-2, represents the success story of rollups in separating the intensive computation wanted for scalability off-chain whereas settling again on-chain. Many extra tasks have adopted this design due to the useful resource effectiveness and more cost effective design of processing transactions utilizing rollups.
It doesn’t cease there. Networks that assist builders see and unlock the worth of modularity have been on the rise. Celestia is a good instance of fixing an apparent drawback: the numerous price of storing information availability (DA) again to Ethereum. Whereas rollups enable for larger throughput, the price of transacting continues to be comparatively excessive as a result of it finally is determined by the storage price of the settlement layer. An answer to this drawback is to supply an alternate DA layer.
The belief {that a} single monolithic design can’t meet right now’s blockchain calls for and not using a trade-off is why the area is shifting in direction of modularity. Ethereum is essentially the most safe blockchain with sensible contracts however has continued to face varied shortcomings with processing transactions and gasoline charges.
The courtesy of the Inco’s workforce
Along with fixing blockchain’s architectural challenges, it’s turning into clear that extra companies are needed for enabling new use circumstances and pushing for web3 adoption. Examples of such add-on companies embrace oracle companies, decentralized RPC, ZK prover networks, AI, to call just a few. Nonetheless, blockchains can’t assist these companies natively as a result of extra overhead, {hardware} necessities, or technical incompatibilities. Given the composable nature of the modular structure, blockchains don’t must assist every thing themselves anymore—every thing may be plug-and-play like legos.
The courtesy of the Inco’s workforce
For instance, one unsolved drawback that this area will carry on tackling is round confidentiality. A lot of the extensively adopted blockchains right now are clear and can’t add on-chain confidentiality with out requiring resource-intensive {hardware} for his or her validators when using cryptography methodologies reminiscent of zero-knowledge proofs (ZKP) or totally homomorphic encryption (FHE).
Past the present 4 blockchain layers (execution, settlement, information availability, and consensus), a confidentiality layer on prime of present dApps is a crucial lacking piece that may allow internet new use circumstances that aren’t possible on prime of clear blockchains. Inco is an instance of a modular protocol that acts because the fifth layer—confidential computing—by introducing totally homomorphic encryption (FHE) to Ethereum and different blockchains with out altering the bottom protocol.
Right now, modular protocols are gaining traction, and with the widespread adoption of decentralization, they’ll seemingly grow to be the usual for constructing in web3. This commonplace will undoubtedly disrupt the vertically built-in method of monolithic chains and faucet into particular Lego blocks that may be matched to create distinct modular stacks. This implies tasks will use the modules they want for his or her particular wants as an alternative of making an attempt to do every thing.
It will unlock infinite scalability as a result of a community may depend upon Ethereum for safety, Transfer because the execution setting, Celestia for information availability, and Inco for confidential computing. The last word aim is for disparate ecosystem modules to coexist and develop collectively.
The panorama of blockchain know-how is poised for vital enlargement with the arrival of modular architectures in 2024 and past. These novel blockchains delegate at the least one of many quintessential features—settlement, consensus, confidentiality, information availability (DA), or execution—to a different distinct blockchain framework.
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Remi Gai
Remi Gai is the founder and CEO of Inco. He’s a web3 founder fellow at South Park Commons, with a background in engineering (Google, Microsoft), entrepreneurship (founding member of Parallel Finance, a collection of defi protocols on Polkadot that reached over 500M in TVL backed by Polychain, Sequoia, Founders Fund, Coinbase Ventures), product administration (web3 UX lead at co-founded blockchain studio), and enterprise capital (8 Decimal Capital). Now, he builds Inco, aiming to interrupt down the ultimate barrier to mass adoption of web3.