Several modular blockchain projects have received investment from centralized exchanges (CEX).

Author: Weilin

The Ethereum Layer2 network, with its efficient and scalable features, has become an important underlying infrastructure in the Web3 world. Another faction of Layer1/Layer2 networks, which provides solutions for scalability through a modular architecture, is also gaining momentum in the Web3 infrastructure.

Modular blockchains aim to achieve decentralized scaling of blockchain networks without compromising network security by outsourcing at least one of the "execution layer, settlement layer, consensus layer, and data availability layer" to external chains.

Since the launch of the first modular blockchain network, Celestia, on the mainnet on October 31 last year, its native Gas token TIA has surged from around $2 to around $16 on January 22. In less than half a year, it has steadily increased by 717%, and its market value of $2.5 billion has pushed Celestia to 37th place in the cryptocurrency market value rankings, making it the only modular blockchain to enter the Top 50 and allowing capital to see the potential of this track.

In 2023, several modular blockchain projects received new investments, including Eclipse, AltLayer, Sovereign, and Dymension. Today, we will introduce the concept and application scenarios of modular blockchains and review high-profile potential projects.

Modular Solution to the "Impossible Triangle"

From the initial design of blockchain, both Bitcoin and Ethereum blockchains are considered monolithic blockchains, where all four functional layers—consensus, execution, settlement, and data availability—are on a single chain, and the network has to bear all tasks alone. This has led to the "impossible triangle" of monolithic blockchains, where scalability, decentralization, and security can only meet two of these characteristics on the chain. Currently, most Layer1 networks sacrifice decentralization to ensure network security and scalability, while Ethereum insists on decentralization and security, leaving scalability to compatible Layer2 networks to solve.

However, as blockchain transaction volume and decentralized applications increase, these monolithic blockchains still experience high frequency of transaction congestion, leading to increased transaction costs, which is detrimental to application operation and user experience.

To address the "impossible triangle" problem, developers have proposed a "modular blockchain" solution, which restructures the architecture of the blockchain in a modular way to meet functional requirements, without compromising the original intention of decentralization, to safely improve performance and expand the network to meet diverse application scenarios.

The concept of modular blockchains can be traced back to the white paper "Data Availability Sampling and Fraud Proofs" co-authored by Mustafa Albasan and Vitalik in 2018. This paper describes how to solve the scalability problem of blockchain without sacrificing security and decentralization, by allowing light clients to receive and verify fraud evidence from full nodes and designing a data availability proof system to reduce the trade-off between on-chain capacity and security.

Currently, Rollups and sharding technology are examples of Ethereum's transition to modular blockchains.

Rollups provide a separate layer for execution, extending Ethereum's monolithic architecture. Rollups can use powerful computers to package and execute multiple transactions before periodically sending compressed data back to the Ethereum mainnet for verification.

Sharding is used at Layer 1 to achieve scalability through Sharding technology. The core idea of this solution is to decompose the Ethereum main chain into different shards and rotate validators randomly between these shards. Each shard is essentially its own mini-blockchain and runs in parallel with the beacon chain. Through sharding technology, Ethereum can significantly increase transaction throughput and scalability to meet the growing user demand.

Which Modular Blockchains Have Potential?

As of now, the Web3 asset data platform RootData has recorded 36 modular blockchain projects, with only Cube and Assembly in a "dead" state, while the rest of the modular blockchain networks are under steady development.

Five modular blockchain projects have been validated in the circulating market and ecosystem.

Celestia (TIA)

Celestia is the first modular blockchain network project, focusing on data availability. Celestia believes that similar to Layer2 Ethereum scaling networks, new data can be published to the Celestia chain instead of directly to Ethereum, saving over 90% of fees.

Data Availability Sampling (DAS) is an important feature of Celestia, allowing users to confirm the existence of a large number of data blocks without downloading the entire blockchain. This technology greatly improves scalability and security.

In addition, Celestia provides convenience for creating independent, self-managed blockchains called sovereign rollups, benefiting from the security provided by the Celestia network.

The Blobstream feature integrates Celestia's modular data availability layer with Ethereum, allowing Ethereum developers to build efficient, high-throughput Layer 2 solutions.

• Circulating supply: 159,016,130 TIA

• Total supply: 1,017,972,603 TIA

• Current price: $15

• All-time high: $20.26

• All-time low: $2.03

Mantle Network (MNT)

Mantle Network is an L2 scaling solution based on Optimistic Rollup technology, providing EVM compatibility and modular design. Incubated by BitDAO, it uses roll-up technology and a decentralized data availability layer (Mantle DA) to provide high throughput, low-cost, and fast deterministic services, while ensuring Ethereum-level security.

• Circulating supply: 3,162,441,863 MNT

• Total supply: 6,219,316,795 MNT

• Current price: $0.64

• All-time high: $0.8488

• All-time low: $0.3136

SKALE Network (SKL)

SKALE Network is a Layer 2 scaling solution that uses a sidechain environment to improve the performance of decentralized applications (dApps) on the Ethereum network. SKALE enables developers to run smart contracts at high speed, high throughput, and extremely low cost.

SKALE Network is deeply compatible with Ethereum and is not subject to Ethereum's storage and computation limitations. In addition to supporting thousands of independent blockchains that grow linearly, it supports various elastic sidechains, storage chains, and other types of subchains.

• Circulating supply: 5,134,227,671 SKL
• Total supply: 5,447,166,667 SKL
• Current price: $0.06
• All-time high: $1.22
• All-time low: $0.01

More economic models and tokens of modular blockchains are still in the testing phase, with these projects either preparing to launch their mainnet or starting to attract ecosystem applications. Here is information about active modular blockchain networks:

It is not difficult to find that highly regarded modular blockchains have attracted investments from centralized exchanges (CEX). In addition, some modular blockchains have received attention and even investments from mainstream blockchain network ecosystems, and some networks have already launched their mainnet and generated a large number of applications.

For example, AltLayer, which recently launched on Binance Launchpool, is a highly scalable application-specific execution layer system with multiple execution layers similar to optimistic rollups (referred to as flash layers). All transactions obtain security from the underlying L1/L2, and it is designed as a modular and pluggable framework for the multi-chain and multi-VM world, enhancing the network's scalability.

Fuel is the earliest Optimistic Rollup deployed on the Ethereum mainnet. It launched its V1 version at the end of 2020. It is a blockchain based on the UTXO model, with its main advantage being the ability to execute transactions in parallel. It provides scalability by using an execution model different from the EVM, with a highly parallelized minimal execution system based on UTXO. It supports ETH and all ERC-20 standard tokens, and currently has 36 applications as top players in its ecosystem, including DeFi, DEX, stablecoins, games, NFTs, Web3 domains, and more.

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