As of the time of writing this article, it is almost impossible for anyone using the internet properly to be unfamiliar with cryptocurrencies like bitcoin.
However, the existence of this cryptocurrency was brought about by the emergence of blockchain technology.
In 2009, blockchain technology was publicly recognized as the technology that powers bitcoin as a replacement for fiat currency, and it has gained significant traction since then.
Today, blockchain is recognized as a technology that promotes the decentralization of power over transaction data while also providing transparency, immutability, traceability, and security through a distributed ledger across a distributed network.
Currently, the adoption of blockchain technology is growing. Many sectors, such as business, government, organizations, and industries, are digging deep into blockchain and deploying it to meet various needs.
To put it simply, the blockchain architecture is made up of three primary layers:
The Execution layer: where transactions are performed i.e. executed
The Networking/Consensus layer: where agreement is made on what transactions are true and how they should be arranged
The Data layer: where the history of valid transactions is stored and can be easily accessed
That being said, the two most prominent architectural approaches in blockchain are modular and monolithic.
A monolithic blockchain is a single, unified system built to manage all the layers of blockchain architecture.
Typically, a monolithic blockchain is designed to handle everything from transaction execution to network consensus and the data availability layer within one chain. Additionally, in a monolithic blockchain, all validators and full nodes perform consensus and chain execution. An example of this is the bitcoin blockchain
To better understand the design of a monolithic blockchain, let's use the analogy of a mobile phone manufacturer.
A typical mobile phone manufacturer like Apple does not produce every single part of the phone in one factory.
Rather, different parts of the phone are manufactured in a separate location where specialized teams can design them before shipping the parts over to the central factory where they are assembled as a mobile phone.
If all the parts were manufactured in a single factory, the factory would not only have to be large, but it would also incur a very high cost of maintenance for its infrastructure.
Ultimately, the lack of specialization among teams would result in lower quality outcomes, and if phone orders increased, the facility would be unable to scale to meet this demand due to a lack of space or manpower.
Therefore, it is safe to say monolithic blockchains are often faced with the scalability trilemma
The scalability trilemma ( named by Vitalik Buterin founder of Ethereum) is a series of trade-offs between decentralization, speed/scalability, and security that one must make when designing a blockchain and constructing rules for its on-chain governance.
Blockchain networks using the monolithic blockchain prioritize one or two of the layers over another layer. For example, Ethereum v1 is a monolithic blockchain optimized for decentralization, it prioritizes the consensus and data layers over the execution layer, which is why it processes 15 transactions per second and requires a high gas fee per transaction.
A modular blockchain is made up of multiple, independent modules that each perform a specific function. For example, one module may be responsible for consensus while another is responsible for transaction execution. This allows for greater flexibility, as changes can be made to individual modules without affecting the entire system.
Additionally, modular systems can be more easily scaled, as new modules can be added or removed as needed.
However, the independent modules can be sidechains (independent blockchains) or layer 2 (L2) networks.
Sidechains: sidechains are separate blockchains that are linked to the main blockchain, allowing for the transfer of assets or data between the two chains. They provide greater flexibility and scalability, enabling the creation of custom blockchain solutions and cross-chain interoperability, as well as allowing for experimentation with new features and consensus algorithms.
Layer 2 (L2) refers to additional layers or solutions built on top of a blockchain network that aims to improve scalability, security, and/or functionality.
To further explain the design of the modular blockchain, let's once again make use of the mobile phone analogy.
When a modular approach is used to manufacture mobile phones, tasks are broken down into smaller components and handled by specialized teams. This procedure can assist in dealing with the stress of high-volume calls.
Blockchain network like EOSIO utilizes a modular architecture and a unique consensus algorithm called Delegated Proof of Stake (DPoS) that allows for high scalability and low latency.
Another example would be Polkadot, which uses a modular architecture to create multiple parallel chains, called "parachains," that can interact with each other, enabling the development of new use cases and scalability solutions.
The implementation of modular designs in monolithic blockchains increases flexibility in the network. For example, the Bitcoin network's layer 2 (the Lightning network) was built to improve the low TPS and allow faster transaction execution.
Similarly, the Ethereum network (v2.0) introduced sharding and rollups to scale its network.
**Sharding **means breaking down transactions on a blockchain into smaller sets of data that can be processed by the network more quickly.
Rollups are a form of off-chain computation that allows for the aggregation of multiple transactions into a single transaction on the main chain, thus reducing the load on the main chain and increasing the number of transactions that can be processed per second.
Additionally, the benefits of modular blockchains also include the increase in:
Scalability: As the demand for blockchain services increases, the modular architecture enables organizations to add new modules to their blockchain systems as needed.
Decentralization: Modular blockchains prioritize network security by lowering the cost for users to run nodes and verify the network. The more users running nodes, the greater the decentralization, making the blockchain more resistant to attacks
Security: Layers are delegated to perform different tasks, which makes it difficult to take down the whole system if one layer is taken control of.
Modular architecture is an essential component of the blockchain ecosystem. It provides the flexibility and scalability needed to ensure the longevity and robustness of blockchain systems. Organizations that adopt a modular architecture will be well-positioned to take advantage of the many benefits that blockchain technology has to offer and will be better equipped to meet the demands of the digital economy.