Modular vs. Monolithic Blockchains
Blockchain technology is a key part of today's digital world, affecting many areas like finance and supply chain management. The use of any blockchain in any industry depends on its architecture. The architecture or structure of a blockchain refers to how the fundamental elements that make up the network - including nodes, ledgers, consensus mechanisms, and smart contracts - are organized, connected, and established within it.
The scalability, security, functionality, and overall capabilities of a blockchain are greatly influenced by its architectural design. Decentralized designs can heighten security measures and increase fault tolerance levels. In contrast, more centralized structures can be faster and more efficient.
Recently, blockchain has evolved quickly, leading to new designs that aim to fix its initial problems. This has brought about two main types of blockchain designs: modular and monolithic.
Both approaches aim to enhance scalability, interoperability, and functionality for decentralized applications. However, they diverge significantly in their methods due to differences in the underlying architecture. The choice between these two alternatives has resulted in what is commonly referred to as the Blockchain Trilemma or Scalability Trilemma: a predicament that confronts public blockchains whereby trade-offs must be made among security (which demands reliable consensus mechanisms and unalterable records), decentralization (characterized by extensive network control distribution), and scalability (involving increased transaction processing capacity).
The Blockchain Trilemma
Source: vitalik.ca
A decentralized blockchain is secure, yet its security cannot be maintained if scaled up. Consequently, the throughput that it offers would decrease.
When a blockchain is both scalable and decentralized, there may be compromises in its security due to obstacles for potential validators.
Decentralized blockchains are likely not both scalable and secure.
In this guide, we will thoroughly analyze modular and monolithic blockchains. Each approach's main characteristics, advantages, and drawbacks will be explored. Additionally, our investigation into scalability, flexibility, and use cases aims to distinguish where each framework shines brightest. We'll also examine how Covalent collaborates with modular blockchain systems to boost accessibility for blockchain data.
Monolithic Blockchains
Definition and Characteristics
Monolithic blockchains have an integrated architecture where all the core components of the blockchain are bundled together in a single layer. This includes the consensus mechanism that validates transactions, the execution logic that runs smart contracts, and data storage.
The most notable example of a monolithic blockchain is Bitcoin. The Bitcoin protocol incorporates the core blockchain functions of network propagation, transaction processing, cryptographic sealing through proof-of-work mining, and ledger state updates. All Bitcoin nodes run the same full-stack Bitcoin software to maintain the network.
Other examples include Ethereum 1.0 and Solana.
Key Characteristics of Monolithic Blockchains
Single unified protocol - The blockchain network is governed by one technical design and a set of consensus rules. All nodes must adhere to the same protocol implementation.
Lack of modularity - All aspects of transaction processing, validation, and ledger updates are handled within the same codebase. There is no separation of core blockchain functions.
Slower evolution - To make any protocol upgrades or changes to the consensus mechanisms, a "hard fork" change to the core protocol must be made, and all nodes must adopt it at the same time.
Broad, general-purpose - Monolithic blockchains are designed to be adapted to many different use cases rather than specialized for particular applications.
Highly secure and resilient - The uniformity of the blockchain protocol and lack of modularity makes monolithic blockchains more secure against bugs and vulnerabilities that could be introduced with significant protocol changes.
Advantages of Monolithic Design
The monolithic design has some benefits that have made it the dominant architecture so far:
Simplicity - With all critical functions in one protocol, monolithic blockchains are relatively straightforward for developers to understand and build upon.
Integrated security - Completing computation, consensus, and data availability in the same layer allows for inherent security mechanisms and controls across the platform. Avoiding message passing between layers improves security.
Uniformity and Complete Decentralization - Networks based on a unified architecture can coordinate upgrades, fixes, and new features in sync across nodes. All nodes verify all transactions and store the complete state. For example, Ethereum executes smart contracts on the same nodes that order transactions.
Use Cases of Monolithic Blockchains
Monolithic chains are well-suited for applications that need:
Absolute integrity of data history.
Decentralized consensus with minimal trust.
Auditability and transparency of all network activity.
Limitations and Challenges
However, monolithic blockchains face the following challenges as they try to scale:
Scalability constraints - Combining multiple demanding functions creates bottlenecks and inefficiencies, limiting transaction throughput and the network's ability to scale. This relates to the blockchain's inherent "trilemma" explained above.
High costs - The computationally intensive work required by unified protocols like proof-of-work translates to higher operational expenses and transaction fees.
Past challenges - Major monolithic networks have faced growing pains from scalability issues, network congestion, and rising costs. For instance, the 2015-16 spam attacks overwhelmed Bitcoin's and Ethereum's capabilities at the time.
Modular Blockchains
Definition and Characteristics
Blockchain technology was initially envisioned with a modular architecture characterized by composition rather than inheritance. Modular blockchains integrate new features and functionality by combining independent modules that are loosely coupled rather than extending a single monolithic codebase. In other words, they compound horizontally rather than vertically.
This modular design allows developers to build and iterate rapidly by mixing and matching modules as needed. Modules can be developed independently and added to the blockchain framework in a plug-and-play fashion.
Modular blockchains have a layered architecture with a minimal base layer focused on network management and consensus. Additional layers and modules are stacked on top to enable different functionalities and use cases. This separation of concerns helps to avoid a one-size-fits-all blockchain with unnecessary complexity at the base layer.
The modular architecture supports component reusability, making sharing and reusing modules across different implementations easy. It also contains complexity when expanding functionality, as new features only interact with the specific modules designed for that purpose. Changes to one module have minimal impact on others, allowing the system to evolve without a high risk of breaking changes.
Modular Blockchain Layers
In a modular blockchain, the primary blockchain functions are separated into layers; the key components are:
Consensus Layer: Responsible for reaching agreement on the state of the blockchain among nodes. Popular consensus algorithms used at this layer include Nominated Proof-of-Stake (NPoS) in Polkadot, pure Proof-of-Stake (PPoS) in Algorand, and Proof-of-Stake (PoS) in Ethereum 2.0.
Execution Layer: Processes and executes transaction logic through smart contracts. This layer handles computation and data storage.
Settlement Layer: Responsible for finalizing transactions and maintaining the network's overall security. It ensures that transactions are securely processed and added to the blockchain in a tamper-proof manner.
Data Availability Layer: Propagates and stores data across the network so all nodes can access it.
Advantages of Modular Architecture
Modular architecture offers several benefits that address the limitations of monolithic blockchains:
Improved Scalability - Each layer can scale semi-independently to increase throughput and lower latency, overcoming the scalability challenges of monolithic chains.
Separation of concerns - Modular architecture divides blockchain functions into layers, such as the consensus layer, execution layer, and data availability layer. This architecture aligns with standard software engineering principles.
Flexibility & customization - Each layer can be optimized for specific functionality without impacting other layers, allowing for greater experimentation.
Interoperability - Standardized communication between layers enables cross-chain composability between different blockchain networks.
Improved Scalability - Processing tasks can be distributed across layers, avoiding bottlenecks and thus helping address blockchain trilemma issues related to scaling.
Enhanced Security Models - Modular separation theoretically enables more robust security as layers can handle vulnerabilities without affecting others. Layers employ independent security models best suited for their specific functions.
Challenges and Tradeoffs
However, modular architecture also introduces the following complexities:
Increased Complexity - Managing communication and coherence between layers adds complexity to system design and maintenance.
Fragmented Experience - Users may find the experience more fragmented than monolithic chains.
Potential Single Point of Failure - Heavy reliance on one layer could create a quasi-centralized point of failure.
The modular approach represents a tradeoff between complexity and customizability that may only suit some blockchain use cases.
Monolithic vs. Modular Blockchain Comparison
Scalability
Modular architectures have a clear edge over monolithic designs in terms of scalability. By separating execution and consensus into separate layers, modular blockchains can handle transactions concurrently, resulting in significantly improved throughput.
For example, Ethereum, in its monolithic form, can process only 15 transactions per second (TPS). In comparison, modular blockchain such as Avalanche regularly handles over 4,500 TPS. This 300x increase in transaction speed highlights the scalability limitations of monolithic blockchains.
Other monolithic networks also pale in comparison to modular transaction speeds:
Bitcoin handles 5 TPS.
Cardano handles 250 TPS.
Polkadot handles 1,000 TPS.
Cosmos handles 10,000 TPS.
Modular architectures like Cosmos and Polkadot leverage innovations like proof-of-history and parallelized block production to massively scale transaction capacity. Monolithic chains are constrained to sequential execution on a single layer.
Developers building high-volume DApps involving NFTs, DeFi, or metaverses need the throughput of modular blockchains.
Adaptability
When evaluating blockchain architectures, it's critical to consider their adaptability to future technological advancements. Two key innovations that may disrupt the blockchain landscape are quantum computing and interoperability solutions.
Monolithic blockchains face challenges in implementing quantum resistance solutions to address the potential threats posed by the advancement of quantum computing due to their tightly coupled structure. Upgrading their cryptographic primitives to post-quantum algorithms would require a hard fork that could compromise the network's unity. Modular blockchains, in contrast, can more seamlessly swap quantum-resistant modules as the technology matures.
Regarding interoperability, modular architectures lend themselves better to cross-chain communication with clearly defined layers. They can integrate interchange standards and protocols more cleanly than monolithically designed networks. However, monolithic networks are exploring layer 2 solutions to enable interoperability while retaining an integrated protocol layer.
Industries and Applications
When evaluating which blockchain architecture best suits a particular application or industry use case, the determining factors often come down to transaction throughput requirements, the need for on-chain data storage, and desired flexibility in governance and upgrades.
Monolithic blockchains excel in applications that require the highest levels of on-chain security and complete decentralization without a need for high transaction rates. Modular blockchains on the other hand, are better optimized for use cases that demand higher scalability, flexibility, and rich on-chain data capabilities. See examples below:
Covalent’s Infrastructure Role in Modular vs. Monolithic
As blockchain technology branches into different architectural models to tackle its scalability, security, and decentralization trilemma, there is an arching need for solid data solutions catering to the diverse development paths. Covalent positions itself in this ever-evolving ecosystem as a crucial data service, bridging the gap between monolithic and modular blockchains.
Covalent's Approach to Indexing Blockchains
Covalent's infrastructure is exceptional in its ability to serve as the essential link between different architectures through its adaptable API that meets the data retrieval needs of these architectures. Monolithic blockchains benefit from Covalent’s robust data indexing capabilities that streamline data-gathering processes from a consolidated source.
Covalent's unified API paves the way for comprehensive on-chain data access in architectures like Ethereum's pre-upgrade state, simplifying developer workflow and enabling extensive data analysis without compromising the network's structure.
Conversely, Covalent compliments modular blockchains by interfacing with specialized layers and sidechains. The integration with Layer 2 Solutions and other modular architectures with Covalent illustrates the infrastructure’s adaptability and foresight in addressing the potential fragmentation of data sources. Covalent leverages this modular landscape, providing seamless data provision and enhancing the interoperability and composability that modular designs intrinsically encourage.
Covalent ensures a seamless data flow between the core blockchain operations and the external, specialized services for semi-modular architectures. For instance, Ethereum 2.0's sharding upgrade poses data retrieval complexities. Here, Covalent's granular approach in indexing using the Ethereum Wayback Machine (EWM) catered to both Layer 1 and Layer 2, ensuring that comprehensive data are readily available, streamlining the developer experience and bridging the structural divide inherent in semi-modular systems.
Enhancing Developer and Enterprise Capabilities
Covalent offers developers a valuable set of tools such as its SDKs, Unified API Guides on various topics, and the recently released GoldRush Kit (beautifully designed React components for dApp frontends) that simplifies the complexities of extracting and interpreting cross-architecture data, reducing both the learning curve and the development lifecycle. For instance, a developer who wants to create a cross-chain asset management platform doesn't have to deal with the peculiarities and unique characteristics of each chain's data storage and retrieval mechanisms.
Conclusion
Blockchain technology continues to evolve, with monolithic and modular designs representing two primary approaches, each with its advantages:
Monolithic Blockchains: Offer an all-in-one solution for computation, storage, and consensus, like the original Ethereum. They prioritize simplicity but often struggle with scalability.
Modular Blockchains: Divide responsibilities across specialized layers, targeting enhanced scalability and flexibility, though this increases operational complexity.
The significance of sophisticated data infrastructures like Covalent becomes apparent in this landscape. Covalent's unified API cuts through the complexity of accessing data from various blockchain architectures, simplifying the development process and enabling powerful queries across over 200 blockchains.
As blockchain designs continue to merge monolithic and modular elements, the constant will be the necessity for seamless data access. Ensuring this accessibility is crucial for unlocking the full promise of blockchain technologies in the years to come.