Ethereum and Bitcoin are holding us back

The year is 2024, and the fast-paced realm of crypto shows no signs of slowing. Innovation is the name of the game, and monolithic blockchains like Ethereum and Bitcoin still reign supreme.

But as someone who’s been knee-deep in the trenches of blockchain development, I can’t help but wonder if these behemoths are really cutting it anymore. Herein lies my thesis:

Modular blockchains are the disruptors poised to revolutionize scalability and creativity towards the next Cambrian explosion of Web3 products as we know them.

As engineers and product developers, it’s time to embrace specialized tools for specialized tasks and leave the one-size-fits-all approach behind. This isn’t to say that prior layer-1s haven’t paved the way for some incredible innovations, but attempting to scale legacy layer-1 blockchains like Ethereum and Bitcoin has proven inefficient and counterproductive. They’re dragging us down, like trying to sprint through quicksand.

Blockchain researchers have grappled with the challenge of creating the optimal system for years. Many architectures attempted to accommodate all users on a single chain or a tightly coupled group of chains. Yet, scaling such systems for billions of users is complex and limited. We’ve thrown everything and the kitchen sink at it with solutions like sharding and layer-2 blockchains to provide additional scaling methods.

Despite this, most efforts still fall somewhat short in addressing all fundamental scalability issues. As a result of these failings, and perhaps in response to them, modular blockchains are strutting onto the scene as a more efficient and scalable alternative. Prime yourself and think, “more legos.”

The emergence of modular blockchains

Think of modular blockchains like the Swiss Army Knife of blockchain development.

These chains break down the blockchain into modular components, specializing in specific tasks at the core of a blockchain’s architecture: execution, settlement, consensus and data availability. By distributing tasks across multiple specialized layers, modular blockchains can, in theory, achieve greater scalability, customizability and security at a faster pace. When you distribute the workload like that, magic happens — so why waddle about in intellectual exercises of scaling bloated layer-1s?

At the core of modular blockchain architecture lies a layered approach that’s as elegant as it is efficient. The old heavyweights like Bitcoin and Ethereum remain the foundational layer of the crypto economy and hold down the fort with their robust security and stability. Meanwhile, layer-2 solutions like rollups and sidechains provide scalability without compromising the security of the base layer. Lastly, layer-3 protocols offer specialized environments tailored to specific development needs.

Read more from our opinion section: Ethereum is too hard to use

One of the first projects to propose modular blockchain development is the Celestia network. Celestia currently functions by separating execution from consensus and implementing data availability sampling (DAS) as a core feature.

Modular blockchains’ adroit-like qualities for specific engineering challenges translate into a targeted effectiveness to service specific industry niches.

To illustrate, GameSwift, a modular blockchain project, is currently working to facilitate the development of games hosted on-chain. Their goal is to create a network of applications that will help avoid gamers’ in-game purchases or earned assets being stored in a central server and consequently hacked. To highlight the relevance of this innovation, global gaming audiences spent approximately $54 billion on additional in-game content in 2020.

The shape of things to come

Modular projects are already pushing boundaries and redefining what’s possible in the blockchain space. Hybrid optimistic and zero-knowledge solutions are on the horizon, promising even greater scalability and security, as is the application of sharding, incentivized verification and parallelized VMs (virtual machines) on the execution layer of a chain.

With layer-1s feeling the heat, Ethereum devs released plans for a unified settlement and data availability layer: danksharding, a promising development, and a term I can’t say aloud without curling my lips. But development and on-time delivery for these monolithic chains’ upgrades have been historically slow and unmet.

By accepting monolithic chains as what might be holding us back, modular architectures offer a glimmer of hope. We are transitioning from monolithic blockchains and siloed consensus layers to modular, application-specific chains with shared consensus layers.

While challenges remain in standardizing cross-chain communication and ensuring decentralization at each level, the potential benefits of modular blockchains are too compelling to ignore. These blockchains have the potential, and are already being applied, to impact industries like supply chain management, real estate (property transactions), digital identity verification, energy grid management and even healthcare data management.

Whether you’re a die-hard Bitcoin maximalist or an Ethereum enthusiast, one thing’s for sure: In a modular future, users emerge as the ultimate beneficiaries.

Niko Hosn, CTO of ZTX and founder of RareMint, is an expert in Web3 gaming and blockchain development. At ZTX, leveraging ZEPETO’s IP — the largest metaverse in Asia with over 430 million lifetime users — he empowers blockchain adoption, fostering a thriving on-chain world for communities and creators.

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