An in-depth interpretation of the endgame between Ethereum and modularity

Author: Chris Powers, Denis Suslov

Compiled by: Ladyfinger, Blockbeats

Editor's note: With the continuous development of blockchain technology, two different design philosophies, single architecture and modular architecture, have demonstrated their respective advantages and application scenarios. Solana's single architecture provides a fast, low-cost transaction experience, but its high requirements for hardware may lead to a trend of centralization, while modular designs, such as the latest trends in Celestia and Ethereum, reduce costs by separating data availability layers. , improve security and flexibility, and support a wider range of applications and innovation.

These developments reflect the evolving nature of blockchain technology and the community’s continued exploration of the balance between security, decentralization, and scalability. With the further development of modular architecture, we may witness a richer and more diverse blockchain ecosystem, providing users and developers with more choices and possibilities. Although there are different opinions and approaches, these advances collectively push blockchain technology forward and mark its evolution towards a more mature and flexible architecture.

Single era

Solana has been a huge hit lately, and for good reason. It has emerged from the dark days of the Alameda crisis with a strong run, going from frequent pauses to successfully handling the busiest airdrop claims in history while maintaining extremely low fees. From the perspective of attracting new users, Solana is a good choice: Ethereum's L2 still charges a whopping $1 per transaction (we really don't think starting with BSC or Tron is a good idea).

Another advantage of Solana is its single global state that reflects all market signals instantly, without arbitrage and bridging jumps between rollups or shards. It's as if trading is seamless 24 hours a day on all trading platforms around the world, with events reflected instantly in price changes on all exchanges, regardless of geographic location or time zone. These are the benefits of a single chain at its best, but there are still drawbacks to this design choice. Most notably, the Solana validator set tends to be centralized due to very high hardware requirements. This is because Solana handles all three layers of blockchain in a single way: execution, consensus, and data availability.

On the other end of the design spectrum, modular architecture—particularly outsourcing the data availability layer—is becoming increasingly popular. This approach reduces transaction costs while keeping hardware requirements low (although MEV poses a threat to this). The modular design also allows for more specialized chains and hardware for specific applications, dYdX being the best example of this.

At the forefront of the modular movement is Celestia, a chain optimized for rollup data efficiency. Ethereum, on the other hand, has achieved modularity in a more step-by-step manner, building the plane as it flies. We believe that rollups are key to enabling scaling and lowering transaction fees, and now the battle for the data availability layer (and the rest of the modular stack) has begun.

Scaling and Data Barriers

The data availability issue was first identified in the early race to scale blockchain. The focus was on minimizing the amount of stored data to maximize the number of nodes in the network. This dynamic is also the basis of Bitcoin’s block size wars. Data availability refers to a blockchain’s ability to make its data accessible to all network participants. The key breakthrough in solving this problem was the introduction of Data Availability Sampling (DAS), as Bridget Harris explains:

“With DAS, light nodes can confirm the availability of data by participating in random sampling rounds of block data without having to download every complete block. Once multiple rounds of sampling are completed and a certain confidence threshold is reached, confirming that the data is available, The rest of the transaction process proceeds securely. This way, a chain can expand its block size while maintaining easily verifiable data availability. Considerable cost savings are also achieved: these emerging layers can reduce DA costs by up to 99%. "

Celestia, Avail, NearDA and EigenDA are the most important DA projects. They do not need to verify transactions, just check that each block is added via consensus and that new blocks are available to the network. They rely on third-party sequencers to execute and verify transactions. Celestia launches in October 2023, Avail and EigenDA will launch mainnet in the coming months, and Near recently announced its DA solution. Let’s review each project’s unique features:

1. Celestia chose the fastest path to market, using fraud proof (which is also what Optimism rollups use). The trade-off is that in its current configuration, Celestia will not be able to support ZK rollups. The Celestia team claims that 1., approximately 70% of all new Arbitrum Orbit chains are using Celestia for data availability.

2. Avail (formerly Polygon Avail), as an independent blockchain, provides a fast and secure data and consensus layer, giving developers what they need to start a rollup (either ZK or Optimistic).

3. EigenDA is probably the most consistent with Ethereum because it is a DA module, not a blockchain. Additionally, ETH re-staked in EigenLayer will be available to secure rollups using EigenDA. Its weakness is that it does not use data sampling or data availability proof.

4. NearDA helps rollups save data availability costs by storing data on Near’s sharded blockchain. NearDA leverages an important part of the Near consensus mechanism, which parallelizes the network into multiple shards.

Massive Rollups start

Then let's talk about rollup itself. In rollups built on top of these data availability (DA) providers, there are a number of tools that make starting rollups easier:

1. By leveraging Celestia’s modular data availability, Manta Pacific offers significantly lower costs compared to a monolithic L2 solution and has already saved $1 million in Ethereum gas fees. Manta also uses custom opcodes to authenticate ZK technology, which makes it very cheap to implement privacy protection and native randomness in the protocol.

2. The Mantle network is built on a modular architecture and combines the optimistic rollup protocol with EigenDA's data availability solution. This integration allows the Mantle network to inherit the security of Ethereum while also providing more economical and accessible data availability.

3. Kinto is a chain that requires KYC. Every user and developer on the network must complete the passport KYC process before making transactions. It uses Celestia to reduce costs.

In a truly modular fashion, the modules at each level are selected according to specific needs. Here you can see the variety of combination options:

"Rollup As A Service" projects like Eclipse make it easier to start rollups, and developers can choose which technology to use for each module.

Similarly, Conduit allows users to deploy a rollup in 15 minutes, supporting technology stacks including Optimism, Arbitrum Orbit and Celestia. A monthly hosting infrastructure fee is paid to Conduit, and a separate data availability fee is payable to the provider.

The richness of possible combinations created by modularity is certainly a major advance. Is this similar to the difference in the difficulty of building a website in the early days compared to the ease and customization of using Squarespace today?

What this means is that modular technology greatly simplifies the complexity of technology implementation by providing multiple combination possibilities, which is a major advancement in technology development. This progress can be compared to the difference between the complex process of creating a website in the past and the convenient, highly customizable website building now using a platform like Squarespace. Modern platforms such as Squarespace make it easy for people without technical backgrounds to create and manage websites, and modular technology provides similar convenience and flexibility in the implementation of blockchain and rollup.

Trade-off considerations

Despite the growth of data availability (DA) projects, many people have reservations about outsourcing DA. Vitalik made his point very clear: “Your data layer must be your security layer.” Dankrad Feist, another member of the Ethereum Foundation, agreed: “If it doesn’t use Ethereum for data availability, Then it is not an (Ethereum rollup) and therefore not an Ethereum L2.”

We agree. Rollups that outsource data availability will be less secure (and really should be called "validiums") than rollups that use the same chain for data and consensus, although they are secure enough for some applications. Short-term projects using this kind of rollup will appear and disappear quickly, making it a good experimental and testing ground. However, for long-term holding of financial assets, L1 like Ethereum or rollup for both data and consensus will remain the lowest risk networks.

Ethereum is moving towards modularity

While skeptical about outsourced data availability, Ethereum places a strong emphasis on modular architecture. The original vision of scaling through sharding was abandoned in favor of modularity.

The three main updates needed to realize the vision are rollups (which we discussed earlier), and proposer-builder separation ("block proposers no longer generate a "revenue maximizing" block themselves, but instead delegate the task to the market external actors (builders)"), and data sampling. The latter is a way that allows light nodes to verify whether a block has been published by only downloading a small amount of randomly selected data. Technically, this is more challenging than the other two and will take two to three years to implement.

Important note: EIP-4844 is the first step in improving Ethereum’s data availability layer before data sampling goes live. As discussed before, improving Ethereum is akin to repairing an airplane while flying; once the Ethereum Foundation recognized the need for rollups (i.e. when Vitalik famously proposed a rollup-centric future), the team chose to do this by adding blobs (a Space specifically tailored for rollup data) to expand the block. Blobs are expected to reduce rollup transaction costs by a factor of ten. EIP-4844 is scheduled to go live in March/April in the Dencun upgrade. While this is a temporary solution to keep Ethereum competitive for two to three years, the long-term solution will be to support proof of validity on the mainnet itself, which will reduce the cost of rollups by orders of magnitude.

While Solana may be vehemently defending its monolithic architecture philosophy (and they may be right for many use cases), the industry seems to be moving toward modularity. As far as Ethereum is concerned, only modular architecture can realize the future:

1. Low transaction costs for millions of users due to rollups (scalability);

2. Protection of the network from threats such as censorship and 51% attacks (security);

3. An ordinary PC or even a mobile phone can run a node to verify transactions (decentralization).

Someone may ask, does Ethereum’s modular architecture solve the blockchain trilemma that is considered to be unsolvable? Technically, it doesn't, since Ethereum is no longer a monolithic network, but as a modular network, it does.

Of the three, we believe that solving decentralization is the most important part of the trilemma. Innovation ultimately reduces transaction costs; prioritizing decentralization (especially geographical distribution) is the only way to ensure long-term network security. Ethereum leads the way in decentralization, with the most decentralized set of validators, with over 800,000 validators. At the same time, with a modular approach, it can accommodate new design innovations with custom rollups launched on top. Celestia and others certainly share this vision. The question that remains is whether Ethereum can move in this modular direction fast enough to keep up with competitors who are building from the ground up, rather than fixing the plane as they fly.