Modular VS Monolithic Blockchains: A Comparison

Most crypto users who are not familiar with the infrastructural part of blockchain development won’t even be aware of this distinction in the underlying technological protocols, while still being faced with the differences of their operational outcomes in their day to day user experience.

Yet, the differences between a classic monolithic blockchain and a more modern modular solution are huge, and come with a far-reaching impact. In order to fully understand them, however, we need to first have a look at the structure of blockchain functions.

The Moving Parts of A Blockchain 

Blockchains have four key duties:

  • Consensus, or the agreement and verification of blockchain data. This determines which transactions are confirmed and their general order.
  • Execution, or the actual process of confirming and validating transactions on the ledger 
  • Data availability, or the possibility of accessing historical transaction data at any point for verification or service purposes 
  • Settlement, or the finalisation of any and all ledger transactions in a way that is immutable and fully verified against all relevant data 

All types of blockchain cover these functions, as they are essential to the very concept of a publicly verifiable virtual ledger, but the way they are distributed across the blockchain structure differs greatly. 

And that’s where the distinction between Modular and Monolithic comes into play.

The Status Quo: Monolithic structures 

Just like in prehistoric architecture, it all started with monolithic structures – which are, by definition, easier to manage and organise due to their cohesive nature. 

A monolithic chain is a ledger in which all the 4 key chain functions described above are carried out on the very same layer – this definition includes ecosystems of single-layer chains such as those devised by Polkadot and its parachains or Avalanche and its ‘subnets’. 

This means not only that transactions are entirely carried out, verified and finalised on the same layer, but it has a variety of other implications. 

Each node that composes the chain holds a copy of the entire blockchain and a record of each transaction – meaning each node can satisfy complex data availability queries. All nodes involved also re-execute and thus verify transactions, and agree on consensus protocols. 

Settlement functions are carried out via an economic stake, which can take the form of energy and effort (mining in PoW) or in the form of a capital stake (validators in a PoS). 

Combining all these features on one layer has a variety of positive upsides, and that’s why this model was predominantly used in the early days of some of the biggest crypto chains out there. 

Ups and Downs Of A Tested Model

Firstly, monolithic structures guarantee security in that they can self-regulate and enforce their own validity security. Additionally, as is evident by their structure, they go above and beyond solving the data availability issue since each data point is stored on a large number of nodes. 

They are also, again by definition, much simpler structures that have been experimented with extensively – leading to a significantly smaller amount of structural snags. 

Finally – and this is not a small consideration given how much financial speculation and investment adoption are drivers of specific tech choices in this industry – they offer a better value proposition by generating more value for any native token involved in their operation.

There are, however, a lot of reasons to be looking for an alternative as these advantages all come with their corresponding drawbacks. 

The repetition involved in providing redundant data and re-executing transactions is obviously not a very efficient system, and needing to cram so much firepower into a single node often means compromising on the node’s resources and thus, output. 

This last element is compensated often with faster block times and bigger block sizes, which invariably lead to higher energy and hardware requirements, and thus, higher costs. And this is very detrimental for the entire concept of blockchain development: the more expensive mining or validation becomes, the less people do it, the more centralised and exposed to threats each chain becomes. 

Ultimately, monolithic structures tend to be bloated with unnecessary historical data and very inflexible, which isn’t great for progressive development.

That’s where modular structures have been revolutionising the field.

A New Solution: Modular Approaches 

A blue digitised chain.

Modular blockchains are distinguished by a simple feature: they spread the core chain functions we analysed over several different layers, to optimise their execution.

The idea is simple: each layer can only carry out specific functions, but it needs to be a very specialised machine and complete these tasks in a much more efficient and satisfactory way than what can be achieved by cramming them all in one place. 

Like modular devices or modular teaching courses, they are made up of individual components which can be combined together but also separated, removed or improved individually. 

Examples of this modular behaviour are rollups, a form of sidechain which is much more tightly coupled with the parent chain and acts as a form of extension of it. These only process transactions while leaving consensus, data and settlement functions to the parent chain. 

Not all monolithic structures are destined to remain such either: Ethereum is perhaps the most prominent example of a monolithic chain which is developing into a modular pattern thanks to the introduction of data sharding to optimise data storage and reduce redundancies – which is achieved via the recent introduction of a ‘Layer 2’ version of the chain.

Pros and Cons Of The Modular Revolution

This new type of approach offers many upsides. 

The first one is essential in a world that is fully adopting blockchain tech: the splitting of functions across several ‘compartments’ leads to less resource competition and, in turn, much higher scalability capability. With an ever expanding user base and the ambition for this trend to continue, this is an essential step forward in terms of tech. 

It’s also a great solution for new chain launches, in that it allows developers to build one small portion of a new ledger at a time, thus not having to rush the rollout of any components and being able to dedicate to each the care they deserve. 

The biggest positive of all remains, as foreseeable, the great flexibility this solution entails. Specialisation is the friend of adaptability, and the possibility to avoid putting all technical eggs in one big basket means any troubleshooting can be more pointed and efficient. 

It’s not all roses, though. Building something modular means inherently working on a more complex, and thus more fallible system – exposing the chain to larger security vulnerabilities and to the risk of ineffective communication between layers. 

The splitting of a chain into various modules also severely limits the potential for utilisation and thus value accrual for the tokens involved in its functions – which in turn means less investment and less publicity. 

Real World Examples Are Abundant 

What’s great is that there are plenty of prominent examples from each category of chains, given the rich and varied landscape created in the crypto industry as of late.

Bitcoin is the obvious first monolithic example – and infamously so, given it rose to prominence as a very energy intensive cumbersome chain.

Another big player which started out as a monolithic structure but is evolving, as explained, was Ethereum. The slow and expensive nature of its old PoW chain was in part a result of the chosen structural type, and the catalyst for its change. 

Solana, on the other hand, was a later monolithic entrant, and focused on optimising scalability and transaction speeds while keeping all core functions on one layer. The trilemma remains valid though, and the dev team couldn’t achieve this without a significant reduction of decentralisation and security rating. 

The examples of modular implementation, due to the relatively new nature of the tech, are much more scarce – but Layer 2 Ethereum is paving the way for more, such as the consensus-focused Celestia and Polygon. 

Modular models such as the aforementioned rollups and validiums also offer off-chain execution and validation, in connection with a main chain that provides the necessary data availability. 

To Each His Own

As evident from the above, the two systems don’t really mean to compete or achieve market supremacy – they are very much designed for different purposes and thus each new blockchain development needs to carefully evaluate both options in order to choose which one to focus on. 

In general, projects requiring security and solidity will probably verge towards the tried-and-tested method of monolithic development, while projects aiming for financial and time efficiency will be edging towards modular solutions. 

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