TL;DR – In the coming months and years blockchains will move away from monolithic blockchains into modular blockchains which result in higher performance.
Today Defi apps need to explore and evaluate various chains before they launch. There are many questions they need to ask themselves, How many active users does the chain have? What are the transaction fees like? How fast are transactions?
Some of the biggest dApps in the space have started on Ethereum, which has around 59% of all DeFI activity and $26 Billion in Total Value Locked.
Ethereum has more than half of all DeFI activity, so why wouldn’t new apps launch there? If you’ve ever used Ethereum, then you know why -– gas fees can reach up to $100 or more. Since it is a layer-1 blockchain, when there is an uptick in activity, gas prices rise, which makes it less practical for users who are using smaller amounts.
To solve the problem, teams started to work on Ethereum layer-2s like Arbitrum and Optimism, which are lightning-fast and reduce gas fees by up to 10-100x while still maintaining the security of Ethereum.** **
Currently, this is where the largest number of dApps have migrated. To understand where apps will head next, we need to cover Monolithic & Modular Chains.
Layer-1s are also known as monolithic blockchains because they take care of four things:
Execution - execution must ensure that only valid transactions are executed, i.e., transactions that result in valid state machine transitions.
Settlement - entails an environment for execution layers to verify proofs, resolve fraud disputes, and bridge between other execution layers.
Consensus - entails agreeing on the order of the transactions.
Data Availability - (DA) entails making the transaction data available. Note that execution, settlement, and consensus require DA.
Having to do all these things limits the scalability of the chain because they have to perform many different tasks simultaneously, resulting in slower speeds and execution time.
Examples of Monolithic blockchains include Ethereum, Binance Smart Chain, Solana, and others.** **
Modular blockchains are separated into three layers. The base layer consists of data availability and consensus, often called the data availability layer (DA), while both settlement and execution are moved on top of the base layer into their own separate layers.
By separating the layers and decreasing their workload, every layer can be specialized to optimally perform only its function and increase the throughput of the system. This modular paradigm enables multiple execution layers, and rollups, to use the same settlement and DA layers.
Celestia is a data availability (DA) layer that provides a scalable solution to the data availability problem. Due to the permissionless nature of the blockchain networks, a DA layer must provide a mechanism for the execution and settlement layers to check in a trust-minimized way whether transaction data is indeed available.
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Fuel is designed specifically to leverage this additional bandwidth in ways no other scalability system can. Fuel is the fastest execution layer for the modular blockchain stack, delivering the highest security and flexible throughput.
Fuel specializes in making execution as efficient as possible. This is in contrast to rollups that have been deployed to date, which have optimized for monolithic problems such as constrained bandwidth. As Ethereum grows, projects that do not adapt will continue to suffer the consequences of a compute-constrained design space. The time for modular execution is now.