Foresight Ventures:「Unified to Divided」Modular Blockchain and Data Availability Layer

0. Rollup’s Bottleneck

If you read the previous post on Rollup I wrote, then you probably noticed that there was an intentional bug in the endgame comparison between Optimistic and zk Rollup.

  1. Switch the type of Rollup (e.g. to Validium), directly using a better performance data availability solution, with the disadvantage of sacrificing security.

1. Blockchain’s Modularity

What we now refer to as Secured Rollup (Arbitrum, etc.), is in fact an implementation of a modular blockchain, and there will be many different modular blockchain implementations, or different variants of Rollup, in the future.

a) Four Modules in Two Layers

A blockchain can be split into two layers, consisting of four modules:

  • Blockchain’s DA module ⇒ computer’s memory (enables short-term data access)
  • Blockchain’s settlement and consensus module ⇒ computer’s CPU (should be hardware to guarantee correct execution of instructions)

b) Modularity Trends from Evolution of Web

We can learn from the development of the Web the future of the blockchain modular development route:

  • Connecting: Ensuring communication and security between modules. This is why homologous modules are more secure, because no additional connections are needed, avoiding the dangers exposed in the process.

c) Why Modularize?

After the modular blockchain decouples the single blockchain, the new network structure = multiple different Rollups like Arbitrum or StarkEx + an underlying main network like Ethereum.

d) Different implementations of Modularity?

  • Multi-Monolithic (e.g. Tendermint/Substrate security layer + Cevmos) stack with Recursive Rollup execution module. Celestia itself actually belongs to this architecture, and is a Cosmos ecosystem blockchain.)
  • Subnet (The most freely assembled blockchain, not inheriting security, but favoring deployment and development efficiency.)
  • Multi-Monolithic: Shared security, composable and interoperable communications, sovereign application chains, but not necessarily good in performance.
  • Subnet: Deployed in seconds, mature solution, but security and decentralization are not always there.
  • Monolithic: “Full” freedom, but the solution is not lightweight and the whole system may be too coupled.

e) Impact of Modularity Concept

The traditional concept of L1 and L2 may have to be redefined after the era of modular blockchain.

  • Modular blockchain: L0 refers to social consensus and trust assumptions on L1, L1 refers to the security layer (DA and Consensus) of the modular blockchain, L2 refers to the execution environment (Settlement and Execution) of the modular blockchain.
  • Definition: Note that for a Rollup such as Arbitrum, the Arbitrum network = Arbitrum’s Execution Environment + Ethereum’s Security Layer and Settlement Module. For Ethereum itself, the Ethereum network = the execution environment of Ethereum + the security layer and the settlement module of Ethereum. When the solutions can be modularly deconstructed, they can be called a practice of modular blockchain. And a network such as Ethereum, which is suitable for L1, can be called a modular blockchain network.
  • Trend: When applications want more functionality, reduced operational costs or enhanced security, and greater sovereignty, applications can choose from a basket of modules to develop an App-chain or App-rollup or App-subnet that suits their needs.

2. DA Layer

Since Rollup not only ensures security, but also improves performance, why not make the blockchain the best ground for Rollup? Modular blockchain is to make blockchain a better foundation layer for Rollup.

a) What is DA?

For modular blockchains and Rollup networks, complete data needs to be there and guaranteed to be available, thus ensuring the network’s decentralization and security:

  • zk Rollup: In the case of a sequencer rug, the state root data is needed to rebuild the state and retrieve funds.

b) Current Data Availability

Current Data Availability affects the security and performance of the network itself.

c) Archived Data Availability

The archived data availability only affects infrastructure outside the network itself, such as blockchain explorers, which may be optional for the network itself, but necessary for user usage.

  • Filecoin: PoSt. Peer-to-peer distributed storage network. Miners who store data can hold on to it, no guarantee of decentralization or DA.
  • IPFS: Still mostly present as an infrastructure, used in the network layer of both Polygon Avail and Celestia’s DA.

3. Modular App-chain Design

We can now act as tech architect for a 10,000 TPS project to make some choices and assemble the right app-chain for our application.

a) DA Layer Landscape

The DA layer has been the focus of much attention recently. However, from our choice diagram, there is no high probability to make “right” so many preemptive choices in a row, and finally proceed to the DA choice.

  • Extreme throughput: sacrifice security and add additional trust assumptions, something like off-chain data committee (security is the same as multi-signature, poor).
  • Both: get high security and high throughput by restaking mode, e.g. DataLayr.
  • Competition: The strength of the DA solution is really a comparison between two dimensions: security and throughput. And the better throughput is easily the overwhelming winner.
  • Value capture: Since there are not many real-world examples to analyze and compare, we can think about the following questions: If the DA layer has a much lower market value than the application chain (as in the case of Chainlink and DeFi applications), does the entire protocol have a security shortcoming? If the DA layer alone cannot form a complete application ecosystem, how can the tokens capture value? The DA layer alone cannot form a complete application ecosystem.

b) Execution Layer Landscape

If a modular blockchain is compared to a highly compartmentalized kitchen, and the performance of the blockchain is the speed of serving food, then the DA layer with more throughput is the bigger pot, and the better execution environment is the cook who is more skilled and can cook more styles of dishes.

c) Consensus Layer Landscape

For a modular blockchain, the consensus layer needs to be:

  • Smart contract environment: facilitate on-chain validation of various outputs.
  • Social and economic consensus: it needs to be a “well-established” large blockchain, so that no additional trust assumptions are required.
  • Barely suitable: Bitcoin, Arweave (no Turing-complete smart contracts on chain, settlement is done on the app-chain), etc.
  • Not so suitable: Solana (network is not particularly stable), etc.
  • Probably the most suitable: future Celestia, future Ethereum.

4. Thoughts about Modular Solutions

a) Further Exploration

DA layer: The state explosion problem makes the barrier to entry too high and weakens the decentralization of the network. The statelessness we described in the DA paragraph is only weak statelessness, i.e., only the block producers need to store state data, and more optimizations are needed later so that all nodes don’t need to store all the state data.

b) Demand and Supply

c) Security

There are two aspects of modularity, splitting and linking:

  • The more complex a system is, the more exposed areas are open to attack. Are the “connections” between modules vulnerable (of course Rollup bridges are actually more secure than IBC bridges? (In a previous post we commented on the dangers of composability)

d) Experience

e) Divided to United

Similar to Apple’s shift from Intel chips to m-series SoCs, will the fragmented architecture of modular blockchains reunite in a few years due to ecosystem or experiential issues, and will monolithic blockchains return to dominance? Will there be interoperability protocols like Cosmos IBC for modular blockchains?

5. Conclusion

Currently the modular blockchain has only shown the tip of the iceberg, but it is already thriving, with various ethereum-based Secured Rollup, Cosmos, Polkadot, Subnet, etc.

About Foresight Ventures

Foresight Ventures is dedicated to backing the disruptive innovation of blockchain for the next few decades. We manage multiple funds: a VC fund, an actively-managed secondary fund, a multi-strategy FOF, and a private market secondary fund, with AUM exceeding $400 million. Foresight Ventures adheres to the belief of “Unique, Independent, Aggressive, Long-Term mindset” and provides extensive support for portfolio companies within a growing ecosystem. Our team is composed of veterans from top financial and technology companies like Sequoia Capital, CICC, Google, Bitmain and many others.

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Foresight Ventures

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Foresight Ventures is a blockchain technology-focused investment firm, focusing on identifying disruptive innovation opportunities that will change the industry