Good morning.
I’m Mitsui, a web3 researcher.
Every Saturday and Sunday at noon, we’ll deliver articles explaining basic vocabulary. We aim to keep each article concise enough for a quick read, while also providing content you can revisit and study.
Today’s topic is “Modular.”
Please watch until the very end!
Why doesn’t Ethereum process everything on a single chain? Why are mechanisms like Layer 2 and rollups continuously emerging? The underlying reason is the design philosophy of modularity (division of labor).
Web3 is evolving into a collection of infrastructure components, each with distinct roles, rather than a monolithic entity. This article explains why the concept of modularity emerged, what problems it solves, and where it is headed.
What is monolithic (single-structure)?
To understand modularity, you first need to know its opposite: monolithic design. Monolithic refers to a structure where all functions are handled by a single system.
Early blockchains were precisely this monolithic type. A single chain handled everything: executing transactions, storing data, and reaching consensus. Bitcoin is the quintessential example. Its simple structure offers the advantages of being easy to understand and easy to verify for security.
However, its simplicity poses a problem: it is difficult to scale. Since everything is processed through a single entity, there are physical limits to its processing capacity. As the number of users and transactions increases, fees skyrocket and processing speeds decline. This issue has been the biggest bottleneck hindering the widespread adoption of Web3.
※Please note that this article is written with Ethereum as the primary example. Many other blockchains, such as Solana, Avalanche, Sui, and Aptos, have overcome scalability issues using a monolithic architecture. Furthermore, even recent versions of Ethereum offer a degree of scalability within its monolithic framework. Therefore, please view this article as an introduction to the general concept and terminology of modularity.
Why is there a limit to scale?
Increasing the processing speed of a blockchain is fundamentally different from simply scaling up a typical server. This is because blockchains are built upon a mechanism called “distributed consensus.”
All nodes participating in the network must verify the same data and reach the same conclusion. As the number of nodes increases, the communication cost required to reach consensus also increases.
Then, wouldn’t it be simple to just increase the block size to process more transactions at once? However, doing so would cause the hardware requirements needed to run a node to skyrocket, making it impossible for ordinary users to operate nodes. As a result, only a small number of well-funded players would be able to run nodes, undermining decentralization.
Here lies a dilemma unique to blockchain: it is impossible to simultaneously maximize all three of scalability (processing speed), security (safety), and decentralization (non-centralization). This problem, known as the “blockchain trilemma,” has long remained a challenge for the industry.
The concept of modularity
Modular design is one solution to this trilemma. Rather than processing everything on a single chain, it involves breaking down functions and assigning each to a specialized layer.
Specifically, we divide blockchain functionality into three major components: Execution, Consensus, and Data Availability.
The execution layer handles transaction computation, the consensus layer ensures the chain’s validity and order, and the data availability layer guarantees that transaction data is stored in a state verifiable by anyone.
Specialization across each layer enables individual optimization. This embodies the very concept of “division of labor” widely adopted in modern manufacturing and software development. Rather than building everything in-house, focus on areas of expertise and entrust the rest to specialists. Modular design applies this principle to blockchain.
The Role of Roll-Up
A prime example of a mechanism that embodies modular design is the “rollup.”
Rollup is a technology that batches transactions for processing outside of Ethereum (L2) and records only the results on Ethereum itself (L1).
Users can execute transactions on L2 quickly and at low cost. L2 bundles multiple transactions into a single “batch” for submission to L1, significantly reducing the gas fees borne by individual users. However, the ultimate security and settlement finality depend on Ethereum, the L1.
This relationship resembles that between a branch office and headquarters. While day-to-day operations are efficiently handled at the branch, final approvals and audits are managed by headquarters. By dividing roles, we achieve both overall efficiency and security.
Benefits of Modularization
The greatest benefit of modular design is scalability. When you want to improve a single function, you don’t need to rebuild the entire system. You only need to enhance the relevant layer. If there’s an issue with data availability, you can replace just that layer with new technology.
Flexibility is another major advantage. Different projects can select and combine modules that best suit their specific use cases. While the optimal design differs between a blockchain for gaming and one for finance, a modular design allows each to choose a configuration tailored to its purpose.
Furthermore, there is the advantage of ease of experimentation. When you want to test new consensus algorithms or data compression technologies, you can verify them on an independent layer without impacting existing infrastructure. This flexibility significantly accelerates the pace of innovation.
Disadvantages of Modularization
On the other hand, modular design also has significant drawbacks that cannot be ignored. The most notable is increased complexity. Users must operate across multiple chains and layers, constantly facing decisions like “Which chain should I bridge to?” and “Which L2 should I use?”
Security dependencies also become complex. Inter-module coordination requires bridges and messaging protocols, which can become targets for attacks. In fact, numerous hacking incidents targeting bridges have occurred in the past, with some cases resulting in losses amounting to tens of billions of yen.
The fragmentation of the user experience is also a serious challenge. Assets scattered across multiple chains, each requiring different wallets and procedures, presents a significant barrier for ordinary users.
Is the modular system the final form?
Modular design is still evolving. The biggest challenge is interoperability. How can data and assets be exchanged seamlessly between different layers and chains? Unless this problem is solved, we cannot fully reap the benefits of division of labor.
Additionally, abstraction is gaining attention as a key direction. Efforts to conceal technical complexity are advancing across the board, enabling users to operate without being aware of the underlying complex mechanisms. In the future, users may be able to utilize Web3 services without even being conscious of which chain they are using. Modularity is not a finished product; it is still in the early stages of its evolution.
Summary
Web3 is evolving into a structure where roles are divided and mutually supportive, rather than relying on a massive centralized system. Division of labor creates complexity, but this is both the price of decentralization and its potential.
Choose a monolithic approach or opt for specialization. Web3 is exploring every possible option in response to this question, and one such path is evolution through modular design.
Ethereum itself may eventually return to a monolithic architecture, but the underlying philosophy of modularity—as a feature within Ethereum—will likely endure.
That concludes our basic explanation of “Modular”!
Disclaimer：I carefully examine and write the information that I research, but since it is personally operated and there are many parts with English sources, there may be some paraphrasing or incorrect information. Please understand. Also, there may be introductions of Dapps, NFTs, and tokens in the articles, but there is absolutely no solicitation purpose. Please purchase and use them at your own risk.
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mitsui
A web3 researcher. Operating the newsletter "web3 Research" delivered in five languages around the world.
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The author is a web3 researcher based in Japan. If you have a project that is interested in expanding to Japan, please contact the following:
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*Please note that this newsletter translates articles that are originally in Japanese. There may be translation mistakes such as mistranslations or paraphrasing, so please understand in advance.