What Are Modular Blockchains?

Modular blockchains are a recent innovation that focuses on splitting up the core functions of a cryptocurrency blockchain – Execution, Settlement, Consensus, and Data Availability – into separate specialized chains. Traditionally, a single monolithic blockchain is responsible for all of these functions . However, certain blockchain architectures are attempting to separate  these functions into different blockchains where each can focus on its specialized role, thereby enhancing their overall performance and efficiency.

For example, Dymension is a network that excels in Consensus, Execution and Settlement through its RollApps framework. These RollApps can then delegate Data Availability to other specialized blockchains, such as Celestia, which is designed specifically for Data Availability. This modular approach optimizes performance and scalability across the blockchain ecosystem.

Implications 

The rise of modular blockchains does not imply that traditional blockchains are obsolete; rather, they now have the option to outsource processing tasks if desired. A notable example of this transition is Ethereum. Historically a monolithic blockchain, Ethereum is evolving into a modular blockchain through various upgrades, including the recent Dencun update, which supports its shift towards modularity. While transitioning from a monolithic to a modular blockchain may be difficult, one of the benefits of a modular architecture is that new modular chains can be created pretty easily as projects are not required to build out a full blockchain stack, allowing projects to focus on ideating and building out differentiated features for their own chain.