Cryptocurrency researcher Bridget Harrisbelieves that the crypto industry will usher in a new wave of modular development in the future, especially innovations in the settlement layer, execution layer, and aggregation layer. Modularization will enhance the existing functions of Ethereum or expand the ecosystem. Add new development opportunities.
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ToggleModularization focuses on the data availability layer and sorter layer
In the past two or three years, there have been many innovations and advances in modularization in the encryption field, but most of them focus on breakthroughs in the Data Availability (DA) and sequencer layers. Harris believes that in fact, the execution layer, settlement layer, and aggregation layer Layers are a relatively neglected area.
The field of data availability is basically an oligopoly market dominated by three major players: Celestia, Avail and EigenDA; and the field of shared sorters already has many competitors, including Espresso, Astria, Radius, Rome and Madara, as well as RaaS such as Caldera and Conduit provider.
( Celestia (TIA) mainnet launched | Future opportunities and challenges of modular blockchain )
Potential development opportunities in the modular industry
The execution layer, settlement layer, and aggregation layer have relatively little development, but in fact, there are project teams in various fields that have seen opportunities and have already been working on them.
Settlement layer: Customization reduces existing security costs
The settlement layer can serve as a place to define the final outcome of the state to protect the security of the execution results. When there is a transaction dispute, in practice the settlement layer can also act as the execution layer, running the transaction again and verifying the certificate to resolve the fraud dispute. The biggest dilemma of Ethereum as a settlement layer is that its scalability is too low to cope with the throughput of general applications. Therefore, some teams try to use modular mechanisms to solve this problem from the side.
Hyperliquid creates a highly specific and customized Layer 1 by writing its own consensus algorithm. Its core architecture does not rely on the existing Tendermint consensus algorithm. It can provide a faster Layer 1 trading platform for perpetual contract transactions, and can also perform customized optimization. However, users still need to cross-chain from Arbitrum.
Recommended reading: Near and EigenLayer create a fast settlement layer SFFL to achieve Layer2 fast communication
Fast Finality Layer (SFFL) provides a clearer understanding of and modularization opportunities for settlement and finality in the blockchain industry.
In response to demand, some teams have even developed settlement environments in their own protocols. For example, Repyh Labs is building a Layer1 network called Delta. Although this is a design concept opposite to modularization, it is still intended to be used in existing provide flexibility in the environment. But of course, the downside of a custom structure is lack of liquidity.
Execution layer: Challenge combinations with higher flexibility
The execution layer was formerly a general-purpose Layer 1 competition chain, such as Solana or BNB Chain, and now it is more commonly referred to as general-purpose Rollups, such as Arbitrum or StarkNet.
With the development of the execution layer in recent years, basically the only features that beat Ethereum are higher throughput and TPS. However, the method has gradually changed from building a new competitive chain in the past to using a modular approach, implemented in the Ethereum ecosystem, and at the same time leveraging the liquidity and security of Ethereum.
But now modularization isn't just about Rollups.
Recently, we have also seen innovations in different virtual machines (execution environments). For example, the execution environment is used as part of a shared network, which is more split and allocated to provide developers with greater flexibility and customization. For example, Layer N allows developers to run nodes in multiple virtual machine environments (such as EVM, SolanaVM, MoveVM) or multiple specific application environments (such as perpetual contract exchanges, order book decentralized exchanges).
Teams in this area are also trying to achieve composability and shared liquidity between different architectures, so that each application on the execution layer can communicate information to each other asynchronously without delays in consensus. Cross communication barriers between different database architectures to maximize overall network throughput.
Aggregation layer: Zero-knowledge proof related processes have great aggregation value
Aggregation refers to providing users or any traffic to find the corresponding market or resources with better efficiency. The aggregation scenario that most people are familiar with is 1nich, which integrates the liquidity of various decentralized exchanges to provide users with the best Transaction path.
Harris said aggregation applications appear to be undervalued by the market, especially for decentralized exchanges, cross-chain bridges and lending protocols. For example, the total market value of their tokens, 1inch and 0x, two mainstream decentralized transaction aggregators, is only about US$10. In comparison, this is only a small part of Uniswap's US$6 billion valuation.
The same is true for cross-chain bridges and lending protocols. In the field of lending, Yearn Finance is the leader in decentralized lending revenue aggregation protocols. Its market value is only about US$200 million, while Aave is about US$1.3 billion. Compared with Across cross-chain bridges, cross-chain bridge aggregators such as Li.Fi and Socket/Bungee have a relatively small market share;
The market gives less value to aggregators.
Therefore, Harris thought about if the aggregation layer is embedded into the platform or the underlying consensus of the blockchain, is there any opportunity to bring new market opportunities?
A recent example is Polygon's AggLayer. Developers can easily connect its Layer1 and Layer2 to the network. The network aggregates related certification mechanisms and allows unified blockchain networks that are compatible with the CDK. Liquidity layer.
The concept of the aggregation layer is usually to interoperate assets in different blockchain networks by integrating proof mechanisms. Similar cases include Avail's Nexus interoperability layer, Nebra, Astria, Sovereign, etc., integrating liquidity through proof aggregation or sequencer auctions.
Recommended reading: Introduction to the shared proof layer. Why has it become an important cornerstone of modular development?
Recommended reading: This article clearly introduces the importance and market opportunities of the shared proof layer (proof aggregation layer), and uses existing major projects in the market including Nebra, Avail Nexus, and AggLayer as cases to explain its concepts. It is highly recommended for readers to read. You can read more Be clear about the positioning of this article.
A new wave of modular storytelling is brewing
Whether it is the settlement layer, the execution layer, or the aggregation layer where many related projects have emerged recently, they are all areas where modularization has been less focused on in the past. Different from the "I don't know which number" data availability layer in the past, new ones are beginning to appear. A wave of real innovation may be a new direction to promote the modular development of Ethereum.
Recommended reading: Introduction to Aligned Layer, how to strengthen zero-knowledge proof applications through verification?
Recommended reading: This article introduces how Aligned Layer can provide faster zero-knowledge proof soft settlement for projects with lower security requirements by creating a decentralized settlement layer. Readers can have a better understanding of the future technology development direction described in this article.
