The Modular Thesis & Ethereum Scalability: Overview To zkLink Nova’s L3 Blockchain Architecture

Blockchains, in their most basic form, are just data blobs stored in a sequence where one group of data follows the other sequentially. The blockchain is a type of data structure that allows people to agree upon and keep track of what data comes first. A blockchain by itself is not very useful — but a blockchain network such as Ethereum where each computer in the network has the same copy of the blockchain allows people to do very interesting things such as creating a new financial system.

The Ethereum network provides a lot of services like data availability, consensus, settlement, and execution that make the blockchain more useful than just a sequence of data blocks. In the very early days of Ethereum, the idea was to scale the network using sharding to support millions of transactions in minutes and provide access to this technology to billions of users. However, it turned out that sharding and scaling a decentralized network is extremely hard — and thus, the Ethereum team decided to change its roadmap and switch to a “Rollup centric” roadmap where many Layer 2s use a “modular approach.”

In this article, we’ll thoroughly analyze the modular blockchain thesis, highlight its use cases and advantages, compare and contrast it with monolithic blockchain designs like Solana, and uncover how Layer 3s like zkLink Nova are employing the modular approach to solve challenges related to liquidity fragmentation and blockchain complexity.

What Is The Modular Stack?

The idea of the modular approach is to break down the properties of modern blockchain networks such as Ethereum into its core parts and create specialized networks for each part to improve scalability while maintaining security and decentralization. It’s an attempt at improving the blockchain experience while making progress towards the blockchain trilemma. This is because a monolithic blockchain approach in the case of Ethereum has reached its limits.

To elaborate further on modular blockchains, the core components we’ll focus on in this section include consensus, settlement, data availability (DA), and execution. These elements are fundamental to how blockchains operate.

Consensus

At the heart of blockchain technology lies the consensus layer. This layer is crucial for achieving agreement among distributed nodes regarding the current state of the network. The consensus mechanism ensures that each transaction is valid and that all copies of the distributed ledger (blockchain) across the network are synchronized. Without consensus, there would be no way to know or agree upon which transaction happened first.

There are various consensus mechanisms, including Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS), each with its strengths and trade-offs. PoW, used by Bitcoin, requires computational work to validate transactions and add new blocks to the chain, ensuring security through energy-intensive processes. PoS, adopted by Ethereum, selects validators in proportion to their holdings, reducing energy consumption and aiming for scalability and security.

At the core, all of these consensus mechanisms are doing the same thing: creating rules to reward honest actors and punish bad actors who may be trying to hack the network.

Settlement

The settlement layer refers to the capability of a blockchain to serve as a final and irrevocable ledger for transactions. This layer is where the transfer of assets is recorded, ensuring the immutability and permanence of transactions. In traditional financial systems, settlement involves transferring ownership of assets, a process that can take days. In contrast, blockchains can facilitate nearly instantaneous settlements based on the chain and consensus algorithm they run.

In the context of the modular stack (or rollups), execution layers can use a more decentralized and secure platform like Ethereum to ensure the finality of transactions. This layer’s effectiveness is closely tied to the consensus mechanism, as it relies on the network’s agreement to validate and record transactions.

There are many rollups (application-specific rollups) and modular solutions like Eclipse that use various services for different parts of the blockchain stack. However, the primary chain for settlement for these solutions tends to be Ethereum due to its decentralization, security guarantees, and historical success of being the most successful smart contract-based blockchain.

Data Availability (DA)

Data availability ensures the availability of any type of information on the blockchain. DA is important because it’s essential to ensure that all participants in the network can verify transactions and the state of the blockchain. This layer addresses the challenges of storing large volumes of data on-chain and making it readily accessible for validation and auditing purposes.

One can think of DA as an ‘insurance’ to settlement. Validators can look at historical transactions and make sure that all transactions up to the current point are valid. However, it’s costly to store data on-chain, especially on Ethereum because of its limited block size. Notably, over 90% of the cost of running a rollup is using Ethereum as a data availability layer.

DA is crucial for scalability and security — therefore, rollups have to pay this cost to Ethereum. However, Celestia recently launched its DA layer for a fraction of Ethereum’s cost and it promises to provide similar security and data availability guarantees with DA sampling and erasure coding.

Execution

The execution layer is where smart contracts and transaction processing occur. It’s responsible for the computational logic that enables DApps to run on blockchain platforms. Smart contracts are self-executing contracts with the terms of the agreement directly written into code. The execution layer handles the logic and computation that power these contracts, enabling a wide range of applications, from decentralized finance (DeFi) to non-fungible tokens (NFTs) and more.

There are many execution environments like Ethereum Virtual Machine (EVM), Solana Virtual Machine (SVM), and many others. In every VM, there is a set of defined instructions and operations that you use as Lego blocks to create any type of custom logic on the blockchain.

Summarizing The Modular Stack

With a modular architecture, blockchains can begin to solve the blockchain scalability trilemma through the principle of separation of concerns. Through a modular execution and data availability layer, blockchains can scale throughput while at the same time maintaining properties that make the network trustless and decentralized by breaking the correlation between computation and verification cost.

Comparing The Advantages & Disadvantages of Modular vs Monolithic Blockchain Designs

Modular blockchain designs offer several advantages over traditional monolithic blockchain systems, which can lead to improvements in scalability, security, and specialization of functions.

Scalability

• Modular Design: By decomposing the blockchain into different layers, each handling a specific aspect (like consensus, DA, and execution), modular blockchains can scale more efficiently. Each layer can scale independently or use different mechanisms suited to its functions, reducing bottlenecks.
• Monolithic Design: In monolithic blockchains, all operations (transaction processing, consensus, and data storage) are handled by all nodes together, which can lead to scalability issues as every node must process every transaction and maintain a complete copy of the ledger.

Upgradeability

• Modular Design: Upgrades can be implemented in a modular system with less disruption. Each module (like data availability layers) can be upgraded independently without affecting other modules’ operations.
• Monolithic Design: Upgrades often require significant coordination and consensus across the entire network, sometimes leading to hard forks (splits in the network), which can be disruptive.

Specialization

• Modular Design: Different layers can be optimized for specific tasks, enabling the use of specialized technologies that are best suited for each layer’s function. For example, using a highly efficient consensus mechanism that is optimized just for consensus without needing to handle transaction execution.
• Monolithic Design: All nodes in the network perform all tasks, which limits the ability to optimize for specific operations since each node must be general enough to handle all tasks.

Innovation

• Modular Design: A modular approach allows for more experimental development in isolated layers without endangering the network’s core functions. This can accelerate innovation in individual areas like scalability solutions or consensus algorithms.
• Monolithic Design: Changes and innovations need to be carefully balanced with the network’s stability and security, often leading to slower adoption of new technologies.

Efficiency

• Modular Design: Modules can be tailored to process their specific tasks more efficiently, potentially using less energy and resources than a monolithic system where every node does everything.
• Monolithic Design: The need for every node to perform every function can lead to inefficiencies, as the system must be designed to accommodate the least efficient part.

In conclusion, modular blockchain designs are often seen as the future of blockchain technology, especially in contexts where scalability and customizability are critical. They offer a flexible, upgradeable, and innovative environment that can meet specific needs better than monolithic systems, which are simpler but may struggle with scalability and flexibility.

zkLink Nova’s Layer 3 Modular Blockchain Composition

zkLink Nova’s modular stack provides unparalleled scalability for DApps building on top of our ecosystem. Each modular component of zkLink Nova can be upgraded independently, giving us the ability to provide developers and users with an enhanced blockchain performance by flexibly combining the best technologies. zkLink Nova’s modular structure is composed of four layers:

1. Sequencing Layer: Collect and order transactions.
2. Execution Layer: Process transactions and update states.
3. Settlement Layer: Finalize transactions on the base chain and execute fund withdrawals.
4. Data Availability (DA) Layer: Ensure data is available.

In addition, it’s worth noting that zkLink Nova’s innovative multi-chain settlement scheme makes us the first Aggregated Layer 3 Rollup Network that can connect to Ethereum and Ethereum’s multiple Layer 2 Rollups with Ethereum equivalent security.

Sequencing Layer

The sequencing layer is primarily responsible for monitoring on-chain deposits, maintaining the Layer 3 state, sequencing transactions, and bundling transactions into blocks and batches.

zkLink Nova provides RPC services for users to interact with the network by sending transactions directly to the zkLink Nova sequencer. zkLink Nova also has an operator module that’s responsible for monitoring on-chain transactions (i.e., priority operations) on the base layers (i.e., Ethereum and the connected Layer 2 Rollups), and relaying priority operations to the sequencer.

The zkLink Nova sequencer takes a list of incoming transactions, makes sure each transaction fits within the constraints required by the proving system and rejects transactions as necessary. Valid transactions are placed into small blocks every 2 seconds and are executed in the ZK Stack’s zkEVM. To spread the cost of interacting with the settlement layers, transactions in multiple blocks will be packed into a batch, which serves as the fundamental unit for generating proofs and on-chain settlement.

Similar to most rollups, zkLink Nova is beginning with a centralized sequencer model. While this approach offers certain development efficiencies, it also presents challenges and risks, such as introducing a potential single point of failure, transaction censorship, and issues around miner extractable value (MEV), affecting network fairness and transparency.

To address these concerns, zkLink Nova is preparing to incorporate decentralized sequencer solutions. These solutions, including platforms such as Espresso, Astria, and Fairblock, aim to mitigate centralization risks by processing and validating transactions across a distributed node network. This strategy will not only boost network security and transparency, but also strive to offer a more secure, fair, and efficient rollup solution to users.

Execution Layer

The execution layer entails executing transactions that update the state correctly. zkLink Nova utilizes the zkEVM (zero-knowledge Ethereum Virtual Machine) of ZK Stack to execute smart contracts and prove the correctness of executions using zero-knowledge proofs. Like the EVM, a zkEVM transitions between states after computation is performed on transactions. The difference is that the zkEVM also creates zero-knowledge proofs to verify the correctness of every step in the program’s execution.

zkEVM allows zkLink Nova to be compatible with existing Ethereum infrastructure. Therefore, zkLink Nova provides an easy way for builders to fork various applications that are already deployed on Ethereum and Ethereum Layer 2 Rollups, thereby laying the foundations for a faster-growing ecosystem.

Settlement Layer

The settlement layer entails an environment for finalizing transactions on the base chain(s). A classic ZK Rollup network typically selects Ethereum as the base chain to verify proofs and settle transactions. By contrast, zkLink Nova can securely aggregate liquidity and native assets across Ethereum and its Layer 2s by allowing users to deposit funds from the connected networks. To achieve this feat, zkLink Nova applies a new settlement paradigm (i.e., zkLink Nexus) that’s able to settle on multiple Ethereum Layer 2 Rollup networks.

To optimize on-chain verification costs, a single Layer 2 network is designated as the primary chain responsible for ZKP verification and checking on-chain transaction consistency. Currently, Linea serves as the primary chain for zkLink Nova since it can execute zk-SNARK proofs and has fast settlement finality on Ethereum Mainnet.

While the other chains will act as secondary chains that do not need to execute ZKP verification — through multi-chain state synchronization via canonical rollup bridges, settling on Linea is equivalent to completing the verification on all chains.

The settlement process includes four stages:

1. Commit: The sequencer submits the zk-proof and transaction batch to the verifier contract on the primary chain.
2. Proof verification: The zkLink contract checks the validity of the zk-proof.
3. Synchronization: The transaction sync hashes of secondary chains are forwarded to the primary chain via canonical rollup message bridges. The primary chain verifies if the sync hashes are consistent with the on-chain transactions previously relayed by the sequencer. Upon the verification of the ZKP and on-chain transaction consistency, the transaction batch can be finalized and the batch root will be sent to the secondary chains.
4. Execution: Upon successfully finalizing a batch of transactions and state change, each chain can proceed with users’ requests for fund withdrawals.

In-Detail: Multi-Chain State Synchronization

zkLink Nova is powered by zkLink Nexus technology for multi-chain settlement. In zkLink’s Nexus, users can deposit and withdraw assets on all the connected networks (Ethereum and Ethereum Layer 2s). Users’ assets are locked in smart contracts on the connected networks and enter the zkLink Nova network via the canonical rollup bridge. zkLink Nexus boasts Ethereum-grade security, achieved through multi-chain state synchronization by transmitting the sync hashes of on-chain transactions via the canonical roll-up message service.

The connected networks on zkLink Nova can be classified into two types and serve different roles:

• Primary Chain: ZK-proofs and data commitments for transaction batches on zkLink Nova’s Layer 3 are submitted to the primary chain (Linea’s Layer 2). The primary chain is responsible for ZKP verification and checking on-chain data consistency by sync hashes.
• Secondary Chain: Secondary chains send sync hashes to the primary chain via the canonical roll-up message service. Upon successful verification on the primary chain, the confirmed batch root is relayed back to the secondary chains, and withdrawal requests on the secondary chains can be executed.

Data Availability Layer

The DA Layer entails making the transaction and state data available. zkLink Nova has chosen Validium mode for storing data. Under a classic Rollup mode, the majority of Ethereum gas costs go to data availability and not proof verification. This is because it’s very gas-intensive to store data on Ethereum. In Validium mode, Nova’s data is stored off-chain with a Data Availability Committee (DAC). This Data Availability Committee oversees the correct state update and keeps a copy of the data that was processed. Shortly, zkLink Nova will integrate with external DA solutions, for example, Celestia, EigenDA, Avail, etc., so that data can be stored in a more decentralized and censorship-resistant way.

Future Of Modular Blockchain Designs For L3s Like zkLink Nova

The development and adoption of modular designs in Layer 3s such as zkLink Nova are poised to open up new horizons for blockchain technology, making it more accessible, versatile, and efficient for a wide range of applications and industries. This approach could ultimately lead to broader adoption and more innovative uses of blockchain technology, as it becomes easier to customize and optimize for diverse needs.

zkLink Nova’s modular design in particular has the potential to:

• make certain application or UX optimizations,
• provide for enhanced security features and additional scalability solutions,
• push the boundaries of smart contract capabilities, and
• enhance the UX by focusing on user experience modules that integrate blockchain functionalities seamlessly into everyday applications, making blockchain technology invisible to end users.

Conclusion

The current state of modular blockchain technology marks a significant evolution in the architecture of distributed ledger systems, addressing the inherent limitations of traditional monolithic blockchains by enhancing scalability, security, and flexibility.

As the blockchain landscape continues to mature, the future of modular designs appears highly promising, particularly with the development of Layer 3 solutions that emphasize liquidity aggregation functionalities and simplified developer environments. These advancements are poised to enable more complex and tailored blockchain applications across various industries, offering optimized capital efficiency, DApp performance, enhanced security features, and a friendlier UX.

With ongoing innovations and increased adoption, modular blockchains are expected to play a critical role in the widespread integration of blockchain technology into mainstream applications, ultimately making the technology more accessible and effective for a broader range of use cases.