The Edge Podcast - Modularity: Unbundling The Blockchain Stack - Revelo Intel

The Edge Podcast – Modularity: Unbundling The Blockchain Stack

In this episode of The Edge Podcast which took place on April 11, 2024, DeFi Dad, Nomatic, Andy, and Robbie discuss modularity, data availability, airdrops, and projects. Read our notes below to learn more.

Background

The Rollup

  • Robbie says that Andy and he met at the University Bitcoin Club before transitioning to the University Blockchain Club. Their continuous pursuit of knowledge drives their engagement with industry experts through podcasts for shared learning.
  • Andy says that college students were intrigued by over-collateralized loans and creating $DAI in 2018. Initial curiosity in $BTC and blockchain transitioned to specific projects like Dragon Chain by late 2017.

What is modularity?

  • Robbie says that modularity involves unbundling components for specialization, enhancing efficiency. Modular blockchains focus on specific core properties or operations, leading to specialized chains for distinct use cases.
  • He adds that Celestia exemplifies a modular approach by specializing in data validation rather than smart contract execution. Contrastingly, Solana is described as a monolithic chain with integrated functions that may require scaling through rollups.
  • Andy says that Solana experiences congestion due to the mem coin craze, leading to increased gas prices. Discussion arises about scalability concerns with the influx of new users and the need for solutions.

Ethereum scaling with modularity and Will Layer-2s ever use alternative DA providers?

  • Andy says that Ethereum‘s integrated stack contrasts with the modular approach adopted by other projects like Celestia, emphasizing unbundling for enhanced functionality. The rise of diverse applications through rollups is seen as beneficial for Ethereum’s scalability and ecosystem growth.
  • He adds that Ethereum’s modularity enhances its strength as a settlement layer, paving the way for alternative execution layers to emerge. New blockchains like Movement and Fluent challenge Ethereum’s dominance, offering innovative VM rips for diverse applications.
  • Andy says that emerging data-focused chains pose competition to Ethereum’s data capacity but reinforce its role as a settlement layer. Contemplation arises regarding layer-2 incumbents’ adoption of alternative DA approaches like Celestia or EigenDA over traditional options.
  • Robbie says that trade-offs between user experience and decentralization may influence decisions toward newer rollups offering improved usability.

What is DA (data availability)?

  • Andy says that transactions are processed by a sequencer on the rollup before being batched and posted to Ethereum. Posting data to Ethereum is costly due to paying for block space and security. Celestia offers an alternative by allowing data posting to a separate blockchain like Cosmos Tendermint-based chain.
  • He adds that when rollup posts data to Celestia, it undergoes verification by Celestia’s validators. Celestia operates mainly for verifying data, making it cheaper as compared to Ethereum’s functionalities.
  • He adds that Celestia has a fallback system where if issues arise with validators, blocks can be directly posted back to Ethereum. Applications using Celestia might face minimal impact even during fallback scenarios.

Can Celestia accrue value?

  • DeFi Dad raises concerns about the low revenue generation currently seen on platforms like Celestia.
  • Robbie says that unbundling the vertical stack into modules scattered in space allows for achieving scalability. Saving users money results in gaining order flow, settlement, and providing cost-effective services. Creating value through cost savings for users contributes to achieving higher token values.
  • He adds that protocols saving users money and ensuring security tend to achieve higher token valuations. Shifting user payments’ value towards tokens leads to increased token values. Emphasizing usefulness and cost-effectiveness drives up protocol valuations.
  • Robbie says that repricing occurs cyclically during bull markets based on asset utility. Valuable assets align with usefulness; e.g., Monero‘s privacy feature was highly valued previously. Shifts in demand influence asset valuation; less useful assets experience price adjustments over time.
  • He adds that services’ utility drives higher valuations amid capital inflows. Increased volume and volatility lead to assets being repriced accordingly. He emphasizes service usefulness as a key factor influencing asset valuation trends.
  • Robbie says that providing valuable data availability solutions can lead to commanding a higher valuation. Enhancing data availability space contributes to increasing asset value.

Major modular projects

  • Robbie says that Hyperlane‘s model involves constructing mailboxes for channel-type connections, allowing opt-in interactions between modular chains.
  • Andy says that Initia provides a rollup framework enabling the launch of modular chains with IBC out of the box for interoperability. Similar to Berachain, Initia incorporates proof of liquidity where validators contribute on-chain liquidity.
  • He adds that Dymension operates as a layer-1 platform validated by tender validators like Celestia and Cosmos chains, supporting rollups for app-specific chains.
  • Andy says that Move VM offers enhanced security through formal verification and real-time auditing properties from the Move language. The parallelization feature allows transactions to run concurrently without affecting each other’s block space usage, ensuring efficient processing.

Effect of Dencun upgrade on modular thesis

  • Andy says that Dencun is a positive step in the theme roadmap for data availability solutions. Modular data availability solutions are better poised to handle specialized use cases and applications effectively.
  • He adds that competition, innovation, and lower fees within the blockchain space are crucial. They anticipate increased competition leading to more innovation and reduced fees are expressed.

Will there be a DA winner-take-all?

  • Robbie predicts that there will not be an overwhelming number of data availability providers but rather a select few specializing in specific use cases. Differentiation between general-purpose data availability providers and those catering to specific applications is expected.
  • He adds that different data availability providers adopt varying strategies regarding how long they retain data. Some providers opt for shorter durations while others keep data available for longer periods based on specific use cases.
  • Robbie says that the concept of “Different Strokes for Different Folks” is emphasized concerning data availability solutions. Providers offer diverse options aligning with users’ preferences related to cost, security, and style or approach.

Airdrop strategies in modular ecosystem

  • Andy mentions utilizing staking mechanisms like Celestia and Dymension for airdrops. He anticipates future airdrops targeting $TIA and $DYM stakers alongside public incentivized testnets like Berachain, Initia, and Movement.
  • Robbie anticipates surrounding imminent token launches including Avail’s token launch. 

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Show Information

  • Medium: YouTube (Video)
  • Show: The Edge Podcast
  • Show Title: Modularity: Unbundling The Blockchain Stack
  • Show Date: April 11, 2024