Modular blockchains specialize in performing a specific operation rather than trying to perform all functions at once. The fundamental principle is to disaggregate blockchain functions into individual specialized modules that do a job very well. Therefore, modular blockchains represent a new architecture for blockchains by dividing the various functions into distinct components, allowing for greater flexibility and scalability.

Modularity essentially consists of building a system that is more efficient than the sum of its individual parts. Let's see the various modules and make references to specific projects:

-Execution: module responsible for the execution of smart contracts
Projects: Arbitrum, Optimism, zkSync, Polygon, Linea, Manta, Scroll, Starknet, Movement

-Abstraction: separation of specific functions from the execution level to allow greater flexibility and reusability
Projects: Particle Network, Anoma, Essential, Flashbots

-Proving: module that deals with the verification of transactions and states through cryptographic proofs
Projects: Succint, Axiom, Lagrange, Nebra, Blockless

-Sequencing: module that orders transactions to ensure integrity and chronological order
Projects: Astria, Radius, Madara

-Storage: management and preservation of blockchain data.
Projects: Filecoin, Arweave, ethStorage, KYVE

-Data Availability: Ensure transaction data is available and accessible for verification
Projects: Celestia, Avail, EigenDA, zkPorter, OG Labs

-Interoperability: ability of different blockchains to communicate and interact with each other
Projects: Wormhole, Omni Network, Axelar, LayerZero, Squid, Connext, Across, Neutron, Polyhedra, Hyperlane

-Oracles: Services that provide data external to the blockchain for use in smart contracts
Projects: Chainlink, Pyth Protocol, RedStone, Supra

-Settlement: level responsible for finalizing transactions.
Projects: Dymension, Initia, Saga, Berachain, Ethereum

-RaaS (Rollup as a Service): provide infrastructure to facilitate the creation of rollups
Projects: AltLayer, Caldera, Zeeve, Carnot, Lumoz, Ankr, Vistara, Snapchain

-Rollup Framework: infrastructure for creating and managing rollups.
Projects: Optimism, Arbitrum, Polygon, Argus, zkSync, Madara, Fuel, Cartesi, Fluent

-Explorers: tools that index blockchain transactions and states
Projects: Dora, Celenium, Subquery

-Data Tooling: tools to manage, analyze and use blockchain data
Projects: Lava Network, Seda, Dora, Routescan, Celenium

So modular blockchain design separates key functions (data availability and consensus, sequencing, and execution) into specialized parts to create the most scalable and efficient blockchain design possible. Therefore, a modular blockchain made up of parts specialized in a certain function performs better than one that tries to do everything. The goal of the DA (Data Availability) layer is to securely verify that the data of a given block has been published correctly in the network and is accessible by all participants in the network. Verifiability is one of the main advantages of using blockchains for any transaction. Data availability is essential to verify whether the data has been published or not and is accessible from every node on the network.

DATA AVAILABILITY
As users execute transactions and rollup sequencers group these transactions into individual blocks, the DA layer verification process begins. Once verification is complete, the block is added to the chain. The launch of Celestia (on Cosmos) in November 2023 ushered in the importance of these solutions. While the Dencun update has enabled the use of Ethereum for DA with blobspace (a data storage solution), the limitations of blobspace are more restrictive than using an altDA solution. However, it should be noted that publishing data directly to Ethereum L1 achieves the highest level of security and decentralization, unlike solutions such as Celestia.
Celestia, already used by many chains (including layer2 Manta), focuses exclusively on ordering transactions and making transaction data available. Rather than focusing on the execution of smart contracts, Celestia stores data and outsources execution to rollups, which allows the networks that use it to scale. Celestia uses Data Availability Sampling (DAS) consisting of lightweight nodes that verify data without having to download entire blocks. Avail, similar to Celestia, will use KZG, erasure coding and validity proofs for mathematical DAs, along with “light” sampling of client data availability. Avail also supports two other products, Nexus and Fusion, which will provide cross-chain liquidity, as well as shared multi-token security. Other DAs are EigenDA and Zero Gravity.

EXECUTION LAYER
The Execution (also known as the Virtual Machine Layer) is part of the modular blockchain stack that specializes in processing and executing smart contracts and transactions.
The most important of the VMs is the EVM, the virtual machine that powers Ethereum and all the other EVM chains. The latter has dominated the virtual machine landscape, serving as the backbone for countless decentralized applications, however there will be a new competitor called "altVM" or "next-gen VM" in the modular space. High-performance, secure, parallelized execution environments will become the standard as rollups and applications increasingly aim to reduce congestion and operate in high-throughput environments. One of the biggest innovations of altVMs is the idea of ​​parallel execution, for example the difference between Ethereum and Solana Virtual Machine (SVM) is that the latter offers parallel execution (multiple transactions at the same time), whereas on Ethereum they are sequential . Within the EVM, there is a single gas commission for all transactions, regardless of the type of transaction and this tends to increase as the number of transactions increases and therefore as the network congestion increases (for a transaction to be validated quickly, it must pay more to get priority).

Execution environments currently notable are:
-Web Assembly (Wasm) by Fluent Labs
-FuelVM by Fuel Labs
-SolanaVM (SVM) by Eclipse
-LinuxVM by Cartesi
-CairoVM by StarkWare (Starknet/Starkex)
-MoveVM by Movement Labs and Lumio
-zkVM from RiscZero

These teams are creating rollups using altVM to increase throughput and execution-level security.

SCALE TO INFINITY
We are currently seeing Layer2 and many of the traditional "monolithic" chains moving towards scalability via a more modular approach. The various Layer3 of Arbitrum, Fractal Scaling of Starknet, Op Stack for Optimism but also Avalanche has subnets (to scale in parallel potentially infinitely). We talk about the need to scale Solana with rollups. Dymension and Initia are Layer1s in their own right with rollups built on top of them (e.g. Nim Network for Dymension). However, in the near future many rollups will stabilize directly on Celestia, as well as other Layer1s will launch their own rollup frameworks to scale a single state machine in a decentralized manner.

CROSS CHAIN ​​INTEROPERABILITY
The modular toolkit makes launching and customizing blockchains quite simple. For example, rollup-as-a-service (RaaS) providers such as Altlayer, Caldera, Conduit along with rollup frameworks such as Initia and Dymension, are facilitating rollup deployments in minutes via no-code interfaces. However, with all these new chains liquidity is dispersed and fragmented. Fragmented liquidity causes slippage on bridging and swaps.
In this regard, there are several interoperability protocols that pave the way for the continued expansion of chains like Hyperlane, building a permissionless interoperability framework. Obviously well-known bridges such as Wormhole, LayerZero, DeBridge, Jumper, Bungee, etc. Without forgetting Union Build, focused on the interoperability of zk-light clients, Omni Network with the Open Liquidity Network standard, Mitosis for liquidity and Catalyst with AMMs. Interoperability completes the modular stack and enables unification of the modular ecosystem in a world of rollups.

SOME PROJECTS
All Initia network rollups will use Celestia for Data Avalability. Formachain on the other hand will be a sovereign rollup using Astria as the sequencing layer and Celestia underneath. Astria is a sequencing network that builders will need to connect to to achieve the network effects of Celestia's rollup ecosystem.
Sovereign rollups are the next step for the Celestia ecosystem. They are more similar to Layer1s which deposit into a DA layer (Celestia). Other modular Data Availability are EigenDa (AVS by Eigenlayer) and Avail. Execution Layer and Settlement is Dymension thanks to which it is possible to build roll-ups with ease, the first was Nim Network which after the great hype went largely unnoticed due to the bad price (market cap) at launch. Additionally, next-generation virtual machine ecosystems like Fuel Network are gaining traction. The other incredibly hot topic recently is chain abstraction, a pivotal role for the modular future. What good are all these chains if we can't make the UX equivalent to a monolithic Layer1? The main chain abstraction protocols are Anoma, Particle Network and Flashbots. Besides chain abstraction, the biggest question mark, so to speak, about modularity is interoperability between the various chains. This problem could be solved by LayerZero, Wormhole, Across Protocol, Jumper Exchange, DeBridge, Hyperlane, Omni Network and Union Build. Catalyst Exchange has also launched its mainnet, this is a cross chain AMM that will go on almost all chains, quite quickly. They started with three superchain implementations and will expand more rapidly.

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