What Monolithic Blockchains Are, How Blockchains Were Designed and Why You Should Care

What Are Monolithic Blockchains?

Monolithic blockchains refers to blockchains which are designed to handle all blockchain functions on their own without delegating any of these to other blockchains, as opposed to modular blockchains. Historically, all blockchains were designed to be  monolithic, including Bitcoin and more recently Solana. Even Ethereum began as a monolithic chain before evolving its roadmap. To understand monolithic blockchains we need to understand the functions of a blockchain, which can be broken down into: Execution, Settlement, Consensus and Data Availability. 

Execution

Execution refers to the processing of transactions and smart contracts on a blockchain. In modular blockchains, Layer 2 (L2) solutions often specialize in execution because they can often handle transactions more efficiently and cheaply compared to their Layer 1 (L1) counterparts. This specialization allows L2s to perform complex computations and operations while offloading other responsibilities to an L1 or other layers.

Settlement

Settlement refers to the finalization and recording of transactions on a blockchain. For example, Ethereum serves as a settlement layer for many Layer 2s due to its robustness, reliability, and high market capitalization. While Layer 2 solutions like Arbitrum execute transactions, they are only considered “finalized” after a proof of the transactions has been recorded on Ethereum. This separation allows Layer 2s to inherit the security of an underlying Layer 1 such as Ethereum, while enabling L2s to process transactions more quickly.

Consensus

Consensus refers to the process by which network participants (validators) agree on the state of the blockchain. A popular form of consensus in cryptocurrency blockchains is Proof-of-Stake (PoS), where validators are chosen to create and validate new blocks based on the number of tokens they hold and are willing to "stake" as collateral. This mechanism ensures that all participants agree on the validity of transactions and the overall state of the blockchain.

Data Availability

In blockchain, data availability refers to the ability of network participants to access and verify the data stored on the blockchain. This data includes transaction details, block information, and the state of the ledger.

Monolithic vs. Modular Blockchains

Ultimately, different blockchain architectures are all focused on solving the blockchain trilemma of balancing decentralization, security, and scalability. Monolithic blockchains handle all core functions (Execution, Settlement, Consensus, and Data Availability) within a single chain, and focus on methods to scale the performance and throughput of the chain itself. On the other hand modular blockchains are typically designed to separate execution from other blockchain functions, commonly onto a Layer 2 (or even Layer 3!) as a scaling method. Both architectures are equally valid and each has its own advantages and trade-offs, leaving the decision to users on which blockchains best suit their needs.