Deciphering Blockchain Scaling: A Comparative Analysis of Modular and Monolithic Approaches
Summary:
This article discusses the ongoing industry debate on blockchain scaling: modular versus monolithic. It discusses the drawbacks of both methods using Ethereum and Solana as examples. The author emphasizes that while scaling is necessary for blockchains, solutions like faster hardware and software upgrades could compromise its decentralization and resilience. The ultimate objective of a balanced, efficient, and resilient chain is crucial for the future of blockchain technology.
Everyone concurs that blockchains need to increase their capacity, but the method of achieving it is a topic of dissension. This has led to a heated industry-wide debate between the "modular" and "monolithic" scaling approaches. Modular scaling, as adopted by the Ethereum (ETH) community, proposes conducting low-value transactions on a stratified system of layer-2s and layer-3s that finally settle on a base chain. The downside to this solution is that it results in network fragmentation and a less than ideal user experience. Contrarily, monolithic scaling, epitomized by Solana (SOL), advocates for consolidating all transactions on a single chain and fine-tuning the network with hardware, software, and consensus enhancements to increase its capacity. While this alternative promises an improved user experience, its feasibility is questionable, since it may compromise key blockchain features like decentralization and resilience.
Many monolithic approach enthusiasts often misconstrue the primary function of a permissionless chain, which is not transaction processing - a job done by centralized networks. Instead, decentralized networks offer a limited asset known as secure blockspace, which serves as the fuel for a decentralized economy. The allocation of this scarce resource is determined by price, since the demand for it varies.
In the world of commodities, the statement "the best cure for high oil prices is high oil prices" is often heard. High prices lead to enhanced usage efficiency, albeit pricing out smaller users. This concept parallels the current state of Solana. The network, bogged down with high failure rates due to an increased demand during the memecoin fever, has resulted in users repeatedly attempting to process their transactions, complicating the problem even further.
While modular chains offer different levels of secure blockspace according to the user size, Solana treats all transactions equally, irrespective of their value. This means a $1 transaction is given the same security as a $1 million transaction. However, Solana developers are continuously working on enhancing the fee markets which would eventually price out smaller traders during peak periods, leaving them with no other choice.
As developers are also working on scaling the network with software upgrades and faster hardware, this could lead to an increase in small-value transactions, as the demand for low-cost scarce goods is infinite. Over time, this could centralize the core network infrastructure, making it less stable. The relentless pursuit of peak performance can lead to network shutdowns, which has been an issue with Solana.
In conclusion, while the monolithic scaling approach is admirable, it falls short if the priority is decentralization and resilience. Therefore, a balanced outlook is crucial for maneuvering the future of blockchains.
The writer of the article, Omid Malekan, who is an adjunct professor at Columbia Business School, states that, although the article is informative, it does not intend to serve as legal or financial advice.
Published At
4/30/2024 12:37:49 AM
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