Understanding Modularity in Ethereum and Bitcoin
Modularity has become a key concept in the world of blockchain technology, particularly in Ethereum and Bitcoin. In Ethereum, modularity has emerged as a response to the scalability challenges faced by blockchains. Developers have adopted a radical approach by decentralizing core functions of the main chain to other blockchains through rollup technology.
This modular transformation has revolutionized how products and services are built on Ethereum, allowing for different architectures to be designed based on specific use cases. However, this has also led to a proliferation of blockchains, with everyone seemingly jumping on the bandwagon to create their own blockchain and, in turn, profiting from it.
While the introduction of new consensus protocols presents exciting scaling opportunities, it also brings about a coordination problem. As users spread across different networks, the challenge lies in making the economy more efficient and synchronized. This fragmentation of the ecosystem has resulted in users being isolated and reliant on intermediaries, leading to inefficiencies and increased risks.
For developers, the lack of interoperability across platforms has created friction and fostered a competitive rather than collaborative environment. The constant creation of new protocols has led to teams competing over similar applications, further fragmenting the network effect. This approach, while offering customization and optimization opportunities, has also concentrated economic activity into fewer permissioned systems.
On the other hand, Bitcoin is taking a different approach towards modularity, with a focus on Lightning as the interoperability backbone. This design favors local and permissionless interactions, allowing financial services to be deployed across different economic hubs and connected through the Lightning Network.
Projects like Mutiny exemplify this vision, where users can access various services such as Nostr Relays, Fedimint federations, and Lightning Service Providers simultaneously. This web-of-trust model introduces an innovative alternative to trustless systems, enabling more efficient exchanges driven by market incentives.
Despite the risks and challenges associated with modularity, both Ethereum and Bitcoin are exploring different paths towards achieving interoperability and permissionless access. It remains to be seen how these architectures and protocols will evolve in the future, but the goal is clear: prioritizing openness and collaboration over financial silos.
