In the past few years, the blockchain ecosystem has been developing and implementing unique solutions to tackle the growing challenges of increased complexity, diverse applications, and the need for improved scalability.
Traditional monolithic blockchains face inherent scalability limitations due to the burden placed on nodes, as all functions are carried out within a single chain. Although approaches such as increasing block size and sharding have been employed to mitigate this issue, they ultimately fail to resolve the trilemma of sacrificing decentralization and security.
The modular blockchain has emerged as an innovative solution to these challenges. By partitioning the blockchain architecture into distinct functions—such as consensus, computation, data availability, and verification—and executing them on separate layers tailored for specific purposes, modular blockchain achieves enhanced scalability.
This strategic segmentation reduces both the throughput and data requirements of nodes, allowing for greater scalability without compromising decentralization and security. As a result, the modular blockchain is rapidly gaining traction in the blockchain space.
Most rollups currently use Ethereum as their Layer 1 (L1). However, rollups that use Ethereum as their L1 are dependent on Ethereum for data availability (DA), consensus, and settlement. This means that Ethereum ultimately determines the state of the rollup.
Celestia is different. As an L1, Celestia is only responsible for DA and consensus. This means that a rollup using Celestia as its L1 can execute transactions (execution layer) and convert state (settlement) of the rollup by itself, just like an L1 blockchain.
This gives Celestia two key advantages:
Overall, Celestia is a more efficient and scalable L1 than Ethereum for rollups. This is due to Celestia's unique design, which allows rollups to execute transactions and convert state by themselves.
Ethereum is planning to introduce shards that act like the data availability (DA) layer of Celestia.
The introduction of shards is intended to reduce the cost of setting up a rollup, but it does not remove the part where Ethereum determines the state of the rollup.
This means that even with the introduction of shards, the rollup is still dependent on L1, as it submits block headers to L1 and fraud proofs run on L1.
This can cause problems with the rollup having to deal with the huge state of Ethereum.