Web3 went through a change that nobody quite anticipated. In 2017, it was still a new term and an experiment to most people. By 2021, everybody was talking about decentralized finance, NFTs, identity systems, and entire app ecosystems. That attention then quickly brought blockchain to mainstream conversation, and venture capital investments started flowing.
By 2024, it was already clear that early blockchain designs weren’t sufficient for the future, and we saw the launch of the first modular blockchain. This design is quickly becoming the future of blockchain, and innovative developer companies like Altius Labs have gone all out in supporting scalability and performance through blockchain modularity.
But why all the attention? Let’s look at why the industry is pivoting towards modular blockchains.
Early blockchain designs are reaching their limits
Early blockchains, like Bitcoin and Ethereum 1.0, were built with the main goal of proving that decentralization can work. And in that sense, they more than succeeded. Bitcoin showed us that we can have digital scarcity without a central authority, and Ethereum proved that programmable blockchains could support entire app ecosystems.
But while they are quite good at what they do, these architectures weren’t designed for the scale that Web3 aims to operate in. They handle execution, consensus, and data availability within a single system, and you’d have to sacrifice one of performance or decentralization to improve scalability.
When traffic is high, the lack of scalability and speed results in applications slowing down and network charges increasing significantly.
What modular blockchains change at a structural level
Instead of bundling execution, consensus, and data availability, modular systems split them. They each operate on different layers that are tightly connected but can be maintained and scaled separately.
A key focus of the specialization is the execution layer, which is increasingly being handled off-chain through rollups. Transactions and smart contracts run on a Layer 2 network, with the network only reporting summaries or sending cryptographic proofs to the base network (Layer 1).
This means the base network has been freed from the transaction and most of the validation work, leading to faster processing and lower fees. And at the same time, security is maintained as everything is still based on the main, secure blockchain.
The first modular blockchain was Celestia, but Ethereum has also been moving towards modularity with various updates since 2024.
Solving the scalability trilemma
One of the challenges in blockchain design has always been the scalability trilemma, a term coined by Ethereum co-founder Vitalik Buterin.
It’s the idea that you can only ever optimize for two out of the three blockchain properties – security, decentralization, and scalability – at the same time. This would mean that if you wanted to scale, you’d have to sacrifice decentralization, as validation would be faster when centralized.
Modular blockchains make it easy to solve this as the different functionalities operate on different layers. When you optimize the Layer 2 network that determines transactions, you won’t need to touch the layer that handles consensus and security.
Supporting faster innovation and better developer experience
Web3 is all about innovation, and modular blockchains give developers the green light to experiment. When operating on a monolithic chain, every change affects the entire system. This means you can’t easily upgrade smart contracts or test new transaction models as the process is slow, risky, and highly constrained by the base chain.
The fact that the execution environment is a different entity in modular blockchains changes all that. You don’t have to deal with the rest of the system, so you can experiment freely and roll out new virtual machines when you need to. You can even change smart contract languages without touching the consensus layer.
This separation improves the developer experience, reduces friction, and accelerates innovation, creating a more capable environment for the diverse applications Web3 aims to enable.
