Which is better – Modular or Integrated blockchain? Expert speaks

4 views 10:22 am 0 Comments November 28, 2023

When it comes to building blockchains, there are two main approaches: modular and integrated or monolithic systems.

Modular blockchains are designed with interconnected modules or components, each handling specific functions. This modular approach offers several advantages, including streamlined system development, testing, and maintenance. It also brings enhanced flexibility and scalability to the table.

On the flip side, integrated blockchains take a different route. They consolidate all core tasks, such as consensus, security, data availability, and transaction execution, into a single layer.

Ultimately, both approaches have their merits, and choosing the right one depends on the specific requirements and objectives of the blockchain project.

At the Breakpoint 2023, Kyle Samani, the Managing Partner at Multicoin Capital, gave an engaging presentation shedding light on the contrasting dynamics between integrated and modular blockchains and how they impact the industry significantly.

Advantage of integrated systems over modular 

Describing how modular systems operate, Kyle explained that standardization is a critical challenge in modular blockchains. Unlike integrated systems, which adhere to common standards, modular systems’ heterogeneity poses issues, introducing complexity and potential security risks to the financial ecosystem.

He continued by stating that the advantages of integrated systems have made it viable for building on-chain order books. He also presented data comparing spreads and profitability for takers and makers on Uniswap and Phoenix, showcasing the advantages of integrated systems.

Kyle’s conversation touched real-world applications, highlighting Visa’s foray into on-chain settlements using USDC on Ethereum and Solana as integrated blockchains. He applauded the move as a step towards sustainable on-chain price discovery, emphasizing the value it brings to users and market makers.

He explained this as a result of his team’s reflection after working in the blockchain space for a while. 

In looking at what the data tells us in practice, it’s now obvious to us that high-performance integrated chains are the correct way to handle trading and payments,” he said. “It took us a little bit longer, I’d say, as an ecosystem, as an industry, and as an investment firm to appreciate all of those things, but we can now finally see it and understand it.”

Parallelism from integrated blockchains

Diving into the technical aspects, Kyle explained the significance of parallelism in integrated blockchain systems. He said that parallel execution of transactions allows for localized fee markets, enhancing scalability and maintaining cost efficiency. 

Drawing parallels to the importance of integration, he cited examples from technology giants like Apple and Nvidia. He also addressed the critical role of bandwidth in blockchain systems, emphasizing the need for tight coupling between the networking layer and the execution layer. Integrated systems, he argued, outperform modular ones by maximizing overall system performance.