Blockchain Architectures
Last updated
Last updated
This research provides a comprehensive analysis of blockchain architectures, focusing on the blockchain trilemma and the various layers that constitute a blockchain stack. It explores the different blockchain architectures from monolithic blockchains to modular designs, sidechains, rollups, and app-chains, highlighting their benefits and drawbacks. The analysis aims to offer insights into the trade-offs and innovations driving the development of scalable, secure, and decentralized blockchain solutions.
At the foundation of blockchain architecture lies the blockchain trilemma, a concept that underscores the inherent challenge of simultaneously achieving three critical aspects of blockchain technology: decentralization, security, and scalability. This concept, first articulated by Vitalik Buterin, co-founder of Ethereum, posits that a blockchain can effectively attain only two of these three properties at any given time.
Decentralization enhances the security of blockchains by reducing the likelihood of a single party gaining control over the network. While decentralization fosters transparency and fairness, it often results in lower throughput due to scalability constraints.
Security pertains to the robust defenses that blockchain networks must implement to stop malicious entities from compromising the system. A strong security posture is essential for maintaining network reliability and trustworthiness; inadequate security levels can create vulnerabilities that may be exploited, leading to disruptions in the consensus mechanism and the overall integrity of the network.
Scalability refers to a blockchain's capacity to accommodate a high volume of transactions per second, determining the network's ability to grow and adapt to user demands. Insufficient scalability can result in slow transaction processing times and elevated fees, making the network lss attractive to users.
Achieving an optimal balance among these three properties poses a significant challenge for blockchain architects, who must navigate the trade-offs inherent in each aspect. While this challenge is considerable, ongoing innovation continues to address these obstacles, driving the evolution from the initial generation of monolithic blockchains to the current landscape of diverse blockchain architectures[1, 2].
On the outside blockchains can be seen as a technology that produces blocks which are linked together in a chain. However, the blockchain technology is much more complex than that. It requires many layers to work together to ensure the proper functioning of the blockchain. These layers are responsible for networking, consensus, data, execution and connection with decentralized applications [3].
The peer-to-peer network is the foundation of blockchain technology, facilitating communication among nodes within the blockchain ecosystem. This network layer is essential for the propagation of transactions and blocks, as well as for the discovery of new nodes and the synchronization of the blockchain's state.
By ensuring that nodes can locate and interact with each other, the peer-to-peer network promotes the synchronization of blockchain states. It can be conceptualized as a collaborative system in which nodes share the computational workload to achieve a unified objective.
This architecture not only enhances the efficiency and resilience of the blockchain but also supports the decentralized nature of the technology, making it more robust against failures and attacks [3, 4, 5].
Consensus layer is integral to ensuring that all nodes within a blockchain network achieve a collective agreement. The two most known consensus algorithms are Proof of Work (PoW) and Proof of Stake (PoS), with PoW utilized by Bitcoin and PoS employed by Ethereum.
This layer establishes a defined set of agreements among peers in a distributed peer-to-peer (P2P) network, thereby ensuring the decentralization and diffusion of power. It guarantees adherence to a single chain and delineates the rules to which nodes must conform, thereby facilitating consensus regarding the accepted state of the blockchain. Furthermore, the consensus protocol is essential for achieving reliability within the P2P network, as it ensures unanimous acceptance of truth among participant [3, 4, 5].
This layer encompasses the foundational technologies underlying blockchain, including the data block and chain structure, hash functions, Merkle trees, asymmetric public key encryption, and timestamping mechanisms. Among these technologies, the most critical component is the storage of data in the form of data blocks.
Data blocks can be conceptualized as a linked list of blocks, wherein transactions are sequentially ordered. Each block consists of two fundamental elements: a pointer to the preceding block and a hash of the current block, which is derived from an ordered list of transactions. This structure creates a chain of blocks, with each block interlinked to its predecessor.
To ensure the security and integrity of the information contained within the blockchain, transactions are digitally signed. A private key is utilized to sign these transactions, while anyone possessing the corresponding public key can verify the authenticity of the signer. Digital signatures play a crucial role in detecting information manipulation; since the encrypted data is also signed, any alteration renders the signature invalid. Consequently, the data remains confidential due to encryption, preventing unauthorized access or tampering.
This layer is fundamentally responsible for maintaining the security and integrity of the blockchain, achieved through the implementation of Merkle trees, cryptographic techniques, and consensus algorithms [3, 4, 5].
Execution layer encompasses runtime environments, such as virtual machines, containers, and compilers, which are installed on the nodes within the blockchain network. Upon the receipt of new transactions, these transactions are executed within the designated runtime environment.
The primary responsibility of the execution layer is to facilitate the execution of smart contracts and decentralized applications (dApps) on the blockchain.
A robust execution layer is critical for ensuring the effective functioning of both smart contracts and dApps, thereby contributing to the overall performance and utility of the blockchain ecosystem [3].
Application layer represents the highest tier of the blockchain stack, serving as the interface that connects decentralized applications to the underlying blockchain technology. It can be viewed as the API gateway into the Web3 ecosystem. This layer comprises smart contracts, chaincode, and decentralized applications (dApps) that interact with the blockchain network, facilitating various services and functionalities for users.
Among the numerous applications of blockchain technology, cryptocurrencies are the most outstanding; however, other significant use cases include crypto wallets, smart contracts, non-fungible tokens (NFTs), and decentralized finance (DeFi) solutions.
While the user interface and user experience (UI/UX) of applications in this layer may resemble those of traditional Web2 applications, the backend data storage is fundamentally decentralized, residing on the blockchain. This architecture ensures that data remains secure, transparent, and immutable, thereby enhancing trust and reliability in the services provided
When assessing various blockchain architectures, it is essential to consider both the blockchain trilemma and the individual layers to gain a comprehensive understanding. While some approaches integrate these elements holistically, others concentrate on specific components, which can subsequently be combined to achieve the desired characteristics.
Monolithic blockchains have served as the foundational architecture in the blockchain ecosystem since the inception of the first cryptocurrencies. They offer an all-in-one solution that encompasses robust security and decentralization; however, they often encounter significant challenges regarding scalability due to their integrated design. This limitation is directly linked to the blockchain trilemma, which necessitates trade-offs between decentralization, security, and scalability.
In a monolithic blockchain, all operations occur on a single layer, which places all responsibilities on the nodes. These nodes execute consensus, ensure data availability, and validate transactions, thereby performing all core functions of the blockchain simultaneously. This model is prevalent in the blockchain space, with Bitcoin and Solana as the most prominent examples.
Developing and maintaining a monolithic blockchain necessitates substantial resources and expertise, as its architecture is complex and interdependent. Consequently, many blockchains emerge primarily as forks of existing projects, with developers concentrating on enhancing specific features rather than creating new solutions from the ground up. While this approach can be cost-effective and efficient, it also restricts opportunities for innovation and customization.
As the limitations of monolithic design become increasingly evident, alternative blockchain architectures are gaining traction.
Proven Resilience: Monolithic blockchains have been battle-tested in real-world scenarios, establishing trust and reliability.
Robust Security: Their integrated approach tends to enhance security through established protocols and practices.
Simplified Data Availability: Issues regarding data availability are more straightforward to address within a single-layer architecture.
Established Ecosystem: There is substantial support from existing experience and tools, facilitating development and integration.
Inefficient Execution: The simultaneous execution of all functions can lead to inefficiencies.
Resource Limitations: Constraints on node resources—such as CPU, memory, and storage—can adversely affect the blockchain's efficiency.
Inflexibility: Optimizing desired qualities often necessitates trade-offs with others, limiting adaptability.
Scalability Challenges: Increasing throughput generally requires enlarging block sizes, which can lead to centralization due to heightened hardware requirements.
Security and Decentralization Trade-offs: Enhancing one property often compromises another.
State Bloat: Accumulation of state data can lead to inefficiencies and performance degradation.
Prominent examples of monolithic blockchains include Bitcoin, Solana, and Tron. As the blockchain landscape evolves, understanding these architectures' strengths and weaknesses is crucial for fostering future innovations [1, 6, 7].
Sidechains represent an approach to solve blockchain scalability, functioning as separate blockchains that run parallel to a main chain. This architecture allows for the transfer of assets between the main chain and the sidechain, enabling developers to experiment with new features or functionalities without altering the primary blockchain's operations.
Sidechains maintain their own consensus mechanisms, allowing for faster transaction speeds and reduced congestion on the main chain. However, they also introduce additional complexities, such as the need for secure bridges to facilitate asset transfers and potential security vulnerabilities that may arise from their independence.
Increased Scalability: Sidechains can handle a greater volume of transactions, relieving congestion on the main chain.
Flexibility for Experimentation: Developers can test new features or protocols without impacting the primary blockchain's stability.
Customization: Sidechains can be tailored to specific use cases or applications, allowing for innovation in blockchain development.
Security Risks: Sidechains may have different security models, which can expose users to vulnerabilities.
Complex Asset Transfers: Moving assets between the main chain and sidechains requires secure mechanisms, adding complexity.
Potential Fragmentation: The existence of multiple sidechains can lead to fragmentation in the ecosystem, complicating interoperability.
As blockchain technology evolves, sidechains may face limitations compared to rollups, which offer superior scalability and security. While sidechains have historically provided unique opportunities for experimentation and customization, their reliance on independent security models may hinder their viability in the future. Rollups, by leveraging the security of the main blockchain while enhancing throughput, present a more compelling solution for the next generation of decentralized systems [10, 11].
Modular blockchains represent an innovative shift in blockchain architecture, characterized by their separation of various functionalities into distinct layers or modules. This architectural design aims to optimize performance and scalability while addressing the limitations inherent in monolithic designs. By decoupling application, execution, consensus, and data availability into separate components, modular blockchains enhance flexibility and adaptability across various use cases.
In a modular blockchain architecture, each layer is responsible for specific tasks, allowing for specialization and independent optimization of each component. For instance, the execution layer can focus solely on running smart contracts and decentralized applications (dApps), while the consensus layer ensures agreement among nodes regarding the blockchain's state. This separation of concerns enables each layer to scale independently, improving overall throughput and performance. Moreover, this architecture simplifies development, testing, and maintenance processes, enhancing flexibility and scalability within the system.
Modular blockchains are particularly well-suited for applications requiring custom functionality, such as rapid or cost-effective operations. Developers can prioritize two components of the blockchain trilemma—decentralization, security, or scalability—allowing for greater customization. This modular approach not only facilitates system improvements but also creates a product where the whole is greater than the sum of its parts, streamlining system development.
Enhanced Scalability: By decoupling components, modular blockchains achieve greater scalability, as each layer can be optimized for its specific function without impacting others.
Flexibility: Developers can tailor each layer to meet specific requirements or integrate new technologies without redesigning the entire system.
Improved Resource Utilization: Nodes can specialize in certain tasks, allowing for more efficient use of resources and reducing bottlenecks that often arise in monolithic architectures.
Interoperability: Modular architectures can facilitate better communication between different blockchain networks and protocols, promoting interoperability within the broader ecosystem.
Increased Complexity: The separation of functionalities introduces complexity in the network's design and implementation, requiring more sophisticated coordination among layers.
Potential Security Vulnerabilities: With multiple layers interacting, additional security concerns may arise, especially if one layer is compromised.
Dependency Management: The interdependencies among various layers must be carefully managed to ensure reliability and consistency across the network.
Modular blockchains, though relatively new, are an active area of research with a focus on enhancing scalability and flexibility. Projects like Fuel, Celestia, and Polygon Avail lead these efforts, each targeting specific components like execution layers, data availability, and interoperability. Their work demonstrates how modular designs can overcome the constraints of traditional monolithic structures while laying the groundwork for future blockchain innovations. This research is crucial as it shapes the next generation of decentralized systems and their broader applications.
Even though we are currently at the early stages of modular blockchain development, this approach shows promise for addressing the blockchain trilemma and enabling the creation of more efficient and effective blockchain solutions.
As the blockchain landscape continues to evolve, modular blockchains are expected to play a significant role in advancing the capabilities and applications of decentralized technologies [1, 6, 7].
Rollups are a type of modular blockchain solutions designed to enhance the performance of blockchain networks, particularly those operating on a monolithic architecture. By aggregating multiple transactions into a single batch and processing them off-chain, rollups aim to reduce the load on the primary blockchain (Layer 1) while maintaining the security guarantees provided by it. This allows for increased transaction throughput and reduced costs, making rollups a compelling solution for scalability challenges faced by many blockchain ecosystems.
There are two main types of rollups: Optimistic Rollups and Zero-Knowledge Rollups (ZK-Rollups). Each employs a distinct approach to transaction validation and security, serving different use cases and performance requirements.
Optimistic Rollups:
These rollups assume that transactions are valid by default and only require verification when a dispute arises. This approach relies on a fraud-proof mechanism that enables users to challenge invalid transactions.
By processing transactions off-chain and only submitting periodic summaries (or "rollups") to the main blockchain, optimistic rollups significantly reduce on-chain congestion. A well-known implementation of optimistic rollups are Optimism and Arbitrum, which aim to enhance Ethereum's scalability while ensuring compatibility with existing smart contracts.
Zero-Knowledge Rollups:
Unlike optimistic rollups, ZK-rollups utilize cryptographic proofs to validate the correctness of transactions. They generate succinct proofs (Zero-Knowledge proofs) that allow the main blockchain to verify the validity of batched transactions without needing to inspect all individual transactions.
ZK-rollups offer enhanced privacy and security, as transaction details are not disclosed during validation. ZKsync is a prominent example of a ZK-rollup, facilitating high-throughput transactions on Ethereum.
Rollups present an innovative approach to scaling blockchain networks, offering significant benefits in terms of throughput and cost while addressing the limitations of traditional designs.
By utilizing the underlying Layer 1 blockchain, they tackle the blockchain trilemma by shifting processing to Layer 2 while ensuring security through the consensus mechanisms of the main chain. This approach enables rollups to boost transaction efficiency and affordability without compromising the security assurances of Layer 1, thus effectively balancing scalability, security, and decentralization within blockchain frameworks.
Increased Throughput: By processing transactions off-chain, rollups can handle significantly more transactions per second than traditional blockchains, improving overall throughput.
Lower Transaction Costs: Rollups can reduce fees for users, as the costs of aggregating transactions are shared among multiple participants, leading to cheaper per-transaction fees.
Enhanced Security: Rollups leverage the security of the underlying blockchain, ensuring that even as they process transactions off-chain, they maintain the integrity of the network.
Compatibility: Many rollups are designed to be compatible with existing blockchain protocols, allowing developers to migrate their applications without extensive modifications.
Latency: Rollups can introduce delays in transaction finality since they rely on the underlying blockchain for dispute resolution and finality.
Complexity: Implementing rollups requires developers to understand the intricacies of both Layer 1 and Layer 2 solutions, which may increase the complexity of application development.
Dependency on Layer 1 Security: While rollups inherit the security of the main blockchain, they remain vulnerable to Layer 1 attacks, and their effectiveness depends on the stability and security of the underlying network.
Immaturity of Technology: As a relatively new technology, rollups may contain design flaws or bugs that could affect their performance or security, posing risks for users and developers alike.
As rollups continue to evolve and gain adoption, they are likely to play a crucial role in shaping the future of decentralized applications and blockchain technology [6, 7, 8, 9].
App-chains are specialized blockchains designed to run specific decentralized applications (dApps) or services, focusing on optimizing performance, scalability, and user experience for a particular use case. Unlike general-purpose blockchains, app-chains are tailored to meet the unique demands of their application, allowing for custom features, governance models, and security parameters.
By operating independently, app-chains avoid congestion from other applications, offering high throughput and reduced costs. However, their security often depends on the underlying Layer 1 or a dedicated validator set, posing potential risks. Projects like Cosmos and Avalanche Subnets are examples of app-chains that aim to cater to specific application needs while still maintaining interoperability with broader blockchain ecosystems.
App-chains represent a future-oriented approach where individual applications can have more control over their environment, making them well-suited for customized and complex decentralized services.
Flexibility: App-chains offer the ability to customize key parameters such as transaction speeds, gas fees, and governance rules, allowing for greater control over the user experience.
Sovereignty: Each app-chain operates independently, reducing the risk of failures in other chains impacting its operation.
Performance: With dedicated resources, app-chains experience less congestion, improving transaction throughput and reducing costs.
Innovation: App-chains enable developers to experiment with novel governance or economic models without affecting other parts of the ecosystem.
Security: App-chains may not inherit the full security of a Layer 1 blockchain, making them potentially more vulnerable to attacks.
Limited Interoperability: Without proper cross-chain communication mechanisms, app-chains can face challenges in interacting with other blockchains or networks.
Resource Intensive: Managing an independent app-chain requires substantial infrastructure and maintenance, increasing the operational burden on developers.
Fragmentation: The rise of many app-chains can lead to fragmentation of the ecosystem, making it harder for developers and users to interact across platforms.
Currently, building a custom app-chain is a challenging and costly endeavor due to the early-stage development of the technology. The lack of mature tooling, developer resources, and infrastructure support significantly increases the complexity of building and maintaining an app-chain. Many teams are required to develop custom solutions from scratch, adding to the time and cost. Additionally, because app-chains are relatively new, finding experts and comprehensive documentation can be difficult, further increasing barriers to entry for developers and projects [12, 13, 14, 15].
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[5]: 2024. "A beginner's guide to understanding the layers of blockchain technology"
[6]: 2024. "Modular vs. Monolithic Blockchains"
[7]: 2024. "Monolithic vs. modular blockchain"
[8]: 2024. "What Are Rollups? ZK Rollups and Optimistic Rollups Explained"
[9]: 2024. "What Are Blockchain Rollups? A Full Guide to ZK and Optimistic Rollups"
[10]: 2024. "Sidechains Explained: What You Need to Know"
[11]: 2024. "What are sidechains?"
[12]: 2024. "What are Appchains?"
[13]: 2024. "What is an appchain (application-specific blockchain)?"
[14]: 2024. "Breaking Down Appchains: The Next Step for DApps?"
[15]: 2024. "A dApp Developer’s Guide To Appchains"
