Modular Blockchains: The Race to Become the Top Security Provider

Blockchains seek to perform four key functions: consensus, data availability, execution, and settlement. While monolithic blockchains perform all of these functions in the same layer and in a generalized manner, a modular approach seeks to separate them among different chains and protocols. Ethereum’s execution-focused Layer-2 (“L2”) rollups have succeeded in capturing market share and have become major revenue generators for Ethereum, which provides them with security. Other Layer-1s (“L1s”) have taken notice and are also seeking to enter the lucrative security market.

EigenLayer seeks to solve the problem of fragmented blockchain security by pooling Ethereum’s security for other applications to utilize with their restaking technology. Cosmos has focused on a slightly different solution to help increase the security of its appchains with its Replicated Security model. Neutron is the first project to launch using this technology, with many others coming soon. A notable Cosmos project, Osmosis, has proposed its own version of shared security called Mesh Security, focusing on stakers rather than validators. On Bitcoin, Babylon has been working on a solution to leverage the security of the Bitcoin blockchain to increase the security of Cosmos appchains and eventually other proof-of-stake (“PoS”) blockchains. Stacks, with their novel proof-of-transfer (“PoX”) consensus mechanism, has also worked out a solution to using Bitcoin to secure its transactions. Developments in the upcoming Stacks Nakamoto Release will further solidify this technology.