"Coming up is the 1 year anniversary when I told my family to buy Bitcoin for $50k during Thanksgiving Dinner. "
_Greg
Cryptocurrency has a serious problem. According to Mustafa Al-Bassam,
"We're stuck in an endless cycle of new L1 smart contract platforms. Each purport to fix the problems of the L1s in the previous cycles.
These L1s rinse and repeat the same bizdev strategy of prior L1s, building copy-cat DeFi & NFT ecosystems."
What are L1 and L2 Blockchains?
Analogy: A parent is layer 1 and a child is layer 2. A parent is independent of a child, but an infant child is dependent on the parent.
Therefore, Layer 1 blockchains are parent blockchains whereas Layer 2 blockchains are infant blockchains built on top of the parent blockchain.
Layer 1 (L1) blockchains include Bitcoin and Ethereum. The blockchains are independent and require no extra support to run. They are base blockchains, built on top of nothing but the root. They can function as blockchains on which other blockchains are built.
Layer 2 (L2) blockchains, however, are built on top of L1 blockchains, for example, Bitcoin Lightning is built on top of Bitcoin.
How Can We Break From This End Less Cycle of Monolithic L1 Projects?
According to Al-Bassam, the crypto space can break from this cycle by using rollups to build modular blockchain networks.
" ...with rollups, we can build modular blockchain networks, removing the need to spin up new L1 smart contract platforms just to deploy incremental improvements."
What are Rollups? Rollups are offline scaling solutions. According to Quicknode,
" Rollups perform transaction execution outside the main Ethereum blockchain and send the transaction data back to the main Ethereum network." For example, "ZK-rollups are "hybrid scaling solutions"—off-chain protocols that operate independently but derive security from Ethereum."
A scaling solution is simply a method that allows for expansion while increasing efficiency and output. Layer 2 protocols (for example off chain layers and sidechains ), which are built on top of the main chain, are used on blockchains as scaling solutions.
Some projects that are building on this include Celestia. The project is not only committed to support builders in a nascent but also in growing a modular ecosystem.
The project believes that modularism will defeat maximalism of L1 projects.
What are Modular Blockchain Networks ?
Dictionary definition: Modular mean 'relating to', 'of', 'based on a module'.
Modular blockchains are the opposite of monolithic blockchains. This type of blockchain is part of a modular stack. The concept of modular blockchains is simply an evolution of the sharding concept.
According to Celestia,
"... a modular stack consists of layers of specialized blockchains that utilize each other to create a complete system. Monolithic blockchains are limited by handling all functions on a single layer."
Advantages of modular blockchains over monolithic ones include scalability, ability to creating new blockchain easily, and sovereignty.
Can Modular Blockchains Help Reduce the Monolithic L1 Cycle?
Well, this is difficult to tell. However, the project is quite promising. 2022 has many new DeFi Trends, from Yield Farming,to the Aptos Ecosystem, and now to Modular Blockchain Networks. With the constantly changing crypto markets, anything is possible. Modular Blockchains might as well eliminate the L1 monolithic cycle.
What about Greg, I don't know, maybe he'll teach his family about "the dip" this year; if he's even invited to the Thanksgiving Dinner.
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