Viewpoint: Modularization will be one of the most profound trends in the evolution of district-level chains

Author: Blue Fox Notes

Modularization not only includes some projects evolved from cosmos technology (such as tia, dym, etc., with many more on the way…), but also includes Ethereum L2/L3, BTC L2, cross-chain, and so on. These different projects focus on different layers, but gradually break down the walls of originally isolated monolithic chains and move towards partial integration.

In this context, the competitive landscape and dynamics will gradually change. The original moats will be gradually broken down and recombined and evolved in the integration. That is, the uniqueness of blockchain projects is becoming increasingly important. Otherwise, they will gradually lose their position in the wave of modularization.

1. Chaotic Battle for 2-3 Years

With the arrival of modular blockchains, the DA layer, execution layer, and even the settlement layer will enter a period of great chaos. After about 2-3 years of turmoil, some foundational projects will emerge, based on which the underlying infrastructure of the entire crypto space will be formed. These infrastructures will form deeper moats over time, unless disruptive technologies emerge.

2. The Window for New High-Performance Blockchain Projects is Basically Closed

After 2-3 years, unless there are breakthrough technologies, the narrative of new monolithic blockchains will basically end. Whether it is monolithic blockchains or new high-performance blockchain entrants, it will be difficult to gain a foothold.

3. Existing High-Performance Monolithic Chains Need to Find an Indispensable Position

In this situation, even existing high-performance public chains need to find their fundamental position in this chaotic landscape, or they risk losing their original moats. According to the evolution of modular blockchains, the pressure on high-performance public chains should be significant, as their performance's irreplaceability is weaker compared to security.

4. Ethereum Will Also Be Impacted

Ethereum itself will also be impacted, especially in the DA layer and execution layer, but this is determined by the blockchain itself; no single monolithic blockchain can solve all problems. This includes BTC and Ethereum, both of which are balanced, and some value being siphoned off is inevitable.

However, Ethereum possesses the most scarce resource in the entire crypto space (security), which gives it its indispensability.

5. Possible Evolution

One possible evolutionary scenario is that Ethereum and BTC will provide the most basic settlement layer services for the entire crypto space. There may also be a few L1s with some settlement layer opportunities; the DA layer will experience full competition in its early stages, including Ethereum, EigenDA, Celestial, Near, Avail, etc. The execution layer will mainly occur in Ethereum L2 (op, arb, strk, zksync, blast, etc.), high-performance public chains (Solana, Avalanche, Aptos, Sui, etc.), and a large number of new BTC L2 projects on the way.

6. The End of the Wilderness Era in the Crypto Space: Modularization and Large-Scale Adoption

With the arrival of modular blockchains, Ethereum and BTC are gradually evolving into providers of underlying security services, while other DA layers, execution layers, and settlement layer projects provide services at different levels to meet the needs of various applications.

The flourishing of blockchain mainly occurs at the application layer, rather than in the infrastructure aspect. Of course, there will be appropriate decentralization, but it will not be a complete flourishing; rather, it will be partial decentralization.

After this cycle of modularization, the competition in blockchain infrastructure is coming to an end. In the next decade, competition at the crypto application layer will become more intense. This includes game, social, DeFi, NFT, AI, shared services, and more. This marks the beginning of large-scale adoption in the crypto space, which will gradually occur 2-3 years later.

From 2009 to 2026, a span of over a decade, has essentially been the wilderness era of the crypto space, filled with speculation. However, during this period, the underlying infrastructure has gradually improved, leading the crypto space towards large-scale adoption.