Ever since the invention of Bitcoin in 2009, blockchains have wrestled with the problem of how to scale in order to meet the growing demand of digitally native users while maintaining enough decentralization to resist censorship from nation-states.
This highly delicate balancing act is commonly referred to as the scalability trilemma, which is a series of trade-offs that developers must make between decentralization, security, and scalability when designing a blockchain network.
Initially, the scalability trilemma was addressed by increasing the size of blocks on a network, then later by adopting alternative consensus mechanisms such as proof of stake or directed acyclic graphs as a way to reduce the amount of time it would take for nodes to achieve consensus.
In recent years, many prominent figures in the blockchain space have begun to realize that the solution to solving the scalability trilemma requires addressing the underlying monolithic architecture of a blockchain that forces one to make trade-offs between speed, security, and decentralization.
A monolithic blockchain is one that handles transaction execution, network consensus, and data storage all from within the same network.
We can view these 3 components are layers within a blockchain network:
- The application & execution layer → where transactions are executed
- The network & consensus layer* → where consensus is achieved on what transactions are true
- The protocol & data layer → where the history of validated transactions are stored
*Consensus and network layers are technically separate but highly interconnected.
Examples of monolithic blockchains include Bitcoin, Ethereum at its current state, and Solana.
These blockchains attempt to offer the fastest possible performance on the execution layer, the most secure method for determining consensus, and a growing network of nodes that can store all of the data that accumulates from transactions on the blockchain.
The limitations of monolithic blockchain architecture
Where this approach starts to break down is when one segment of users demands faster transaction speeds in order to enjoy P2E games, NFT marketplaces, and DEX trading, while another set of users requires more decentralization in order to feel safe storing high-value assets on-chain.
This growing divergence in interests from highly active user groups is what stresses a monolithic blockchain and forces it to make compromises that ultimately end up upsetting both groups. For example, Bitcoin sacrifices scalability for decentralization, while leaving so much more to be desired in terms of launching commercially viable DApps due to its scalability limitations. Ethereum sacrifices affordability for decentralization by forcing users to pay higher gas fees during periods of network congestion, effectively pricing the majority of users out of Ethereum-based applications. Solana sacrifices decentralization for speed but has difficulty keeping the network online during its own periods of network congestion.
Modular vs Monolithic Architectures
A modular blockchain architecture disrupts this paradigm by separating each layer into specialized components through the use of sidechains, shards, and layer 2 scaling solutions
By opting for a modular architecture, blockchains can exist not as a single resource-constrained network, but as a collection of specialized networks that are each optimized for one or more aspects of the scalability trilemma.
One way to think about the limitations of a monolithic blockchain architecture is to compare it to a car manufacturing facility. If all parts of the car are manufactured in a single warehouse, the facility would eventually become unable to meet the capacity and costs requirements to maintain its infrastructure as more orders came in. The lack of segmentation and specialization amongst workers would also lead to lower quality outcomes and an inability to scale to meet growing production requirements.
Accumulate’s Modular Vision
Accumulate was born out of an understanding that designing a modular architecture is the only way to truly solve the blockchain scalability trilemma.
What this looks like in practice is a blockchain network that serves as the de-facto communication and audit layer between blockchains, enabling the seamless transfer of tokens or other kinds of digital assets between Accumulate Digital Identifiers (ADIs) across different chains regardless of their consensus mechanism.
ADIs are human-readable addresses similar to website URLs that are chosen by individuals or assigned by organizations to represent their presence on the blockchain. Accumulate essentially allows modular blockchains to increase transaction speeds by outsourcing execution functions to a scalability-optimized and identity-based network.
Existing Layer 1 and Layer 2 networks can use ADIs to model real-world entities, including companies, IOT devices, government agencies, etc. Using ADIs, entities can issue smart contracts and perform transactions between each other at much faster speeds and for lower costs compared to interchain or cross-chain transfers between monolithic blockchains. Currently, the Accumulate network can handle over 70,000 transactions per second with an average transaction fee of $0.0025.
In addition, Accumulate leverages the security of decentralization-optimized monolithic blockchains like Bitcoin and Ethereum to backup transaction data between ADIs in order to ensure that the data remains tamper-proof and censorship-resistant.
Modularity Within Accumulate
Accumulate takes a novel approach to its own modular architecture. Each ADI is made up of a collection of independent sub-chains that are managed by 4 account types:
- Token Accounts
- For issuing tokens and tracking deposits and withdrawals from a token account.
- Data Accounts
- For tracking and organizing data approved by an ADI
- Staking Accounts
- For staking Accumulates ACME tokens to participate in consensus and secure the network
- Scratch Accounts
- For accruing data that is needed to build consensus across the Accumulate network and enabling the coordination of multisig validation.
Each account is like a continually expanding Merkle tree, which is a hierarchical data structure that succinctly encodes large batches of data in the form of a Merkle root or hash.
Hashes are like certificates that allow you to verify the history of transactions within a Merkle tree through simple computation. They also make it possible for the consensus layer (where nodes coordinate to validate transactions from each Accumulate account) to be separated from the data layer, where all validated transaction data is stored as a hash.
Block Validator Networks or BVNs are responsible for producing hashes, which are then tied together and summarized by a Directory Network (DN).
The Directory Network plays a critical role in the Accumulate network, consolidating the records of all transactions that occur between the 4 ADI accounts and their various sub-chains, thereby allowing Accumulate to maintain a single unified state, even while existing as many fragmented networks running in parallel.
Backup Consensus & Data Storage
Even though Accumulate does a good job of consolidating and storing transaction data across its various ADI accounts, it relies on the support of an external system to ensure that its data is backed up with added security.
This is where modular blockchains that have chosen to trade scalability for decentralization play a key role.
Through a process called ‘Anchoring’, Accumulate is able to backup transaction data that is recorded on Accumulate to more decentralized blockchains like Bitcoin and Ethereum. With Anchoring, a cryptographic proof or hash containing batches of Accumulate transactions from across the entire network is inserted into the Bitcoin or Ethereum blockchain and validated by miners on those networks.
This is the equivalent of backing up your data on multiple hard drives that each have their own unique security system.
Ultimately, a modular blockchain architecture offers a unique solution to the scalability trilemma that does not depend on making trade-offs but instead focuses on designing separate yet interconnected blockchain networks that are optimized for specific functions and yet can coordinate with each other to achieve consensus on the state of the broader network.
This stands in stark contrast to how modular blockchains have traditionally focused on scaling vertically by increasing the size of blocks or adopting more centralized consensus mechanisms, both of which have diminishing returns.
Networks like Cosmos and Polkadot are early adopters to the modular blockchain framework, while Ethereum is currently making a transition from monolithic to modular architecture with the Beacon Chain migration and launch of sharding and various L2 networks.
Accumulate advances the modular blockchain approach by not only designing its own unique modular architecture consisting of accounts, subchains, and Block Validator Networks, but also by serving as an identity-based execution layer for monolithic blockchains that want to achieve faster transactions speeds without compromising decentralization or security.