Modular Era

What we envision

The modular era is an upcoming future where user actions span multiple rollups and chains.

Imagine users freely navigating through numerous Web3 applications, seamlessly interacting with different rollups and chains without even realizing it.

Behind the scenes, user assets will be constantly transferred across a giant mesh of blockchains to facilitate user actions.

This future is not that far away

The imminent arrival of such a future is evidenced by several noticeable trends. Foremost among them is the remarkable advancement of modular blockchain architecture, and another important one is the rapid surge of assets on Ethereum Layer 2 (L2) networks.

  • Modular blockchain architecture has revolutionized the process of building a new chain, making it akin to assembling Lego blocks - selectively integrating pre-made layers of blockchain. Products that provide these layers are attracting significant attention. As of February 2024, Celestia’s market cap boasts $2.8Bn, having surged eight-fold in the last four months. Eigenlayer has $2.5Bn worth of assets locked in its protocol. These developments have made the creation of new rollups and chains effortless and streamlined, catalyzing a proliferation of innovative new networks

  • L2 networks are attracting a substantial volume of assets. For example, Arbitrum alone has witnessed an inflow of $7.8Bn in $ETH, solely accounting for the transactions via its canonical bridge. Use cases for various assets are escalating across different networks. Millions of transactions are executed daily on Arbitrum, Optimism, and zkSync rollups. This indicates a growing trend where users are more engaged with specialized applications spread over various rollups and chains. As user activity expands beyond a single chain, there is a corresponding rise in the frequency of asset transfers between these networks

Cross-chain DeFi infrastructure is critical

Cross-chain DeFi as an infrastructure is a key component of the modular era. This infrastructure is crucial for seamless transfers and conversions of assets for users to enjoy the full potential of Web3 applications across multiple networks. As the modular era matures, the cross-chain DeFi market will grow exponentially.

Liquidity networks are the backbone of cross-chain DeFi

Liquidity networks* handle the transfer of assets between chains. A scalable liquidity network is essential to accommodate the burgeoning demands of cross-chain DeFi. However, existing liquidity networks are not scalable enough to meet the upcoming demands of the modular era.

Various Forms of Liquidity Network

  1. Native assets directly utilized to settle cross-chain transfer (e.g., Stargate)

  2. Liquidity in DEXs for converting denominations minted by bridges (e.g., USDC.axl for Axelar, hUSDC for Hop) into principal assets used on the destination chain (e.g., USDC.axl -> USDC)

  3. Liquidity prepared to front cross-chain transfer on the destination chain and also to reimburse the fronted assets later (e.g., Squid Boost, Across)

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