Rollups are not just scaling solutions; they are the new definition of a blockchain. A Layer 1 like Ethereum now functions as a universal settlement and data availability layer, while execution is outsourced to specialized rollups like Arbitrum and Optimism.
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Why Rollups Are Redefining What an L1 Even Is
The monolithic L1 is dead. Rollups are unbundling the blockchain stack, forcing base layers to specialize in security and data availability. This is the new architectural reality.
introduction
THE PARADIGM SHIFT
Introduction
Modular execution layers are dissolving the monolithic L1 model, redefining the blockchain stack's fundamental architecture.
The L1 competitive moat has shifted from raw throughput to security and liquidity. A rollup's value is derived from the cryptoeconomic security of its base layer (Ethereum, Celestia) and the capital efficiency of its native bridges.
Evidence: Over 90% of Ethereum's L2 transaction volume is processed by rollups, with Arbitrum and Base consistently handling more daily transactions than Ethereum mainnet itself, proving the execution layer migration is complete.
key-trends
WHY ROLLUPS ARE REDEFINING WHAT AN L1 EVEN IS
The Unbundling: Three Architectural Shifts
Monolithic L1s are being decomposed into specialized layers, turning the blockchain stack into a competitive market.
01
The Problem: The Monolithic Trilemma
Traditional L1s like Ethereum and Solana bundle execution, consensus, and data availability into one layer, forcing a trade-off.\n- Security requires decentralization, which slows execution.\n- Scalability demands centralization, which weakens security.\n- Rollups unbundle this, letting each layer optimize independently.
3/3
Forced Trade-Off
1/3
Pick One
02
The Solution: Sovereign Execution Layers
Rollups like Arbitrum, Optimism, and zkSync are not just scaling solutions—they are becoming the primary execution environment.\n- They inherit Ethereum's consensus & security ($100B+ economic security).\n- They innovate on execution speed and cost ($0.01 avg. tx, ~2s finality).\n- This creates a Cambrian explosion of virtual machines (EVM, SVM, MoveVM).
$0.01
Avg. TX Cost
~2s
Finality
03
The New Battleground: Data Availability
With execution settled, the critical infrastructure war shifts to data availability (DA). Cheap, secure DA is the bottleneck.\n- Ethereum (via blobs) offers gold-standard security at a premium.\n- Celestia and EigenDA provide modular, cost-optimized DA (~$0.0001 per kb).\n- The choice dictates a rollup's security model and cost structure.
100x
Cost Differential
$0.0001/kb
Modular DA Cost
04
The Endgame: L1 as a Settlement & Consensus Backstop
Base layers like Ethereum are evolving into a universal settlement and security hub.\n- Their primary product becomes cryptoeconomic security and neutral consensus.\n- This enables interoperability between rollups via shared bridging (e.g., layerzero, wormhole).\n- The value accrual shifts from gas fees to staking and restaking ecosystems (EigenLayer).
$100B+
Security Backstop
Universal
Settlement Layer
WHY ROLLUPS ARE REDEFINING WHAT AN L1 EVEN IS
L1 Role Comparison: Monolithic vs. Modular Era
This table compares the core architectural responsibilities of a traditional monolithic L1 versus a modular L1 in the rollup-centric paradigm.
| Architectural Responsibility | Monolithic L1 (e.g., Ethereum pre-2020, Solana) | Modular L1 (e.g., Ethereum post-Danksharding) | Sovereign Rollup (e.g., Celestia, Fuel) |
|---|---|---|---|
Execution | |||
Data Availability | |||
Consensus & Settlement | |||
Sequencing | |||
Proposer-Builder Separation (PBS) | Optional | Required for PBS builders | Not applicable |
Gas Fee Recipient | L1 Validators | L1 Validators & PBS Builders | Rollup Sequencer |
Primary Revenue Source | Execution & Settlement Fees | Data Availability & Settlement Fees | Sequencing & Execution Fees |
State Growth Burden | Permanent, on all nodes | Permanent, on specialized nodes | Temporary, pruned after dispute window |
deep-dive
THE SHIFT
The New L1 Mandate: Security as a Service
Layer 1 blockchains are no longer application platforms but specialized security providers for rollups.
The L1 is now a security vendor. Its primary product is a decentralized, high-assurance data availability layer and settlement guarantee. Applications migrate to rollups like Arbitrum and Optimism for execution, paying the L1 for this foundational security service.
Settlement replaces smart contracts as the core function. An L1's value accrues from finalizing proofs and securing data, not hosting dApp logic. This redefines competition: Ethereum versus Celestia versus EigenDA, measured in cost-per-byte and proof verification speed.
Evidence: Ethereum's roadmap (Danksharding) and the rise of modular chains like Arbitrum Orbit and OP Stack explicitly treat the L1 as a shared security hub. The market cap battle is now about which chain secures the most high-value rollups.
counter-argument
THE ARCHITECTURAL SHIFT
The Monolithic Rebuttal (And Why It's Wrong)
The 'monolithic vs. modular' debate is a false dichotomy that ignores how rollups are redefining the L1's core function.
The L1 is now a settlement layer. The primary job of an L1 like Ethereum is no longer execution; it is to provide data availability and consensus for rollup state transitions. This is the modular thesis in practice.
Monolithic chains are just bundled rollups. Chains like Solana or Sui are high-performance, integrated systems. They bundle execution, consensus, and data availability into one stack, which is functionally a single, optimized rollup with a proprietary DA layer.
The distinction is a deployment choice. The real competition is between shared security models (Ethereum rollups, Celestia rollups) and sovereign security (monolithic chains, EigenLayer AVS). The modular stack offers optionality; the monolithic stack offers integration.
Evidence: Ethereum's fee market is dominated by blob data from Arbitrum and Optimism, not user transactions. The base layer's purpose has fundamentally shifted from execution to settlement and security provisioning.
takeaways
THE L1 ENDGAME
TL;DR for Builders and Investors
The L1 vs. L2 distinction is collapsing. Rollups are not just scaling solutions; they are the new architectural paradigm for sovereign execution.
01
The Modular Thesis Wins
Monolithic chains like Solana are an optimization, not the rule. The future is specialized layers: Ethereum for consensus/security, rollups for execution, and DA layers like Celestia/EigenDA for data.\n- Builder Benefit: Launch a chain with custom VM (FuelVM, SVM fork) without bootstrapping validators.\n- Investor Signal: Value accrual shifts from monolithic gas fees to modular service markets (sequencing, proving, DA).
100x
Cheaper DA
~1-3s
Finality
02
Sequencers Are the New Validators
The core value capture and centralization risk of an L1 shifts to the sequencer. Projects like Espresso and Astria are building shared sequencer networks to commoditize this role.\n- Builder Benefit: Outsource sequencing for neutrality & liquidity; focus on app logic.\n- Investor Signal: The "L1 token" model is being unbundled. Value accrues to sequencer token, prover network, and DA token separately.
$100M+
MEV Revenue
1 of N
Risk
03
Interop is Now a Protocol, Not a Bridge
Native cross-rollup communication via shared settlement (Ethereum) or light clients (IBC, LayerZero) makes rollups feel like shards of one system. UniswapX and Across use this for intent-based swaps.\n- Builder Benefit: Compose across rollups seamlessly; users never hold base-layer gas.\n- Investor Signal: Bridging TVL ($30B+) will migrate to native liquidity layers and intents infrastructure.
<5 min
Withdrawal Time
$30B+
TVL at Stake
04
Execution is a Commodity, Sovereignty is Not
Rollups like Arbitrum Orbit, OP Stack, and Polygon CDK let you deploy your own chain but inherit security. The differentiator becomes governance, fee tokens, and community.\n- Builder Benefit: Full control over upgrade keys and treasury without the security burden.\n- Investor Signal: Valuation multiples will apply to ecosystems (Superchain) and high-GMV apps, not generic execution layers.
0
Validator Setup
100%
Fee Control
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