Why Modular Execution Layers Are Eating the World

Ethereum's L1 and Solana's single-threaded execution hit a physical wall. You can't scale compute, data, and consensus on one machine without crippling trade-offs in decentralization or cost.

• Security vs. Sovereignty: Rollups get Ethereum's security but sacrifice customizability.
• Throughput Ceiling: Monolithic chains are bottlenecked by ~5,000-50,000 TPS before hardware requirements explode.
• Innovation Tax: Every dApp is forced into the same VM, fee market, and upgrade cycle.

Separate execution into sovereign chains with purpose-built VMs, using a shared data availability layer (Celestia, Avail, EigenDA). This is the Modular Stack.

• Sovereignty: Chains like Dymension RollApps and Fuel Network control their own governance and upgrades.
• Specialization: Gaming chains use Move VM (Sui, Aptos), DeFi chains use Solana VM via Eclipse, AI chains use custom VMs.
• Cost Efficiency: Execution costs drop by ~90%+ by offloading data to a dedicated DA layer.

Modularity enables new execution paradigms that are impossible on monolithic chains. This is where the real performance leap happens.

• Parallel Execution: Solana, Sui, and Monad achieve ~100k-1M TPS by processing non-conflicting transactions simultaneously.
• Intent-Based Flow: Protocols like UniswapX and CowSwap delegate transaction routing to specialized solvers, abstracting complexity from users.
• Local Fee Markets: A socialFi app's congestion doesn't spike your DeFi transaction costs.

Ethereum's base layer is a victim of its own success, with ~$60B TVL creating a ~$1B annual fee market. This makes simple swaps and NFT mints economically unviable for most users, directly fueling the demand for rollups.\n- Fee Pressure: Base layer gas fees remain structurally high, acting as a tax on all activity.\n- Resource Contention: A single app's success (e.g., a major NFT mint) can congest the entire network, a classic tragedy of the commons.

Teams building on shared L2s like Arbitrum or Optimism are still subject to their governance and tech stack decisions. Dedicated execution layers (rollups/appchains) offer full control over the stack.\n- Custom Economics: Set your own gas token and fee model, like dYdX with its USDC-denominated fees.\n- Tailored VMs: Choose execution environments (EVM, SVM, MoveVM) optimized for your application's logic, as seen with Aptos and Sui.

Fragmentation creates liquidity silos. Bridging assets between hundreds of chains is a ~$200M annual market for exploiters, with major hacks on Wormhole and Nomad. This is the core problem interoperability layers like LayerZero and Axelar are solving.\n- Security vs. Speed Trade-off: Native bridges are slow but secure; third-party bridges are faster but introduce new trust assumptions.\n- User Experience Friction: Multi-step bridging and signature approvals kill conversion rates for cross-chain applications.

Execution layers outsourcing sequencing (e.g., to Espresso or Astria) gain scalability but reintroduce a centralization vector and potential MEV leakage. This is the modular trade-off: you unbundle to scale, but must re-bundle critical functions securely.\n- MEV Recapture: A dedicated sequencer allows a project to internalize its MEV, unlike on a shared L2.\n- Liveness Risk: Relying on a third-party sequencer creates a new single point of failure for your chain's activity.

Splitting liquidity across dozens of rollups diminishes capital efficiency and increases slippage. This creates the market for intent-based solvers (UniswapX, CowSwap) and cross-chain liquidity aggregators (Across, Socket).\n- Solver Networks: They atomically route orders across fragmented pools, abstracting complexity from the user.\n- Unified Pools: Protocols like LayerZero's Omnichain Fungible Tokens (OFTs) attempt to create native cross-chain liquidity without wrapping.

Modular chains rely on external data availability (DA) layers like Celestia or EigenDA. Cheap, scalable DA is the bottleneck; if it fails, the entire rollup halts. The security model shifts from consensus security to cryptoeconomic security (fraud proofs, stake slashing).\n- Cost Structure: ~90% of rollup cost is DA. Cheap DA is non-negotiable for scaling.\n- Proof Overhead: Validity proofs (ZK) require massive compute, while fraud proofs (Optimistic) have a 7-day challenge window, locking capital.

EVM rollups are hitting a scalability trilemma of their own. You can't optimize for high throughput, low cost, and rapid state growth simultaneously on a single VM. This forces painful trade-offs for apps.

• Sequencing congestion from one popular app slows down all others.
• State bloat from NFTs/DeFi inflates node requirements for everyone.
• Innovation lag: New VMs (Move, SVM, FuelVM) are locked out, stifling experimentation.

Modular execution separates the VM from settlement. Teams deploy app-specific or VM-specific chains (like Fuel, Eclipse, Movement) that settle to a shared DA and security layer (e.g., Celestia, EigenDA, Ethereum).

• Choose your VM: Optimize for parallel execution (FuelVM), asset-oriented logic (Move), or high-throughput gaming (SVM).
• Guaranteed resources: Your app's performance is isolated from network noise.
• Sovereign upgrades: Deploy new opcodes or precompiles without contentious hard forks.

Multiple execution layers create a fragmentation problem. The solution is shared sequencing and universal state proofs. Networks like Astria, Espresso, and Radius provide cross-chain atomic composability and MEV protection.

• Atomic cross-rollup bundles: Execute transactions across Fuel and an EVM rollup in one block.
• Unified liquidity: No more bridged asset silos; native assets move via intent-based systems (Across, LayerZero).
• Developer UX: One RPC endpoint can route to the optimal execution environment.

Execution layers are becoming high-margin SaaS. Providers like Caldera, Conduit, and Gelato RaaS abstract away node ops for a fee, turning chain deployment into a ~15-minute API call.

• Revenue capture: Value accrues to the execution layer (transaction fees) and shared sequencer (ordering fees).
• Vertical integration: Stack providers bundle execution, sequencing, and interoperability (e.g., Eclipse with SVM on Celestia).
• The endgame: Execution is a commodity; the moat is in developer tools, liquidity, and cross-chain UX.