Modular blockchains are increasingly riding this wave within Web3, advocating decentralization, specialization and open innovation. It’s a very different approach from monolithic blockchains, where every function happens on one chain.

Ethereum's "The Merge" upgrade in September 2022 was a pivotal moment, transitioning the network from a Proof-of-Work to a Proof-of-Stake system. While this move hasn’t exactly been seamless, it’s allowed Layer 2 networks to scale more efficiently on top of Layer 1.

Celestia has been through a tremendous cycle of adoption since launching in late 2023. Its data availability (DA) layer has become the default DA layer for over 25 modular chains in early-stage rollouts and testnets.

The Cosmos SDK has experienced a similar growth, up 13% in monthly active developers on a year-over-year basis. Ethereum currently settles the equivalent of 11 million daily transactions! This is a notable increase from only 1 million transactions on Layer 1 last year at this time.

As of this writing, more than 40 rollups are in production or public testnet. However, aggregating all Layer 2 development together, there’s been a 230% yo-y increase in development activity fueled mostly by Optimism, Arbitrum and Base.

These rollups are only possible thanks to highly standardized formats like blobs. They benefit from a shared security layer in Ethereum, allowing for communication between them to occur seamlessly. Modular infrastructure projects have now collectively raised more than $400 million since 2022. Eclipse recently closed on $50 million, Avail $27 million and Dymension $6.7 million.

Data availability layers such as Celestia or Avail are expected to be the go-to solution for developers. The end users are reaping transaction costs that are more than 99% less. At the same time, the network drives greater throughput with help from Layer 1 security.

Ethereum rollups are starting to be customized for specific use cases. DeFi, gaming, identity management. This specialization is creating positive ecosystem diversity and helping to spur innovation.