The execution layer manages the execution of transactions and smart contracts within a blockchain, ensuring that all operations are processed correctly. How does this technology layer actually work? Why is it so essential to blockchain transactions?
What is an execution layer?
In the blockchain ecosystem, each transaction or interaction with a decentralized application (dApp) must be processed, validated and recorded within the blocks.
This process relies largely on a key component called the execution layer, which manages the execution of transactions and smart contracts.
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Understanding the architecture of monolithic and modular blockchains
To understand the importance of the execution layer, it is essential to know that blockchains, particularly in the case of modular blockchains, are broken down into several specialized layers.
Some blockchains like Bitcoin operate in a monolithic modelwhere all functions are managed within a single architecture.
This includes transaction execution, consensus validation, data availability management, and transaction settlement.
However, with the massive increase in users and transactions, this monolithic model has reached its limits, leading to high fees and longer processing times.
To overcome these limitations, a modular approach has emergedwhere each function is assigned to a separate layer of the blockchain, thereby optimizing scalability and overall efficiency. The execution layer is one of these specialized layers.
Layer architectures of monolithic and modular blockchains – Source: IntoTheBlock
The role of the execution layer in the blockchain
The execution layer is the layer responsible for executing transactions and smart contracts. This is where users interact directly with the blockchain via dApps, and where smart contract instructions are executed.
Transaction processing
When a transaction is initiated on a blockchain (for example, sending TIA tokens to the Celestia blockchain), the execution layer takes care of this operation.
It verifies that the transaction is valid (for example, that the sender holds enough TIA in their wallet), executes it, and then updates the network state accordingly.
This layer manages the state of the blockchain ensuring that all changes (such as the transfer of cryptocurrencies or the execution of smart contracts) are correctly processed and recorded.
Execution of smart contracts
Smart contracts are autonomous programs that execute when certain predefined conditions are met. They play a key role in decentralized applications, whether DeFi or blockchain gaming.
The execution layer executes these smart contracts according to programmed rules.
For example, in a decentralized finance (DeFi) protocol, a smart contract can govern a loan or a borrowing. The execution layer will check if the conditions (such as the collateral posted) are met before executing the loan or borrowing.
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The importance of the execution layer for the blockchain
Scalability101
Separation of tasks in a modular blockchain solves the scalability problems encountered by monolithic blockchains.
By separating transaction execution from other functions, the execution layer allows for faster and more efficient processing.
A concrete example is the use of layer 2 which moves part of the transactions outside the main chain.
The execution layer within layer 2 processes off-chain transactionsthen groups them together before submitting them to the main chain. This reduces transaction fees paid by users and speeds up transaction processing, while maintaining the security of the main blockchain.
Cost reduction and flexibility
By offloading part of the calculations from the main chain, the layer 2 managing the execution layer help reduce costs for users.
The execution layer also allows greater flexibility for developers, who can configure this layer according to the specific needs of their application, whether processing a large number of transactions or managing complex smart contracts.
The example of the execution layer in the evolution of Ethereum
With the transition to a modular architecture, Ethereum relies in part on layer 2 solutions to improve its scalability and efficiency.
The execution layer, in this model, focuses on transaction processing and the execution of smart contracts. Scaling solutions such as Arbitrum and Optimism leverage this layer to move some transaction processing off the Ethereum main chain.
In fact, these layer 2s move part of the processing of transactions off-chain, while submitting the final results, once these transactions have been processed and compressed, to the Ethereum settlement layer for validation and definitive recording on the main channel.
This process allows solutions like Arbitrum and Optimism to significantly increase Ethereum's transaction processing capacity, while reducing costs and delays, without compromising the security of the main blockchain.
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