  Chemical reactions are a prominent feature of molecular communication (MC)
systems, with no direct parallels in wireless communications. While chemical
reactions may be used inside the transmitter nodes, receiver nodes or the
communication medium, we focus on its utility in the medium in this paper. Such
chemical reactions can be used to perform computation over the medium as
molecules diffuse and react with each other (physical-layer computation). We
propose the use of chemical reactions for the following purposes: (i) to reduce
signal-dependent observation noise of receivers by reducing the signal density,
(ii) to realize molecular physical-layer network coding (molecular PNC) by
performing the natural XOR operation inside the medium, and (iii) to reduce the
inter-symbol interference (ISI) of other transmitters by canceling out the
remaining molecules from previous transmissions. To make the ideas formal, we
consider an explicit two-way relaying example with a transparent receiver
(which has a signal-dependent noise). The proposed ideas are used to define a
modulation scheme (which we call the PNC scheme). We compare the PNC with a
previously proposed scheme for this problem where the XOR operation is
performed at the relay node (using a molecular logic gate). We call the latter,
the straightforward network coding (SNC). It is observed that in addition to
the simplicity of the proposed PNC scheme, it outperforms the SNC scheme
especially when we consider ISI.
