Better MonadError handling to avoid nesting ExceptT in modifyError

[carbolymer]

Changelog

- description: |
    Better `MonadError` handling to avoid nesting `ExceptT` in `modifyError`
# uncomment types applicable to the change:
  type:
  # - feature        # introduces a new feature
  # - breaking       # the API has changed in a breaking way
   - compatible     # the API has changed but is non-breaking
  # - optimisation   # measurable performance improvements
   - improvement    # QoL changes e.g. refactoring
  # - bugfix         # fixes a defect
  # - test           # fixes/modifies tests
  # - maintenance    # not directly related to the code
  # - release        # related to a new release preparation
  # - documentation  # change in code docs, haddocks...

Context

This PR addresses problems with modifyError from mtl noticed by @newhoggy. Briefly speaking, mtl's modifyError nests MonadError e m in the ExceptT. Therefore using modifyError multiple times produces a type similar to:

ExceptT e1 (ExceptT e2 (ExceptT e3 m a))

This is a problem, because nested monads will have a negative performance impact.

There are two ways to fix this:

1. (this PR's approach) Use MonadTrans constraint in addition to MonadError.
2. Use concrete monad for errors: (MonadIO m, ...) => ExceptT e m a everywhere instead of MonadError, use other monad constraints on m.

Checklist

• Commit sequence broadly makes sense and commits have useful messages
• New tests are added if needed and existing tests are updated. See Running tests for more details
• Self-reviewed the diff