App-specific blockchains, or appchains, are designed specifically to support the creation and deployment of decentralized applications (DApps). In appchain, each app runs on a separate blockchain, linked to the main chain. This allows greater scalability and flexibility, as each application can be customized and optimized for specific use cases.
Appchains are also an alternative solution for scalability to modular blockchains or layer-2 protocols. Appchains exhibit similar characteristics to modular blockchains, as this is a type of blockchain architecture that separates data, transaction processing and consensus processing elements into distinct modules that can be combined in various ways. These can be thought of as “pluggable modules” that can be replaced or combined depending on the use case.
Why does this separation of functions exist? Greater flexibility and adaptability to appchains compared to the traditional, monolithic blockchain architecture, where these functions are all built in one program. They allow for the creation of customized, sovereign blockchains – tailored to meet specific needs and use cases – where users can focus on specific tasks while offloading others to other layers. This can be useful in terms of resource management, as it allows different parties to specialize in different areas and share the workload.
The scalability of blockchain technology is a key factor for future success. Due to scalability issues in layer-1 blockchain architectures, there has been a shift towards using modular blockchains or layer-2 protocols, which provide a solution to the limitations of monolithic systems.
As a result, the the adoption of layer-2 networks is increasing, because it provides a way to solve scalability and other problems in current blockchain networks, especially for layer-1 like Ethereum. The Layer-2 protocol offers lower transaction costs, fewer capacity limitations and faster transaction speeds that pave the way for widespread adoption, attracting the attention of 600,000 users.
Appchains vs. monolithic chain
Appchains are no different from monolithic chains. Monolithic chains, like appchains, follow the fat-protocol thesis where one chain is handle the most decentralized financial activity (DeFi). and settles everything in one layer with valuable tokens. However, layer-1 blocking is difficult to measure. Current Appchains do not have the same limited space issues as monolithic chains, but can use modular solutions in the future if needed.
“The fundamental value proposition of appchains is state interoperability,” explains Stevie Barker, researcher at Osmosis Labs, a decentralized trading protocol in the Cosmos ecosystem. He told Cointelegraph:
“Appchains are sovereign because they have precise control over all the stacks and other areas of blockchain structure and operations that they want to customize. And they are interoperable because appchains can freely interact with each other.
Appchains can optimize user experience and make execution faster, easier and more efficient. They can also secure the chain by recruiting validators to enforce code, generate blocks, relay transactions and more. Alternatively, they can borrow security from another set of validators, interchain security, or combine both options to share security between the entire interchain.
Osmosis has developed a new proof-of-staking method called “superfluid staking” that aims to improve security and user experience. This approach allows liquidity providers to issue tokens in a liquidity stake (LP) to help secure the chain. In return, they will receive staking rewards in addition to LP rewards, which can increase capital efficiency. This could be a more seamless and integrated approach to staking, as liquidity providers may be rewarded for both LP and staking activities.
With today’s progress, all interchains will be able to use staked assets for DeFi activities without the risk of centralization or compromising chain security, as is often the case with traditional liquid staking derivatives. This will allow users to take advantage of DeFi opportunities while maintaining the security and decentralization of staked assets. Valentin Pletnev, CEO and co-founder of Quasar, a decentralized appchain designed for asset management, told Cointelegraph:
“Having the entire stack from top to bottom allows for easy creation of value and purpose for tokens – it also allows for higher efficiency as the chain can be designed around specific use cases and optimized.”
Appchains work too effectively manage the Maximum Extract Value (MEV), which refers to the profit earned by those who have the power to decide the order and include transactions. MEV has become a problem for DeFi users in various ecosystems. However, the appchain can more quickly implement an on-chain solution that reduces bad MEV and directs healthy arbitrage benefits from third parties to the appchain itself. This can help improve the user experience and reduce the potential for exploitation in the DeFi ecosystem.
Appchains allow radical blockchain experiments to take place quickly. While Tendermint and the Cosmos SDK are incredible technologies that allow applications to roll inter-blockchain communication (IBC) protocol-ready blockchains are fast, the entire Cosmos stack does not need to be an IBC-connected appchain. Barney Mannerings, co-founder of Vega Protocol, an application-specific blockchain for trading derivatives, told Cointelegraph:
“As the space moves to a multichain and multi-layer world – where assets can be moved between chains and layers of special scale – the distribution of applications across multiple hubs can be applied.”
Appchains offer a path to a new communication standard of blockchains. Native token transfers between ecosystems eliminate bridges and allow cross-chain native token transfers.
Application-specific blockchains also offer several valuable benefits that appeal to developers and users alike. Its ability to improve scalability, performance, security and interoperability of applications makes it a valuable tool for building next-generation software. As technology continues to evolve, we will see more developers using application-specific blockchains for their applications.
However, the use of multiple appchains can make them more complex and difficult to manage compared to other types of blockchain technology. Since every application uses blockchains, managing and maintaining multiple blockchains can be resource-intensive and time-consuming. Integrating different application chains can be challenging due to compatibility issues.
Overall, the advantages and disadvantages of app chains depend on the use cases and requirements of the DApps being developed. In some cases, application chains may provide a suitable solution for building and using DApps, while other types of blockchain technology may be more suitable for others.