At Coincipher, we continuously track the evolution of blockchain technology to keep our readers informed of the latest developments. As avid researchers of the web3 space, we have taken a keen interest in the advent of application-specific blockchains, more commonly known as appchains.
Summary
Appchains are specialized blockchains optimized for a particular use case or task, such as gaming, decentralized finance, supply chain tracking etc. They aim to improve efficiency, reduce congestion and provide better performance compared to general-purpose blockchains.
Appchains work by customizing components like transaction processing, consensus mechanisms, governance models etc. specifically for the dApp they serve. This enables them to scale sustainably.
They are different from layer 1 solutions in their focused approach and work atop major layer 1s in most cases while retaining sovereignty. Appchains enhance modularity, scalability and interoperability for the niche they operate in.
What are Appchains and How Do They Work?
Due to their wide scope, general-purpose blockchains often face limitations in optimizing for every use case they aim to serve. This led to appchains – application-specific blockchains tailored to particular tasks.
For instance, a blockchain tailored specifically for decentralized finance (DeFi) can optimize transaction speeds, throughput for swaps and liquidity provisioning. Similarly, a blockchain dedicated to blockchain gaming can prioritize seamless gameplay by enhancing scalability.
Appchains can function as layer 2 solutions or independent layer 1s connected via layer 0 protocols like Cosmos for interchain communication. Modular architectures allow components like the smart contracts layer to be tailored, similar to layer 3 protocols, for niche requirements.
Such specialization in appchains enables customization of various components like transaction fees, consensus models, governance structures to best suit the needs of the application.
Functionality
Appchains provide a focused environment for dApps to operate in which is customized based on their requirements. For instance, an appchain may choose to have faster block production times to support high transaction volumes for a DEX running on it.
They achieve this flexibility by having a modular architecture consisting of various layers like networking, data, and consensus that can be tweaked accordingly.
Modular Architecture
The modules in an appchain architecture are:
Network Layer: Manages P2P communication between nodes Application Layer: Hosts dApps and interfaces Data Layer: Stores blockchain and dApps data Consensus Layer: Implements consensus protocols Smart Contracts Layer: Automates and enforces rules
This modular design also promotes interoperability with other appchains.
Most appchains leverage the security of major layer 1s by building on top of them while retaining sovereignty over their own economics and governance. This helps avoid reinventing the wheel.
The Backbone
Appchains typically operate on top of layer 1 chains like Ethereum while having degrees of independence via bridges. Projects like Cosmos provide the backbone “Layer 0” internet of blockchains on which independent sovereign appchains can function while enabling interchain communication.
Benefits of Appchains
Modularity
The modular architecture of appchains provides flexibility to customize each component like transaction fees, validators as per dApp needs. Developers have full control similar to building an application from scratch.
Scalability
Dedicated infrastructure and focused use case allows appchains to scale efficiently for the application they are built for. Strategies like modular architecture, parallel processing and separate mempools add to scalability.
For instance, DyDx chain on Cosmos can process over 1000 orders per second after migrating from Ethereum owing to scalability limitations faced earlier.
Interoperability
Appchains can be designed to enable interoperability across chains to transfer assets and data seamlessly. Standards like IBC on Cosmos ecosystem allows appchains to retain sovereignty while benefiting from cross-chain transfers across Cosmos appchains.
Comparison of Appchains with other Blockchain Solutions
| Appchains | Layer 1 Blockchains | Layer 2 Blockchains | Sidechains | |
| Definition | Specialized for niche use cases | General purpose networks for transactions, smart contracts etc | Improves scalability of Layer 1 chains via off-chain processing | Parallel blockchains usually pegged to a Layer 1 |
| Consensus | Flexible based on implementation | Have their own consensus | Leverages security of Layer 1 | Can differ from Layer 1 |
| Scalability | High if optimized for use case | Limited due to various constraints | High due to off-chain processing | Varies, but higher than Layer 1 |
| Interoperability | Can enable cross-chain transfers | Limited to own ecosystem | Works closely with Layer 1 chains | Variable depending on design |
| Use Cases | Niche applications like DeFi, NFTs etc | General purpose like transactions, contracts | Cheaper and faster transactions | Complement Layer 1 use cases |
Examples of Appchains Architectures
Polkadot Parachains
Polkadot parachains connect to the main Relay chain to derive shared security while being independent sovereign chains with their own tokens, governance etc.
Cosmos Zones
Zones in the Cosmos ecosystem like Kava, Osmosis possess high degree of sovereignty with own validators but leverage IBC protocol for seamless inter-appchain transfers.
Avalanche Subnets
Subnets allow high customizability over parameters like virtual machines and validator sets tailored to dApp requirements.
Popular Projects Built on Appchains
| Project | Appchain | Use Case |
| Acala Network | Polkadot Parachain | DeFi Applications |
| ChainX | Polkadot Parachain | Cross-Chain Transfers |
| THORChain | Cosmos Zone | Decentralized Liquidity Network |
| Band Protocol | Cosmos Zone | Blockchain Data Oracle |
| Pangolin | Avalanche Subnet | Decentralized Exchange |
Conclusion
Appchains usher in an era of niche blockchain solutions that can cater efficiently to various emerging web3 use cases spanning decentralized finance, NFTs, gaming and more. Their focused approach solves pressing needs of scalability and sustainability that plague general purpose networks. With wider adoption, appchains can spearhead innovation across domains while retaining the security of established layer 1s via interoperability.
FAQs
How are appchains different from sidechains?
Sidechains run in parallel to and are often pegged to a parent Layer 1 blockchain. Appchains can exist as a sidechain or run independently as a layer 2 while being application-specific.
Can an appchain function without an underlying Layer 1?
Yes, appchains can operate as independent Layer 1 chains in themselves without being reliant on other chains. Many appchains leverage the robust security of major L1s via bridges.
