What are appchains?

What are Appchains?

Appchain (application-specific blockchain, appchain) is a blockchain designed exclusively for the operation of one specific decentralized application (dapp).

The use of such solutions gives developers more freedom in the formation of ecosystems, governance structures and consensus algorithms for the decentralized applications they create.

How do appchains work?

Appchains work in much the same way as the basic blockchain, but on top of the latter. The main difference is that they are app-specific.

In the context of security, appchains rely on first-level (L1) blockchains. Such systems are highly customizable and have significant performance potential because they do not compete with L1 applications for processing power and storage space.

Such solutions usually have a utility token. It is used for staking, as the app’s internal currency, and for voting.

Appchains are supported by validators from the main network (if they agree to send resources to a specific application).

What are the benefits of appchains?

Using a new approach when building applications has a number of advantages compared to L1, second-layer (L2) solutions and side chains. As already mentioned, appchains bring customization and increase the performance of systems without sacrificing security, since they rely on the underlying blockchain.

Direct use of L1 when creating dapps involves competition with other applications for limited computing resources. This is fraught with the potential for performance degradation and a lengthy platform upgrade process because the developers have no control over the consensus protocol.

Due to competition between dapps based on the same network, it is possible that just one popular application uses a disproportionate amount of resources. This leads to an increase in fees (as, for example, against the backdrop of the launch of XEN Crypto) and delays in transaction processing.

Appchains offer low and predictable transaction costs, which benefits the user experience.

As the popularity of decentralized applications grows, developers may face the need for advanced customization and optimization of various parameters, including throughput, finalization, security level and accessibility (permissionless or permissioned).

For traditional organizations, appchains provide an opportunity to dive into Web3 without making the platforms public from day one. For example, companies may initially require validators to comply with KYCrely on a limited pool of developers, and choose specific services for cross-chain interaction.

What are the disadvantages of appchains?

The main difference and, perhaps, the limitation of appchains is that they are “sharpened” for one specific application. L2 solutions, on the contrary, are able to interact with a wide variety of dapps.

Appchains offer limited composability and some degree of isolation, which can lead to liquidity fragmentation. The problem is largely solved by integrating cross-chain bridges, but the latter are often a target for hackers.

If the application is not used actively enough, then launching and maintaining the appchain can be a waste of time and money. Platform-dedicated validators can efficiently deploy resources elsewhere.

The work of the appchain can be fraught with various difficulties. For example, related to the management of additional infrastructure elements like sequencers or validators.

At the disposal of developers, there may not be ready-made solutions “out of the box” – block explorers, RPC-providers, indexersoracles, fiat gateways, etc.

There are advantages to creating L1 solutions – for example, the availability of a huge amount of resources, infrastructure elements, tools for developers (especially beginners). This abundance can facilitate integration with different ecosystems.

With L2, developers can increase the scalability of services without having to make significant changes to the codebase.

Second-tier solutions also offer a high level of security, as they rely on the main blockchain. For example, Optimism and Arbitrum process transactions quickly, and send “fraud proofs” to the main network thanks to Optimistic rollups technology.

How are appchains different from sidechains?

Sidechains involve the operation of a parallel network with two-way binding to the main one, but such solutions do not rely on the security of L1. Sidechains differ from L2 in that they do not send transactions to the main blockchain.

Appchains are created for a specific application (app-specific). Sidechains, on the other hand, perform operations of any kind. Their main drawback is reduced security due to limited decentralization.

One of the most famous sidechains is Polygon Proof of Stake, which is part of the Polygon project ecosystem. The latter also includes Polygon Edge, an open source development environment that allows you to create L2 solutions.

Which projects have appchains?

Some blockchain projects provide developers with the ability to create appchains. Among them:

Polkadot Parachains

Polkadot is a network EVM-compatible blockchains – parachains connected to the central network (Relay Chain). The latter specializes in validating transactions of all related systems.

The Relay Chain uses a Proof-of-Stake consensus mechanism, where validators stake DOT (Polkadot’s native token).

Each group of validators is responsible for a specific parachain, appointed and supported by collators: they collect user transactions and validate blocks based on the Proof-of-Validity algorithm (proof of validity). For their work as nodes, collators receive a reward, the amount of which depends on the particular parachain.

The number of slots for parachains in the Polkadot network is limited to 100. They are distributed through auctions, during which DOT holders vote for projects for their subsequent connection to the Relay Chain.

“Parachain slots can only be obtained for a certain period of up to two years. At the end of this period, the slot is returned to the auction,” explains on the project website.

Parachains can also serve as bridges connecting the Polkadot network to external L1 blockchains like Ethereum.

Such solutions provide developers with all the above features of appchains, including the freedom to choose an economic or management structure, allowing the use of utility tokens.

One of the main disadvantages of parachains is the limited number of slots that can be won during the auction. This makes such solutions less accessible.

The Polkadot team is working on parathreads, pay-per-use parachains. The solution will allow developers to upload the project code to the Relay Chain and launch several collators without waiting for the parachain auction. In the future, parathreads can be upgraded to parachains in case of participation and victory in auctions.

The number of parathreads supported by Polkadot is also limited to 10,000.

Another drawback of the ecosystem is that Relay Chain does not support smart contracts. This limits the capabilities of the Polkadot network.

Examples of parachain projects:

• Acala – DeFi hub for the Polkadot network;
• Litentry is a cross-chain aggregator of identification solutions.

What are Appchains?

Appchain (application-specific blockchain, appchain) is a blockchain designed exclusively for the operation of one specific decentralized application (dapp).

The use of such solutions gives developers more freedom in the formation of ecosystems, governance structures and consensus algorithms for the decentralized applications they create.

How do appchains work?

Appchains work in much the same way as the basic blockchain, but on top of the latter. The main difference is that they are app-specific.

In the context of security, appchains rely on first-level (L1) blockchains. Such systems are highly customizable and have significant performance potential because they do not compete with L1 applications for processing power and storage space.

Such solutions usually have a utility token. It is used for staking, as the app’s internal currency, and for voting.

Appchains are supported by validators from the main network (if they agree to send resources to a specific application).

What are the benefits of appchains?

Using a new approach when building applications has a number of advantages compared to L1, second-layer (L2) solutions and side chains. As already mentioned, appchains bring customization and increase the performance of systems without sacrificing security, since they rely on the underlying blockchain.

Direct use of L1 when creating dapps involves competition with other applications for limited computing resources. This is fraught with the potential for performance degradation and a lengthy platform upgrade process because the developers have no control over the consensus protocol.

Due to competition between dapps based on the same network, it is possible that just one popular application uses a disproportionate amount of resources. This leads to an increase in fees (as, for example, against the backdrop of the launch of XEN Crypto) and delays in transaction processing.

Appchains offer low and predictable transaction costs, which benefits the user experience.

As the popularity of decentralized applications grows, developers may face the need for advanced customization and optimization of various parameters, including throughput, finalization, security level and accessibility (permissionless or permissioned).

For traditional organizations, appchains provide an opportunity to dive into Web3 without making the platforms public from day one. For example, companies may initially require validators to comply with KYCrely on a limited pool of developers, and choose specific services for cross-chain interaction.

What are the disadvantages of appchains?

The main difference and, perhaps, the limitation of appchains is that they are “sharpened” for one specific application. L2 solutions, on the contrary, are able to interact with a wide variety of dapps.

Appchains offer limited composability and some degree of isolation, which can lead to liquidity fragmentation. The problem is largely solved by integrating cross-chain bridges, but the latter are often a target for hackers.

If the application is not used actively enough, then launching and maintaining the appchain can be a waste of time and money. Platform-dedicated validators can efficiently deploy resources elsewhere.

The work of the appchain can be fraught with various difficulties. For example, related to the management of additional infrastructure elements like sequencers or validators.

At the disposal of developers, there may not be ready-made solutions “out of the box” – block explorers, RPC-providers, indexersoracles, fiat gateways, etc.

There are advantages to creating L1 solutions – for example, the availability of a huge amount of resources, infrastructure elements, tools for developers (especially beginners). This abundance can facilitate integration with different ecosystems.

With L2, developers can increase the scalability of services without having to make significant changes to the codebase.

Second-tier solutions also offer a high level of security, as they rely on the main blockchain. For example, Optimism and Arbitrum process transactions quickly, and send “fraud proofs” to the main network thanks to Optimistic rollups technology.

How are appchains different from sidechains?

Sidechains involve the operation of a parallel network with two-way binding to the main one, but such solutions do not rely on the security of L1. Sidechains differ from L2 in that they do not send transactions to the main blockchain.

Appchains are created for a specific application (app-specific). Sidechains, on the other hand, perform operations of any kind. Their main drawback is reduced security due to limited decentralization.

One of the most famous sidechains is Polygon Proof of Stake, which is part of the Polygon project ecosystem. The latter also includes Polygon Edge, an open source development environment that allows you to create L2 solutions.

Which projects have appchains?

Some blockchain projects provide developers with the ability to create appchains. Among them:

Polkadot Parachains

Polkadot is a network EVM-compatible blockchains – parachains connected to the central network (Relay Chain). The latter specializes in validating transactions of all related systems.

The Relay Chain uses a Proof-of-Stake consensus mechanism, where validators stake DOT (Polkadot’s native token).

Each group of validators is responsible for a specific parachain, appointed and supported by collators: they collect user transactions and validate blocks based on the Proof-of-Validity algorithm (proof of validity). For their work as nodes, collators receive a reward, the amount of which depends on the particular parachain.

The number of slots for parachains in the Polkadot network is limited to 100. They are distributed through auctions, during which DOT holders vote for projects for their subsequent connection to the Relay Chain.

“Parachain slots can only be obtained for a certain period of up to two years. At the end of this period, the slot is returned to the auction,” explains on the project website.

Parachains can also serve as bridges connecting the Polkadot network to external L1 blockchains like Ethereum.

Such solutions provide developers with all the above features of appchains, including the freedom to choose an economic or management structure, allowing the use of utility tokens.

One of the main disadvantages of parachains is the limited number of slots that can be won during the auction. This makes such solutions less accessible.

The Polkadot team is working on parathreads, pay-per-use parachains. The solution will allow developers to upload the project code to the Relay Chain and launch several collators without waiting for the parachain auction. In the future, parathreads can be upgraded to parachains in case of participation and victory in auctions.

The number of parathreads supported by Polkadot is also limited to 10,000.

Another drawback of the ecosystem is that Relay Chain does not support smart contracts. This limits the capabilities of the Polkadot network.

Examples of parachain projects:

• Acala – DeFi hub for the Polkadot network;
• Litentry is a cross-chain aggregator of identification solutions.