In 2009, Satoshi Nakamoto launched the first blockchain, Bitcoin. The pseudonymous developer created the network to facilitate P2P (Peer-to-peer) payments. However, the increased user base and network activity made it difficult for Bitcoin to provide high throughputs at low transaction costs. As a result, the Lightning Network was developed to address the limitations and boost Bitcoin’s scalability.
Similarly, the second-biggest blockchain, Ethereum, has faced scalability issues since the rise of its decentralized finance ecosystem. To address these problems, appchains have been introduced. But what are appchains? We recommend reading this article to find answers.
Explaining Appchains
An appchain (application-specific blockchain) is a type of blockchain intended to support specific applications like gaming or DeFi apps. Appchains are usually forks of layer-1 blockchains. They are built using the existing codebase but introduce optimizations and customizations.
By using the codebase of layer-1 networks, appchains enhance compatibility, thus facilitating interoperability and easy integration. Moreover, building an appchain on a proven foundation reduces the time required to develop it from scratch.
Importance of Appchains
As mentioned, appchains introduce customization, which plays a key role in enhancing user experience and performance. Considering they dedicate a network’s resources to specific apps, appchains tend to attain higher throughput and reduced costs compared to layer-1 blockchains.
Furthermore, appchains introduce security protocols specifically meant for particular apps, thus minimizing the vulnerability risk that affects most general-purpose blockchain networks.
Another notable benefit of appchains is that they allow developers to create transaction prioritization strategies to enhance user experience. Many layer-1 networks have failed to implement these strategies since they host different types of applications that compete to have their transactions processed first.
Also, given that appchain developers retain greater control over their projects, it gives room for rapid innovation to respond to the ever-changing requirements of applications.
Challenges Related to Appchains
The cost of developing and maintaining appchains is significantly high. This acts as a barrier for small Web3 firms that wish to create appchains for their projects. Further, appchains may encounter challenges as they interact with other networks. For instance, they use blockchain bridges, which have been targeted several times by hackers, to facilitate asset transfers. Therefore, these bridges can cause appchain users to lose their digital assets within seconds.
Moreover, appchains find it difficult to develop effective economic models that incentivize validators sufficiently due to their small user bases. Also, given that appchains are less popular than general-purpose blockchains, they do not witness massive adoption.
Sidechains vs. Appchains – What’s the Difference?
While both appchains and sidechains are connected to base chains, they serve different purposes. Appchains are designed for specific apps, while sidechains can cater to multiple types of applications. Additionally, appchains have a higher degree of customization than sidechains.
Examples of Appchains
Several appchains have been developed over the past few years. Some of them include:
Arbitrum
With over 3,5 billion in total value locked, Arbitrum is built to support decentralized finance (DeFi) apps. As of September 2024, GMX and Pendle are the most used DeFi applications on this appchain. It is worth mentioning that Ethereum DeFi platforms, Uniswap and Aave, have expanded to Arbitrum.
Immutable
This appchain is designed to support crypto gaming. Over 150 gaming projects have been launched on Immutable since 2021. The appchain continues to be an attractive destination for game studios due to its ability to process thousands of transactions within seconds.
ZetaChain
Built using the Solana codebase, ZetaChain is an appchain specifically intended to support derivatives trading platforms. Data from DefiLlama shows that ZetaChain-based trading apps have processed $9 billion worth of trades since the start of 2024.
Do Appchains Need Native Tokens?
No, appchains can utilize the native tokens of base chains to power transactions rather than launching their own. However, having a native crypto can benefit appchains massively. For instance, they can create a solid governance system by allowing token holders to take part in decision-making processes.
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